We’ve talked a lot about the financial advantages of home ownership. Even with the massive swings we’ve seen for real estate, home ownership, over time, remains one of the most secure ways to build long-term wealth. The combination of low mortgage rates and tax advantages, such as mortgage interest and property tax deductions, as well as capital gains exclusions will almost always make buying a better financial decision than renting. But, home ownership isn’t all about the money. There are a number of other factors that can make owning a home the preferred choice.
Back when I (Bob) moved into my first house, it was a rental. Nevertheless, it was an achievement to make the transition from college dorm room to apartment to a real house. However, since it was a rental, the degree to which I could make the place my own was somewhat limited by my landlord’s rules and regulations. I’ll always remember when I decided to paint one of the rooms a deep burgundy color. For me it was a bit of dramatic self-expression, the kind of impulsive act you might expect to get out of someone who was only 24. For my landlord, it was a giant pain, and he had to go through gallons of cover-up paint to get the room back to neutral for the next tenant. I almost lost my security deposit over that burgundy room.
That brings us to one of the benefits associated with home ownership, the freedom to do pretty much whatever you want with your own personal property. Other than zoning and homeowners association rules, you’re king of the castle, and if you want to paint a room burgundy, or paint your whole house burgundy, that’s entirely up to you.
There is great gratification in transforming a house to reflect your own personal style. And as a couple of real estate agents who have been in thousands of homes, we can tell you that there is no limit to the variety of styles homeowners have chosen to select. Most are a fairly conservative interpretation of whatever passes for the prevailing Pottery Barn presentation. But others have maximized the personal freedom with home ownership by building a monument to their own individuality.
We’ve all heard people talk about the “pride of home ownership.” There’s a real emotion associated with having your own piece of planet Earth and getting your hands dirty fixing the place up. These days, you can even get on Google Earth and see what you’ve done from a satellite in space.
Just last week, we were on Google Earth and saw that the updated satellite shots of our house showed how we reshaped the driveway and fixed up the pool. What we did won’t change the course of mankind, but it was still fun to zoom in from a picture of the entire planet to the little piece of dirt we own and see how our efforts had changed the landscape.
The whole concept of “sweat equity” and the ability to build a comfortable home out of little or nothing generates a degree of self-esteem that is hard to find with any other endeavor. One of the greatest examples of this can be found in American history. At high noon on Sept. 16, 1893, the Oklahoma Land Rush took place when 100,000 people raced to claim 42,000 pieces of land made available for settlement.
When the starting rifle fired, they all took off, some on horses, others in wagons, and even on foot, they made the mad dash, in hopes of laying claim to a piece of property they could call their own. For those who were successful, all they would start with was a rocky mess of dirt and weeds. But, they had the vision to realize that ownership of the land was how it all would start. With the fortitude of perseverance, and a little luck, they could then build a home and make a life.
A sense of belonging
There are many elements to this aspect of home ownership. Foremost is the concept of community. A community can be created among those who rent, but there is a stronger bond among people who have made the commitment to buy. When there’s the substantial skin in the game associated with home ownership, people are more apt to become active in the community, and this leads to a wide variety of positive outcomes. Studies have shown that areas with high levels of home ownership have more stability, stronger family units and better schools.
Renting, by its very nature, tends to be a transient way of life. Sure, there are people who rent for economic reasons or just because it provides them with greater flexibility, should they need to make a move. Regardless, those who rent just don’t put down the same kind of roots as those who buy. As a result, they tend to be more aloof from the type of activities that build strong, safe neighborhoods.
Over the years, home ownership rates have fluctuated. From 1900 through the end of WWII, only 45 percent of Americans owned their home. Then the troops came home, and a wide variety of financing programs opened the door to the great middle class, allowing many more in the burgeoning baby boom to own a home. Ownership rates shot up into the 60 percent to 65 percent range. During the housing boom, it then peaked at almost 70 percent in 2004. When the bubble burst, ownership fell back to pre-bubble levels and currently stands around 63 percent.
Many economists believe that 65 percent or so is a natural and sustainable level for home ownership. There will always be a certain group of people for whom renting is a better option. Consequently, as much as we’d like to see everyone own their home, ownership levels much above 70 percent might not be attainable or advisable.
But even with the turmoil we’ve had in the real estate market and the pressure of a severe recession, the vast majority of Americans still realize the economic and social benefits of buying. Wanting to have your own place is part of human nature, a part that we doubt will ever go away.
A version of this column originally appeared in The (Baltimore, Maryland) Daily Record, sister publication to The Daily Record.