"I think people need to get past the view that you can't have a successful life without one day owning a home." This from the Atlantic's Business blog, agreeing with Barney Frank's apparent suggestion that the poor should be encouraged to rent, rather than to buy homes. What do you think? Is owning a home part of the American dream that poor people should participate in? I was struck by the point (which I've seen before) that home ownership reduces labor mobility. A lot of people right now can't move to where the jobs are because they are stuck with a house they can't sell.
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Most migrant workers do seem very happy, but considering the work Barney's done these last several years I'd have to say the best thing would be for his ilk to stick to worrying about creating jobs and forget the social engineering experiments for a few decades.
RE:"A lot of people right now can't move to where the jobs are because they are stuck with a house they can't sell."
…for as much as they still owe on it. Too bad. That's the risk they took when they put 5% down on a mansion that gobbles up 50+% of their net monthly earnings. I know people who are in nearly the same situation with their vehicle loans. Too bad again. A basic rule of gambling at the tables, or in the game of life, is to not wager more than you can afford to lose. Believe me, there can be a great deal of comfort in a lifestyle configured on rational planning and prudent uses of credit.
AND RE:"Is owning a home part of the American dream that poor people should participate in?"
Sure….with some creative financing methods and maybe some tax relief too. However, I think this will become more of a generational issue than one strictly focused on "poor people". Since young(?) workers can expect to change career paths or employers many more time than their parents did, why would they be expected to tie themselves to houses that they will probably be leaving every few years? I see more rent-to-own options and five year home leases in the future…regardless of income level.
Is this a simple question with a simple answer?
Home ownership fosters community and permanence, which are things we like. Up until this financial crisis, a home was a reasonable investment. If I had purchased a home for the same amount I started renting (not unreasonable for an $80,000, 30-year fixed rate mortgage), I would have a mortgage between half and two-thirds paid off by now.
But the mobility issue is a huge problem, especially in a country with such wretched public transportation nationally, and spotty coverage locally. The one group of people who will move the most often in their lifetimes are the poor, because the jobs they work are the most expendable.
Frankly, I don't care what Barney Frank thinks. I doubt that man does his own grocery shopping. Let him look a minimum-wage earning cashier in the eye and tell her he doesn't think she deserves to own a home. That'll be the day.
The merits (or pitfalls) of home ownership are so crucially linked to market forces — and to a person's individual, subjective circumstances — that painting with a broad policy brush on either side of this issue seems less than helpful.
Nonetheless, it should be acknowledged that the prevailing, stereotypical "sage advice" in this arena has always been that one is just "throwing money away" if renting. This may or may not be true.
If anything, the current state of the real estate market (and economy, generally) should cause us all — "poor" or not — to scrutinize that old "sage advice" from a renewed (more cautious) perspective. Perhaps this may be becuase such "sage advice" became the prevailing view during less tumultuous and more stable times.
So maybe Frank is partly right, although his delivery seems kind of simplistic and elitest. Perhaps people — not just "the poor" — should be more openly encouraged to tread intelligently and cautiously before jumping into a home. This seems more reasonable than sticking with the outmoded logic that dictates that a home is always a smart investment in comparison to renting.
Paradigm shift, y'all?