Tag Archives: American Dream

Another article on declining homeownership rates

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Bloomberg Businessweek highlights how American’s view of home ownership has changed in the last few years:

The most affordable real estate in a generation is failing to lure buyers as Americans like Pauli sour on the idea of home ownership. At the end of 2010, the fourth year of the housing collapse, the share of people who said a home was a safe investment dropped to 64 percent from 70 percent in the first quarter. The December figure was the lowest in a survey that goes back to 2003, when it was 83 percent.

“The magnitude of the housing crash caused permanent changes in the way some people view home ownership,” said Michael Lea, a finance professor at San Diego State University. “Even as the economy improves, there are some who will never buy a home because their confidence in real estate is gone.”…

“If we’ve learned anything from this mess, it’s that housing is not a risk-free investment,” said Michelle Meyer, a senior economist at Bank of America Merrill Lynch Global Research in New York. “Everyone knows someone underwater in their mortgage or struggling to sell a home.”…

The U.S. home ownership rate dropped to 66.5 percent in the fourth quarter, the lowest in more than a decade, according to the Census Department. The rate probably will retreat another percentage point by 2013, according to Meyer, of Bank of America Merrill Lynch, and Lea, the finance professor. That would put it back to a 1997 level.

“People will still aspire to own their own homes,” Lea said. “They’ll just be a lot more practical about it.”

This article tends to focus on the money side of things (housing as less of an investment, tighter credit, lots of people with underwater mortgages, a future with a reduced or no involvement from Fannie Mae and Freddie Mac, etc.) but I think the key (or exciting) information is in the last two paragraphs I cited above:

1. The homeownership rate has dipped but not a whole lot. Even in the housing boom of roughly the mid 1990s to the mid 2000s, the US homeownership rate increased from 63.6% in early 1993 to 69.2% in late 2004. So over an eleven year stretch of relative prosperity and increasing home values, homeownership rose about 6.5 percentage points. From this peak in late 2004 (69.2%), the homeownership rate had dropped to 66.5% for the fourth quarter in 2010. In a six year stretch, the rate had dropped 2.7%. If you look at the historical data since 1965 (all of these figures are from an Excel table on the Census website – Table 14 on this page), before the 1990s, the homeownership rate moved fairly slowly either up or down. Perhaps what is not so unusual about homeownership is not that it has fallen in recent years but rather that it rose so much between 1993 to 2004.

2. Additionally, this is all tied to American aspirations: do they still aspire to own their own home? While this article (and many others) highlight how this might now be more difficult, this key part of the American Dream still seems to be intact. Even if future neighborhoods or suburbs look different (like this article suggests they might), the interest in owning one’s property still appears to be high. While there is no guarantee that more and more Americans will be able to own their own homes (how high might the American homeownership rate realistically go anyway?), it will likely take more than this what has happened in this particular economic crisis to cast a new vision of American fulfillment that doesn’t include a single-family home or space.

The evolving American Dream: more dense but still private

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I’ve written about several aspects of the American Dream including unhappiness and how the American Dream might now be about perfection rather than acquiring goods or status. One key aspect of this Dream is housing, often viewed as a single-family house in a suburb. A new report from the National Association of Realtors suggests homebuyers now have some new preferences:

The 2011 Community Preference Survey reveals that, ideally, most Americans would like to live in walkable communities where shops, restaurants, and local businesses are within an easy stroll from their homes and their jobs are a short commute away; as long as those communities can also provide privacy from neighbors and detached, single-family homes. If this ideal is not possible, most prioritize shorter commutes and single-family homes above other considerations.

1. The economy has had a substantial impact on attitudes toward housing and communities…

2. Overall, Americans’ ideal communities have a mix of houses, places to walk, and amenities within an easy walk or close drive…

3. Desire for privacy is a top consideration in deciding where to live…

4. But, having a reasonable commute can temper desire for more space…

5. Community characteristics are more important than size of home…

6. Improving existing communities preferred over building new roads and developments…

7. Major differences in community preferences of various types of Americans…

All of these points are from the executive summary which also has some key percentages for each point.

The results of this survey seem similar to a recent report (see here) earlier this year from the National Association of Home Builders that suggested Generation Y wants more urban settings and more social (and smaller?) homes. In the long run, it remains to be seen whether these changes are broad cultural changes, generational changes (driven by younger generations), or opinions changed primarily by recent economic conditions.

Richard Florida sums up the report this way:

We’ve come to a crossroads that neither dyed-in-the-wool sprawl advocates nor crunchy urbanists dreamed of two decades ago, in which the choice isn’t between urban and suburban but between neighborhood and subdivision. A great neighborhood is a great neighborhood whether it’s in the city or the suburbs. It’s not an either/or, between crowded apartments or Cape Cods on cul de sacs, it’s more of a blend. Developers and planners take note: there is a potentially enormous market in cities for narrow single-family houses on small lots, like you see in places like Santa Monica and Venice. And as I wrote in The Wall Street Journal not too long ago, there are countless ways that our suburbs can be densified and reinvigorated. The American Dream hasn’t died–it just looks a lot different than it did in the 1950s. It looks a lot different than it did a decade ago.

So this report may not really be a repudiation of the suburbs but rather a new vision for suburbia: private yet dense (with still a clear 80% preference for single-family homes) and with neighborhood amenities. I am a little surprised that there aren’t more specific questions about preferred housing size or housing costs. Additionally, the survey seems set up to ask a lot of questions about smart growth with little explanation why this was the main focus.

(A side note: the study was a web survey:

The 2011 BRS/NAR Community Preference Survey is a web-enabled survey of adults nationwide using the Knowledge Networks panel. Knowledge Networks uses probability methods to recruit its panel, allowing results to be generalized to the population of adults in the U.S. A total of 2,071 questionnaires were completed from February 15 to 24, 2011. The data have been weighted by gender, age, race, region, metropolitan status, and Internet access. The margin of sampling error for the sample of 2,071 is plus or minus 2.2 percentage points at the 95% level of confidence. A detailed methodology can be found in Appendix A.

Knowledge Networks (KN) is a firm that gets around some of the common problems of web surveys (typically having to do with having a representative sample) by having representative panels who take web surveys. In order to get a representative sample, KN employs this technique:  “Since almost three in ten U.S. households do not have home Internet access, we supply these households a free netbook computer and Internet service.”)

Op-ed: the American Dream is now about attaining perfection

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The American Dream is a popular topic: politicians, businesses, citizens, and immigrants have all had a hand in defining this set of values and goals. A recent op-ed in the Boston Globe by Neal Gabler suggests that the end goal of the American Dream has changed in recent years from seizing opportunities to attaining perfection:

But over the past 50 years, the American Dream has been revised. It is no longer about seizing opportunity but about realizing perfection. Many Americans have come to feel that the lives they always imagined for themselves are not only attainable; those lives are now transcendable, as if our imaginations were inadequate to the possibilities. In short, many Americans have come to believe in their own perfectibility…

We agonize a lot over perfection, and we dedicate a lot of time, energy, and money to it — everything from plastic surgery to gated communities of McMansions to the professionalization of our children’s activities like soccer and baseball to pricey preschools that prepare 4-year-olds for Harvard. After all, we are all on the Ivy League track now.

Or else. And that’s another thing that a perfectionist society has engendered. It has removed failure as an option because we realize that there are no second chances, that mistakes are usually irrevocable, and that you have to assume there are other people out there — your competition! — whose wives will always be beautifully coiffed and dressed or whose husbands will be power brokers, whose children will score 2,400 on their SATs and who will be playing competitive-level tennis, whose careers will be skyrocketing, whose fortunes will be growing. In a world in which perfection is expected, you must be perfect. Otherwise you are second rate.

I wish Gabler had some more space to expand on this idea. When he says we are chasing “perfection,” what exactly does he mean? I’m guessing that this does not refer to perfect lives: no one has these as we all have troubles to face and obstacles to overcome. We all face failure at some time or another. I wonder if by perfection, Gabler really is getting at something else, something along the lines of, “perfect enough to be better than most others.” When do we or would we know that our lives are perfect or is it more about being perfect enough?

When I read this piece, I was reminded of sociologist Juliet Schor’s argument in The Overspent American: in recent decades, Americans have spent more money and time chasing richer and richer reference groups. Even if we enjoy our house, we see better houses that supposedly middle-class families have on TV or in movies. Even if our kid is smart, we read newspaper stories about the kid who got a perfect on their SAT and seems to have every opportunity available to them. If we are always chasing other people, we might indeed get to a similar point – until other people have even more or something different. But we often only assess where we are at by comparing ourselves to others.

In this sense, perfect is not perfection but rather good enough to be better than most. Or perfect enough to look better than most. As Schor suggests, this could become an endless cycle of keeping up with the Joneses. Or as Gabler puts it, we are seeking to “live within [our] illusions” and to “live not just the good life but the perfect one.”

From former suburban home to authentic home to be restored

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What happens to suburban homes that were once on the outskirts of the big city? One writer describes the 1927 rowhouse she and her husband bought in Jackson Heights (part of Queens, New York City) and their plans to restore it:

Friends warn me this will be a lifelong endeavor. But my husband and I have always preferred houses with some history in them (this is our fifth, and maybe last, transaction). I suspect it’s a rejection of my New Jersey McMansion rearing.

To get a better sense of this house’s past, I turned to Daniel Karatzas, an agent with Beaudoin Realty Group and the local historian. He wrote the book, “Jackson Heights – A Garden in the City,” which sits on our coffee table. Well, it used to. Now it’s in storage.

Our house, Karatzas told me, was designed by Robert Tappan, “one of those unsung architects” who helped develop the neighborhood into a slice of suburbia just a few miles from midtown Manhattan.

“It wasn’t like Frank Lloyd Wright,” says Karatzas. “They were building traditional styles that would appeal to upper middle-class families. They used vernacular architecture. … Tudor, French, Georgian. That made it seem the houses had been there longer than they had.”

The houses on my block first sold for between $24,000 and $28,000. If he had to liken it to a modern-day phenomenon, Karatzas said, our 1920s house might have once been considered like “those McMansions in New Jersey.”

A couple parts of this stick out to me:

1. This neighborhood was once a suburb of New York City. While the home is now 80+ years old, it is still more of a suburban setting. According to this brief history of Jackson Heights, the community was built primarily after World War I, which would have been during a large wave of suburbanization.

Suburban homes generally get a bad name, both today and historically for being relatively cheaply made and looking all the same. Perhaps this is epitomized by the 1962 song “Little Boxes” by Malvina Reynolds – here are the opening lines:

Little boxes on the hillside,
Little boxes made of ticky tacky,
Little boxes on the hillside,
Little boxes all the same.

There’s a green one and a pink one
And a blue one and a yellow one,
And they’re all made out of ticky tacky
And they all look just the same.

And yet, with age, some suburban homes can become the sort of authentic homes that people desire. This house has history but it is suburban history. While the realtor suggests this home was probably like a McMansion of the 1920s, the writer is interested in restoring and rehabilitating this home, gold-metal cabinets in the kitchen and all.

2. The primary comparison made is between this new purchase and the McMansion the writer grew up in New Jersey. We don’t quite know why this writer disliked this New Jersey upbringing but it is clear that this new home has more character than that home did. She also suggests that her father is likely puzzled by her decision to move back to Jackson Heights: “Sometimes, I suspect my decision to settle in Jackson Heights puzzles him, since he worked so hard to get out and buy a house in the suburbs.” While one generation viewed a move to the suburbs as a good thing, some people in later generations see a move back to city life (though this is somewhere between city and suburban life) as desirable.

Does this mean that the sort of suburban homes that people now call McMansions may one day be authentic and the sorts of places that others will want to restore? This idea perhaps assumes that Americans will continue to move further and further out from the center of metropolitan regions and then the older suburban homes will age and no longer be on the fringes. What is the long-term fate of McMansions: will they fall apart? By co-opted for other uses (like perhaps being subdivided into multiple units)? Become desirable reminders of the past? Become teardowns themselves and the land put to other uses?

Looking at how consumers are the major beneficiaries of fixed-rate mortgages

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The historical development of the fixed-rate mortgage, usually 30 years in the United States, helped contribute to the post-World War II suburbanization boom in the United States. Several scholars take a look at who exactly benefits from the fixed-rate mortgage (FRM):

The FRM clearly occupies a central role in the U.S. housing finance system. It has been the dominant instrument since the Great Depression and currently accounts for more than 90 percent of mortgage originations. The FRM is regarded as a consumer-friendly instrument, which is one reason why it enjoys enduring popularity. But the instrument can cause problems for both current and prospective borrowers. And part of its popularity is due to government support as well as past regulatory favoritism. The FRM is heavily subsidized through the securitization activities of Fannie Mae and Freddie Mac. These subsidies, which lower the relative cost of the instrument, are an important factor in its popularity. The FRM also imposes costs on the mortgage industry and on investors in mortgage securities—costs that are likely to rise as the economy recovers. Importantly, the FRM is a onesided design. Consumers, particularly those who utilize the prepayment option, benefit while investors and taxpayers bear the cost.

The PDF file linked to from this document has a lot of interesting information. A few thoughts about this:

1. The fixed-rate mortgage came about because of particular historical conditions and interests. Prior to World War II, other kinds of mortgages were sold.

2. The fixed-rate mortgage is not as common in lot of other countries around the world. There are other ways the mortgage market could be set up.

3. The authors suggest that the FRM is the primary mortgage instrument in this country because of governmental approval. Here are the final two sentences in the conclusion of the PDF:

There is nothing so special about housing finance that necessitates the government absorbing the credit risk of the vast majority of the mortgage market or underwriting the interest-rate risk of the that market. Two episodes with massive taxpayer loss should convince us of that fact.

But I think this may be overlooking the cultural and symbolic value Americans place on owning a home. While this scheme may put taxpayers on the hook, Americans also value homeownership, particularly as a lynchpin of the American Dream. Most (if not all) presidents since Calvin Coolidge have pushed policies that would boost the homeownership rate. From FHA and VA loans to Fannie Mae and Freddie Mac, the government has poured billions into homeownership. So while consumers might benefit from this setup, would we be willing as a nation to push for different types of mortgages that might make it more difficult for Americans to purchase a home?

Psychology Today: we are more unhappy even as we have attained the American Dream in the suburbs

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The latest issue of Psychology Today (March/April 2011, not yet available online) features a story about unhappiness and the American Dream. One researcher of economics and happiness says, “The U.S.A. has, in aggregate, apparently become more miserable over the last quarter of a century.” The basic premise is this: we have gained what the American Dream promised, families, home ownership, levels of luxury, and yet we are more unhappy than ever. Why is this the case?

The article goes on to cite a number of problems: having more public activities moved inside the home and limited contact with the broader communities (with home churches, homeschooling, and working from home cited as examples); an overemphasis on children who end up dominating the lives of their parents; moving to the suburbs; and we unrealistically dream of fulfillment that is said to come with marriage, having children, and growing older.

I’ll quickly tackle the suburbs issue here. The bulk of this section cites the 2000 book Suburban Nation: The Rise of Sprawl and the Decline of the American Dream, a classic New Urbanist text. In short, the New Urbanists argue that suburban neighborhoods emphasize individualism and simply bigger homes, not community, leading to an impoverished public realm. Through the redesign of neighborhoods, such as including porches on the front of houses, moving garages to back alleys, and having a coherent sense of architecture across buildings, community life can be encouraged. The author of this article suggests there is a “disconnect between ‘suburban expectation…and the blighted reality of sprawl.”

This is not a new argument about the suburbs: indeed, critics were saying similar things back in the 1920s and 1950s during the early waves of American suburbanization. This article also trades in typical arguments: “And those parents who live in a cul-de-sac just a highway exit or two from a strip mall might be the first to admit they’re experiencing an American dream that may be less Norman Rockwell than Revolutionary Road.” One question could be raised about this section on suburbs: is it the suburbs themselves that are causing the problem (the actual physical design and layout) or the expectations that come with them? Since the early 1900s, Americans have moved to the suburbs partly to avoid the city. While the suburban lifestyle certainly has faults, would Americans choose to leave the suburbs and move elsewhere? New Urbanists offer an interesting alternative: maintaining single-family home but having denser suburbs which would hopefully have richer community interaction. Interestingly, this article does not call for people to leave the suburbs but perhaps to adjust their expectations about what the suburbs can actually offer.

More broadly, the article sets this up as an issue of out-sized expectations. The American Dream offers much but also seems to leave people wanting more and more. How about a slightly different question: is the end goal of adult life happiness and/or satisfaction? One way to deal with the issue of the American Dream would be to scale back our expectations so we are more satisfied with what we have. Another way to deal with the issue is to wonder if pleasure (measured as happiness or satisfaction) is the ultimate goal in life.

(A note about Psychology Today: I am not a regular reader so my observation may be silly or obvious. But this article, and a few others I flipped through, were quite “pop” and short on academic analysis.)

Thinking about religion, education, and marriage

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A recent Pew study on marriage has been getting a lot of attention, particularly for the finding that an increased number of Americans think marriage is obsolete. Another study, this from the National Marriage Project, provides some more interesting findings about marriage: “Marriage is an emerging dividing line between America’s moderately educated middle and those with college degrees.”

Ross Douthat explains some of the implications of this study:

This decline is depressing, but it isn’t surprising. We’ve known for a while that America has a marriage gap: college graduates divorce infrequently and bear few children out of wedlock, while in the rest of the country unwed parenthood and family breakdown are becoming a new normal. This gap has been one of the paradoxes of the culture war: highly educated Americans live like Ozzie and Harriet despite being cultural liberals, while middle America hews to traditional values but has trouble living up to them.

But the Marriage Project’s data suggest that this paradox is fading. It’s no longer clear that middle America does hold more conservative views on marriage and family, or that educated Americans are still more likely to be secular and socially liberal…

There has been a similar change in religious practice. In the 1970s, college- educated Americans were slightly less likely to attend church than high school graduates. Today, piety increasingly correlates with education: college graduates are America’s most faithful churchgoers, while religious observance has dropped precipitously among the less-educated.

In part, these shifts may be a testament to the upward mobility of religious believers…

This means that a culture war that’s often seen as a clash between liberal elites and a conservative middle America looks more and more like a conflict within the educated class — pitting Wheaton and Baylor against Brown and Bard, Redeemer Presbyterian Church against the 92nd Street Y, C. S. Lewis devotees against the Philip Pullman fan club.

But as religious conservatives have climbed the educational ladder, American churches seem to be having trouble reaching the people left behind. This is bad news for both Christianity and the country.

This is interesting: marriage, and those who both defend it and practice it, may be within the purview of the educated but not others. Does this suggest marriage has become something of a luxury, something that those with education (and presumably more money) can afford but those without this capital don’t see as a necessity? And when and why exactly did this shift take place?

I would be curious to know what sociologists think is the link between these findings and what goes on in college. Is marriage simply part of the typical life aspiration for someone who goes to college where it isn’t for people who don’t get a college degree? Is there something that happens in college or during that time period or having a college degree that pushes people toward marriage? How exactly is having the college degree linked to this action?

And in the final part of what I cited, Douthat makes a point about the role of churches: how exactly can or should they promote marriage, particularly to the parts of the US population that aren’t as open to it? Do churches promote marriage by promoting families (activities and education for the kids, etc.) or is there more that should be done? Have more churches in recent years shifted their attention away from the working-class to the more educated?

Homeownership rates back to 1999 levels

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With the economic and housing troubles of the last few years, the homeownership rate in the United States is now down to 66.9%, the lowest level seen since 1999:

The percentage of households that owned their homes was unchanged at 66.9 percent in the July-September quarter, the Census Bureau said Tuesday. That’s the same as the April-June quarter.

The last time the rate was lower was in 1999, when the rate was 66.7 percent.

The nation’s homeownership rate was around 64 percent from 1985 through 1995. It then rose dramatically during the Clinton and Bush administrations, hitting a peak of more than 69 percent in 2004 at the height of the housing boom.

The economic boom played a large role but both Clinton and Bush pushed homeownership across the board as an unmitigated good for America and its citizens. How will current politicians respond regarding homeownership? We received a number of pieces of campaign literature in the mail this election season where both Republicans and Democrats talked about helping to save homes. Will owning a home be seen as something that helps uphold the American dream or will the rhetoric change?

Many Americans not optimistic that their childrens’ lives will be better

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A recent Bloomberg poll asked Americans whether they felt the future would be better for their children. The results:

What optimism there is about the immediate future doesn’t carry over to the longer term. Pluralities of those polled say they’re not hopeful they will have enough money in retirement and expect they will have to keep working to make up the difference. More than 50 percent aren’t confident or are just somewhat confident their children will have better lives than they have.

This belief has been an important part of the American Dream for decades. American parents seem willing to sacrifice much for their children to help insure this. Americans are usually quite optimistic about the future and tend to believe American ingenuity and progress will lead the way.

A question I would like to ask on these surveys: would it be okay for your children to have the same quality of life as you have experienced? If not, why not?

(A note about the reporting: many numerical statistics from the survey are thrown out. However, there is little context. The author tries to throw in some commentary about how these statistics link up with what is going on in the country or with a few quotes but this doesn’t add much. Additionally, let’s break down the numbers a bit more: do they differ by gender, race, region, political party, etc.?)

“Is the American Dream dead?”

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President Obama was at a town hall meeting earlier this week where he fielded questions about some difficult topics. One question came from a law school graduate who is struggling at age 30: “Is the American dream dead?”

This is an interesting question. One response to this guy, which I don’t think would really placate him or be charitable, would be to say that one personal case of difficulties does not mean the American Dream has disappeared. On the other hand, this question could lead to the question of whether the American Dream will be redefined in the future because of present economic and social realities.

One part of the American Dream that could complicate the future definition is that Americans tend to want better things for their children. It is fascinating to go back to community studies like Middletown and see in the 1920s how parents wanted their wanted their children to get ahead, primarily through education. What if this is no longer feasible for many? Perhaps the American Dream will simply level off for a while rather than continue to expand. But this would mean parents (and children) would need to change their expectations about what the future might hold.