Tag Archives: homeownership

Study: white flight led to increased homeownership rates for blacks

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A new study suggests one positive outcome of white flight from American cities: more opportunities to purchase homes for blacks.

Historic data suggests, however, that the mass exodus of the white middle class from central cities had one positive result for the people left behind: Suburban white flight helped boost black homeownership in America. And the extent of the effect is striking. Economists Leah Boustan of UCLA and Robert Margo of Boston University have estimated that for every 1,000 white households that moved out of central cities for the suburbs between 1940 and 1980, about 100 black households became homeowners.

In a fascinating paper published in the Journal of Urban Economics, the researchers argue that the two trends didn’t simply occur in tandem. One directly helped cause the other. Between 1940 and 1980, a period during which Boustan and Margo examined data in 98 cities, the share of white metropolitan households in the U.S. living in the suburbs nearly doubled from 35 percent to 68 percent. Over that same time, the homeownership rate among black metropolitan households rose from 19 percent to 46 percent – a jump of 27 percentage points that had been unprecedented in American history…

By their calculation, 26 percent of the nationwide increase in black homeownership between 1940 and 1980 can be attributed to the white exodus to the suburbs. As white families left for newly created housing – following newly paved highways into the suburbs – demand (and prices) dropped for single-family homes in the city. As the cost of homeownership then declined, more blacks who had previously been renters – a group that now made up a much larger share of would-be home-buyers – were able to buy a home for the first time.

The effect was particularly strong in cities that had a large stock of existing single-family homes conducive to ownership, and in those central cities that had a relatively large black population. In New York City, for example, only 15 percent of the housing stock was owner-occupied in 1940. As a result, Boustan and Margo model that every 1,000 white household departures led to just 50 new black homeowners. But in Birmingham, Alabama, with its large black population and numerous detached single-family homes, 1,000 white departures generated 450 new black homeowners.

Interesting claims though it sounds like white flight only accounts for 26% of the rise in black homeownership. What were the other factors?

Also, this article says little about how we might reassess white flight. Does this suggest white flight was partly okay because it led to new homeownership opportunities? Even if blacks were able to purchase these homes, wasn’t it still the case that a massive amount of wealth, financial and social, left urban neighborhoods? It seems like this research could be used to highlight the paradoxes of homeownership – it isn’t a perfect good even if it is a American social ideal.

Should every home improvement increase the value of your home?

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HGTV host Sabrina Soto discusses five home improvements that might actually lower the value of your home:

Converting bedrooms into other spaces: If potential homebuyers “see it’s a four-bedroom house, they want to go to the open house and see four bedrooms. You have to take the guesswork out,” says Soto. If you do convert a room, there’s one feature you should absolutely never mess with. Watch the video to find out what that is.

Hot tubs: Soto thinks inheriting someone else’s hot tub is a turn-off — and she’s not alone. “You’d be surprised how many potential buyers find them to be a little gross.” And once a hot tub is installed, it’s not an easy feature to remove from a deck or backyard.

Colored trim and textured walls: It seems like any potential homebuyer would see these features and know they can easily paint over them, but not so fast, says Soto. “I would much rather paint walls than trim any day — it’s a beast of a job,” she says. And textured walls are “a mess to sand down and remove. The fad is over anyway, so just let it go.” If you feel your trim is outdated, see the video for Soto’s tips on what to do.

Children’s theme bedrooms: Spending hundreds of dollars on a mural for your child’s wall is throwing money away. Not only will they outgrow it in a matter of years, but “you’re never going to get that money back when you sell, so just keep it neutral,” posits Soto.

Too much landscaping: Conventional wisdom says you want your yard to look as nice as possible, but heed Soto’s warning: you want to “keep up with the Joneses — but don’t exceed them.” To a potential buyer, gorgeous, overdone landscaping screams high-maintenance.

My question after reading this list: what if you simply want these features for yourself and not because it might add to your resale value? Granted, if you are looking to sell your house, you might not want to pursue these options. But, if you are looking to live in your house for a while, you might decide that one or more of these features is what you want.

The bigger issue is this: doesn’t a list like this perpetuate the idea that a home is primarily an investment? That is one way to view things but there are other reasons for owning a home.

If homeownership in the US isn’t about making a good investment, what is it really about?

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Politicians and others argue homeownership is a good financial investment. But, if it isn’t really a good investment, what is homeownership in the United States all about?

Politicians and pundits across the spectrum regard homeownership both as the best investment a family can make and a measure of national prosperity. But a significant majority of Americans believe differently. According to a 2012 Pew survey, 86 percent of Americans now believe the key to a middle-class life is a “secure job,” almost double the share (45 percent) who say the same about owning their home. To compare, seven out of ten respondents to a Time/CNN/Yankelovich survey back in 1991 said that homeownership was essential to middle class membership, while just one-third said that a white-collar job was required. Since 2004, the overall rate of homeownership in the U.S. has declined from 69.2 percent to 65 percent…

Of course, I’m by no means advocating that we put an end to homeownership altogether and become a nation of renters. My hunch is a homeownership rate of between 50 and 60 percent is just about right; and that’s not too far from where the U.S. is now. But we can’t hide from the fact that excessive levels of homeownership — either among nations or metros — seem to be associated with lower levels of innovation, productivity and economic development.

I wholeheartedly concur with Columbia University economist Edmund Phelps (I quoted him in my book The Great Reset) when he says, “it used to be the business of America was business. Now the business of America is homeownership.”  And, he adds, “America needs to get over its ‘house passion.'”

Americans like financial investments but they also like other aspects of homeownership. Here are a few other reasons:

1. Some have argued Americans like private spaces to the detriment of public spaces. Having a home that you control, and not just rent, is the epitome of this private space. Owning a home is viewed as related to independence and self-determination.

2. Americans like to consume and houses are another consumption object. When you own, you can put your own personal stamp on the property as well as shape the house into a reflection of yourself. (This is opposed to viewing homes primarily as dwelling places, not as individual expressions.)

3. Owning a home is historically linked to the American Dream. Being able to buy your own home demonstrates that you have made it. The American Dream may indeed change in the future but it takes time to overcome this decades-old inertia.

4. This may not come up much now but homeownership was viewed in the past as a bulwark against communism.

5. Building homes as well as buying and selling them is a big industry. There is a lot of money to be made – though homeowners themselves might not make much.

6. There are long-standing negative perceptions about renters including renters are often from less desirable segments of society and renters are less committed to a community because they are more transient and don’t have the same kind of investment in their property.

While the idea of investing in a home may soon fade, there are other influential reasons Americans choose to buy homes. Economics may be a powerful motivator but it isn’t the only one when it comes to homes.

Don’t think that buying a McMansion will make you happy

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A new book titled Happy Money: The Science of Smarter Spending suggests buying a nice home does not lead to greater happiness:

What could possibly be more satisfying than ditching that old starter home you and your spouse moved into during your broke newlywed years?

Two studies cited in “Happy Money” prove otherwise.

When researchers followed groups of German homeowners five years after they moved into new homes, they all wound up saying they were happier with their newer house. But there was one problem: They weren’t any happier with their lives. The same was true in a study of Ohio homeowners in which it turned out they weren’t any happier with their lives than renters.

“Even in the heart of middle America, housing seems to play a surprisingly small role in the successful pursuit of happiness,” Dunn and Norton write. “If the largest material purchase most of us will ever make provides no detectable benefit for our overall happiness, then it may be time to rethink our fundamental assumptions about how we use money.”

Regardless of whether someone owns a McMansion or not, this goes against a lot of the American Dream. Critics argue McMansions aren’t great purchases because of their poor design, environmental impact, poor community life, and other issues, yet people have continued to buy larger houses in recent decades. At the same time, some of these critics would tell McMansion owners to buy homes that better fit their individual needs. What unites these approaches to homes is the idea that people are better off having purchased a home. Perhaps they are in the eyes of society – indeed, people once argued homeownership would keep people from taking an interest in communism. But, if this research holds up, then perhaps we should retire the argument that individuals will be more satisfied as homeowners and stick to making a civic or community-oriented pitch for homeownership.

Projection: US homeownership rate to continue to fall

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One firm projects the homeownership rate in the United States will continue to fall through next year:

The homeownership rate in the second quarter was unchanged from the prior three month period, according to Census Bureau data released today. It will hit bottom at about 64 percent in the next year as families leave the foreclosure pipeline and enter rental homes, according to a May analysis by London-based Capital Economics Inc. It’s currently the lowest in almost 18 years after averaging about 64 percent for 30 years through 1995.

First-time buyers and minorities are among the groups that have seen the sharpest declines since the crash. While property ownership among senior citizens was little changed at about 81 percent, the share below age 35 that own a home fell to about 37 percent from almost 42 percent five years earlier.

The rate for blacks reached almost 50 percent in the second quarter of 2004 from about 43 percent in 1995, Census Bureau data show. By the second quarter of this year, it had dropped to 42.9 percent. The rate for whites fell to 73.3 percent in the second quarter, from 76.2 percent in 2004.

The good news: the projection suggests the bottom is about 64 percent. The bad news: there are still plenty of people caught in the foreclosure pipeline. This is a reminder that foreclosures aren’t just about people having to leave their current home; it also gunks up the market far down the road.

See charts of the trends, with the latest 2013 2Q data, here.

HGTV surprised when it finds Americans willing to give up vacations to improve their home

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A recent survey by HGTV has some interesting findings regarding what Americans think about their homes:

The collapse of the housing market in 2008 may have put a check on the “the McMansion” era, but HGTV’s first HomePulse Survey finds that consumers still hanker for more space in their homes.

Home improvement remains a priority, with 61% surveyed saying they would “choose to spend on their homes rather than on something else like a vacation or the latest electronics,” according to the research series commissioned by HGTV owner Scripps Networks Interactive and Vision Critical.

Adding to the overall square footage of their home is a top priority. More women (31%) are interested in updating their décor than men (17%). More men (19%) want to improve their in-home technology than women (3%). One in three of the 1,010 panelists surveyed said creating “a beautiful outdoor space” is extremely important to them.

“We expected the ‘HGTV HomePulse Survey’ to confirm that people love their homes and are willing to spend money to improve them, but we didn’t expect that they would be willing to give up something as important as a vacation to do it,” said Denise Conroy, senior vice president, marketing, HGTV.

Some 81% said “money spent on improving my home will show a good return,” and 66% felt “now is a good time to invest in my home.”

Overall, this suggests Americans are willing to continue to sacrifice for homeownership (though I would like to see more specifics about other priorities). This reminds me of an idea in the New Urbanist book Suburban Nation: Americans have a superior private realm within their homes and it appears they want to keep it that way.

It would be helpful to see more about the interest in adding square footage. Making an addition is not an easy or cheap thing to do. It might be simply easier to move to a bigger home but this is more difficult to do in a depressed housing market. An outdoor living space might help the home feel bigger without actually adding anything. Perhaps this indicates HGTV needs even more shows about how to maximize the existing square footage and make use of all the possibilities.

If you are curious, HGTV says it trickle out more results from the survey.

Holding a McMansion mortgage limits your American freedom and liberty

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Here is another argument why you should not own a McMansion: it limits your ability to be a free American.

Want to sever from your body an arm and a leg in the name of the American Dream? It’s certainly at odds with what the dream is supposed to be about. If the idioms ‘freedom’ and ‘liberty’ still reign supreme in the minds of Americans, a mortgage on a single family McMansion is losing its shine.

The lifestyle manufactured by the burbs lacks the luster it once held. Working incessantly to maintain payments on your suburban box and pay for gas to drive EVERYWHERE is less desirable for those who have the luxury of choice in today’s America…

I recently visited a very well planned subdivision. It had a small row of shops, a park, lots of trees and wonderfully manicured lawns as far as the eye could see. It felt false. It felt like the neighborhood committee was the Joneses that enforced the keeping up. In older neighborhoods there are intermittent shops, bars, community halls, schools and houses of all shapes and sizes. Some neighbors are house-proud and commit themselves to a fine garden and home. Others have bottomed out station wagon in their front yard. The lots are different sizes. The houses have assorted kitsch, architectural details. There are old people who have lived there since the Great Depression.

It’s time for an organic refit of those suburbs that reek of bland mass-market ideals. They come from a time that was most certainly thrown overboard in the 2009 housing crisis. Surely, the frugality that was thrust upon us can manifest itself in creativity!

I interpret this argument as an updated version of a decades-old suburban critique. First, the old part of this critique which was quite common in the 1950s. Living in the suburbs stifles your creativity and ability to innovate. This is because all of the houses look the same, everyone has to drive, the zoning only allows for one use at a time, and conformity is encouraged. In this view, you can’t really be an individual in the suburbs because the environment pushes everyone to be the same.

The updated part of this argument is that owning a single-family home may not be worth the cost. For the last 100 years or so, the United States in both policy and culture has pushed homeownership and its ties to individualism and being part of the middle-class. But, taking on a big mortgage limits your options. Indeed, even conservatives like Dave Ramsey might agree with this critique as there has been an increase in advice to avoid taking on unnecessary debt.

In the end, I suspect this argument hinges on what you consider American freedom to be. Is it the “right” to get ahead and purchase a nice home in the suburbs where you can raise a family? Or is it the “right” to be an individual outside of the mass market and mass society and enjoy and contribute to vibrant communities?

National Association of Realtors commercial in support of tax incentives for homeowners

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The National Association of Realtors is running a new television commercial supporting tax incentives for homeowners. Here is the money line toward the end of the advertisement:

The National Association of Realtors supports maintaining homeowner tax incentives, because they make homeownership more affordable for more families.

There had been talk in the last few years about getting rid of the mortgage interest deduction (see an example here during the fiscal cliff negotiations) but I haven’t heard anything more recently. Is the National Association of Realtors trying to get out in front of this possible issue?

It is interesting how the ad plays on some common themes of American homeownership such as the home as a castle and that kids should feel safe at home instead of having to worry about whether it is affordable. Who exactly is the evil dragon in this ad – banks? Government officials? Putting kids out in front here is a smart move – who wants to deny children a nice home that their parents own?

Replacing the “master” in master bedroom

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The term master bedroom is falling out of favor in the Washington D.C. area:

A survey of 10 major Washington, D.C.-area homebuilders found that six no longer use the term “master” in their floor plans to describe the largest bedroom in the house. They have replaced it with “owner’s suite” or “owner’s bedroom” or, in one case, “mastre bedroom.”

Why? In large part for exactly the reason you would think: “Master” has connotation problems, in gender (it skews toward male) and race (the slave-master).

Enter the owner’s suite…

Winchester, Pulte Homes, NV Homes and Ryan Homes (both under the NVR Inc. umbrella), Van Metre Cos. and D.R. Horton Inc. have all replaced “master” in their floor plans, some more recently than others…

Over time, “master” will be filtered out entirely, he said. The change is “just working through the industry, and finally, bingo, we got it.”

Randy Creaser, owner of D.C.’s Creaser/O’Brien Architects PC, said he ditched “master” in the early 1990s in his home designs. He vaguely recalled a few lawsuits brought against builders over the phrase. Pulte spokeswoman Valerie Dolenga said Pulte made the shift maybe three or four years ago.

How long will it take to get through the entire industry? This clearly hasn’t reached HGTV yet…

More young couples buying a home together before getting married

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Buying a home together before getting married is becoming more popular:

Now, the results of a soon-to-be-released survey from Coldwell Banker indicate that today’s young couples are also more likely to buy homes together before marriage. Nearly one-quarter (24%) of polled married couples ages 18 to 34 said that they purchased a home before they were married. Among married couples ages 45 and up, just 14% said that they bought a house together before tying the knot. Couples in the Northeast stand out as particularly likely to buy real estate before getting hitched: Just 60% in the survey waited until marriage to purchase a home, compared to 72% in the tradition-minded South, where people tend to marry younger (and therefore, poorer).

In a phone interview, Dr. Robi Ludwig, a psychotherapist and Coldwell Banker’s official “lifestyle correspondent,” said that buying a home together has become “the new engagement ring” for some young couples. They’re committing to purchasing real estate as a couple regardless of whether they’ve set a wedding date. Some even forego lavish weddings and honeymoons in order to cover the down payment and a chunk of the mortgage. “Millennials have a very pragmatic state of mind,” said Ludwig. “They know that they have an opportunity here, with low mortgage rates and low housing prices. And they think, ‘We’re moving toward marriage anyway, so let’s buy.’ It makes sense.”…

For young people who are in committed relationships and interested in homeownership, Ludwig said that the benefits associated with shopping for a home together go well beyond the prospect of owning property. While considering the very big step of buying a house, couples are forced to deal with exactly the kinds of issues that they should discuss before marriage. “When purchasing a home, there is a need to be transparent on many levels,” said Ludwig. “You must be upfront with your partner, and you also have to get real honest with yourself.” It’s possible to get married without actually knowing how much money your wife earns, or how much credit card debt your husband accrued in college. Salaries, debt, and more are all on the table when the time comes to get a mortgage, however.

Couples also must obviously figure out where they want to live, and envision how long they’re likely to live there. Even topics like how many kids you want to have come up—because that will factor in to the location, size, and style of home you buy. “It’s easy for couples to not think or talk about these things,” said Ludwig, “but they’re forced to once mortgages and banks are involved.”

This seems like an extra-expensive way to learn about each other before marriage. But, it does fit with a narrative that couples should be economically secure before getting married. Plus, couples do need a place to live…