Homeownership: Is it Worth the Leap of Faith?

Times have changed since the 30-year mortgage formed the crux of the American Dream. Here’s some 2015 perspective on “buying in” to the housing market.

Those who work in the housing-sales industry are putting a lot of effort into creating positive vibes around homebuying right now. For example: Last week the National Association of Realtors made a murky claim about “boomerang buyers,” roughly 1 million Americans who lost their homes during the recession and likely have purchased new homes. (See: “Are they ready to buy again?”)

After all, there are those who believe that markets work on faith and faith alone. If more people believed in housing and trusted the market, they’d jump in, and everything would be great. Folks who believe this often have choice words for people like me when we continue to write about the bumpy recovery and dare to suggest that homebuying isn’t for everyone.

We’re both partially right. Confidence definitely would help the market. After all, taking out a 30-year loan is probably the biggest leap of faith many Americans will ever make. The problem is that the horrors of the Great Recession remain fresh in the minds of many, particularly maturing millennials who should be first-time buyers right now but instead are serial renters. Or parents’ basement dwellers.

Me, I prefer to think the real problem isn’t a lack of faith, but a lack of money. I’ve written many times about the stark truth of wage stagnation. Wages haven’t risen in a generation, while prices have risen a lot, even accounting for the dip during the recession. Give people better wages, and they’ll jump into the housing market.

Of course, it’s easier to make an ad than to change a structure, so you’ll continue to hear a lot more about positive sentiment than wages from the housing industry.

This generating of good vibes is taken to a new level, however, by a recent TV ad by the folks at Quicken Loans. It extols the virtues of bravery.

“The American Dream is terrifying,” says the narrator. “American history is the history of the scary thing being the exact thing we have to do.”

Then, in a leap that creates its own sarcasm, the ad compares our nation’s most incredible accomplishments with choosing buying over renting.

“Cross that ocean. Walk on that moon. Sign the 30-year mortgage on a home.”

I’m glad Quicken clarified which moon it means. Because with advice like this, who knows what inter-galactic crossing the firm could have been referencing? The ad closes by urging people to “buy in,” while showing video of folks bravely diving into the ocean.

Sure, buying a home is the right thing for some people at some times. But I think we’ve all learned that buying a home is not the no-brainer our parents thought it would be. Thirty-year mortgages and homeownership made sense when people had 30-year careers.

But the nature of work has changed dramatically, and the next decade will bring even bigger change. Workers are disposable now, meaning portability is the most powerful asset a worker can have. In other words, you’ll probably have to move — a lot. Moving is hard when you are latched to an asset that may or may not be disposable depending on the timing of the next downturn.

That’s just one of many reasons that the choice to buy a home involves a challenging calculus that is as personal as home shopping itself. No, the choice to sign a 30-year mortgage should not be compared to humankind’s greatest achievements. It should not be labeled “brave.”

What the housing market needs right now is wisdom, not patriotism. Don’t “buy in.” Make a smart choice for you and your family.

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Stacy Johnson

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