As a Realtor I bought into the ideas that Buying A Home is the American Dream. After being in business for over 20 years and seeing the ups and downs of the housing market I think American's have litterally put too much stock into the concept of Home Ownership as the American Dream.
In February 2013 Bloomberg Busines wrote an article called U.S. Homeowners are Repeating Their Mistakes. The article states the Middle Class has too much money invested in their home. According to Bloomberg Business the wealthiest 1% invest 30% of their Net Worth on their principal residence where the middle class is spending upward to 67% of their Net Worth.
As a realtor we know a home is a commodity but something that is not a liquid commodity. Economist call a home " A Consumption Good". You live in your home and hopefully your home value will grow and it becomes a nest egg for the future.
The problem is buying too much of a home and have too much debt tends to put people at risk. According to Bloomberg, from 2007 to 2010, the median American household lost 47% of its wealth while the Richest Americans declined only 18%.
Bloomberg goes on to say the problem is compounded when homeowners started to re-finance and borrow against their home equity. With low interest rates it was easy to borrow and refinance. Now the money is spent, cash reservers are gone and home values are not appreciating fast enough.
Another challenge is the Interest Deductions Americans use. The NAR supports and spends alot of money lobbying to suport Interest Deductions for Americans but here is the problem. The interest deduction actually encourage people to invest more money into their homes and goes contrary to this article stating we already invest too much money in our homes.In 2008 Senator Barak Obama introduced a flat credit which cut your tax bill by a fixed amount. This bill if passed would have slowed down the growth in the housing market and would have forced people to re-consider buying more expensive homes because the flat tax would have been the same for a expensive or less expensive house.
The bottom line is Americans need to re-think the American Dream and Home Ownership. While I think it is safe to buy a home I think it should not be considered your only investment. I think Americans should should save more, invest more, buy less, consume less, and enjoy more and put less stock in the American Dream...