Are we Putting Too Much Stock in the American Dream ?

By
Real Estate Broker/Owner with IL Real Estate Specialists
https://activerain.com/droplet/4NdC

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...

 

 

 

 

Posted by

 

Jack Lewitz Broker Owner

http://www.ilrealestatespecialists.com

 Email Jack Today: jacklewitz@sbcglobal.net

 Call Jack Today ! Cell: 708-309-5334 Office: 847-674-6710

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Rainer
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Michael Thacker - Re/Max Real Estate Center - Louisville
Re/Max Real Estate Center - The Thacker Group - Louisville, KY
Your best friend who just happens to be a Realtor

Very interesting post. Not sure of how I feel about it all, but you did hit some points that I had not considered. Thank you for sharing!

Michael

Michael Thacker - Louisville Realtor

Jan 27, 2016 01:58 AM #1
Rainmaker
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William Feela
WHISPERING PINES REALTY - North Branch, MN
Realtor, Whispering Pines Realty 651-674-5999 No.

Jack , you have hit the nail on the head....It is because of the idea everyone whould be able to own a home is why we got into the mess we were in...Blame the banks if you will, but during the Clinton admin it was dictated taht more people should be able to own and the loan ratio changed many people who could not really afford to own did and lost their homes.

Jan 27, 2016 10:12 AM #2
Rainmaker
2,418,126
Evelyn Johnston
Friends & Neighbors Real Estate - Elkhart, IN
The People You Know, Like and Trust!

That report is amost 3 years old, what are they saying now?

Jan 28, 2016 09:43 AM #3
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Rainmaker
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Jack Lewitz

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