The Upside of Home Ownership

I won't try to argue economics with Felix Salmon. Well, maybe a little bit. We've been bantering about the benefits and costs of home ownership, especially in the current environment of the subprime mess and declining home costs, at least in some markets. I noted the financial and social benefits of home ownership, but failed to link to the social benefits. Here's one link.Granted, these studies are assembled at the website of the National Association of Realtors which is not exactly a disinterested party but that doesn't make them wrong. The social advantages to home ownership seem well documents. Felix makes the point that in a subprime environment where lots of people get in on the action who can't afford it, those advantages might be diminished. Perhaps, although you could argue that the transformative effects of home ownership might extend to the new subprime owners, too.

On the question of wealth, Felix notes that there are many scenarios where renting is better and points to the New York Times calculator. Maybe I'm a dimwit, but I found it hard to come up with a scenario where, over a lifetime, you'd be better off never having owned a home. Yes, there may be particular points on the curve where one outweighs the other but it doesn't take much appreciation--which, over a lifetime, seems inevitable even if there are long periods of stagnant or falling home prices. Certainly rents can rise and fall, too.

I think we're mostly in agreement here. The subprime crisis is a real mess. The home mortgage deduction and others skew the market, although I don't see how you can get rid of it in this environment or quickly without huge social disruption. I've been a longtime critic of the GSEs--government sponsored enterprises like Fannie Mae--as a case of private profit and socialized risk.

But, that said, over a lifetime I find it hard to see how you're better off never having owned a home. At some particular times, renting is better, yes. Over 30 or 40 years? It doesn't seem like much of a contest. I don't think it's surprising that so many people want a home of their own.