[This article first appeared in the Chattanooga Times Free Press]
Q: Does home ownership really matter, and is buying a home really a good decision?
A: During this holiday season, it's the perfect time to answer this question. There is a reason home ownership is called the American Dream.
Home is where we make memories, build our futures and feel comfortable and secure. Home ownership provides important social benefits. It provides shelter and security for families and fosters involvement in community life. Homeowners do not move as frequently as renters, providing more neighborhood stability. In turn, involvement in community quality-of-life issues help prevent crime, improve childhood education and support neighborhood upkeep.
Homeownership is a big deal. One-fifth of the gross domestic product of the U.S. economy is tied to the housing sector, according to a recent statement by FHA Commissioner David Stevens.
However, in the wake of current economic conditions, some critics have questioned the value of owning a home for families and individuals, and suggested that our government rethink its support of policies and programs that support home ownership. Some have even challenged the deductibility of home mortgage interest from income tax.
Owning a home has long-standing government support in this country because home ownership benefits individuals and families, strengthens our communities, and is integral to our nation's economy.
The Federal Housing Authority, Federal Home Loans Banks and Fannie Mae were all created during the worst economic crisis our country has ever faced in the Great Depression.
Lawmakers back then understood the value of home ownership in fostering communities and building wealth over the long haul. For generations, the government has provided federal incentives to help families fulfill the dream of home ownership.
Owning a home remains one of the best ways to build long-term wealth, providing both equity accumulation and tax benefits over time. Home ownership is how many American families begin to accumulate wealth. According to recent data from the Federal Reserve Board, a homeowner's net worth is 11 times that of a renter's.
Americans are skeptical about the economy, about the role of government and about their children's prospect for the future.
The one thing Americans are not skeptical about is the promise of the American Dream and of home ownership's role in that dream.
In fact, according to a recent survey by the National Association of Realtors, nearly eight out of 10 Americans believe buying a house makes good financial sense, and more than half of current renters said that owning a home is a priority of their future.
A fixed-rate mortgage might last 15 to 30 years; renting is forever.
A home is an investment. A rental property is an expense. Home ownership allows you to build up equity over time, which can make buying a home a better value even though it might seem more expensive than renting in the short-term.
As a renter, you're subject not only to rising rents, but also to the sale of the property. As an owner, your home belongs to you until you are ready to move on.
Also, under current tax laws, homeowners can enjoy tax-free profits up to $500,000 from the sale of a primary residence that they have occupied for two of the last five years. If owners are single, they can enjoy tax-free profits up to $250,000.
Critics are using the mortgage subprime meltdown and foreclosure crisis to question home ownership's place in the American Dream and whether the federal government should provide incentives to encourage it.
This is a false argument that is nothing more than a tactic to divert the attention away from the real problems. Home ownership didn't create the mortgage meltdown and foreclosure crisis -- Wall Street greed did and irresponsible lending practices.
Truly helping the housing industry means doing right by homeowners, both by protecting those caught up in the foreclosure mess and also ensuring that those opportunities remain for people who can afford to buy a home. Anyone who is able and willing to assume the responsibilities of owning a home should have the opportunity to pursue that dream.
No question about it, home ownership is a big investment, maybe the largest you'll ever make. But over time, it's an investment that pays for itself over and over. I just checked in with Wikipedia and Merriam-Webster. It still fits the definition. Home ownership is the "American Dream."
Get answers to questions you might have about real estate from Randy Durham, who is president of the Greater Chattanooga Association of Realtors and a broker with Keller Williams Realty. His column appears on Sundays. Send your questions to Business Editor John Vass Jr. at email@example.com.