Plain and simple, owning a home can improve your quality of life, provide stability and give you a sense of control you just can't get from renting. You have a place to live when you rent, but buying is something much deeper – and better.
Research has consistently shown the importance of the housing
sector on the economy and the long-term social and financial benefits to
individual homeowners. The economic benefits of the housing market and
home ownership are immense and well documented. The housing sector
directly accounted for approximately 15 percent of total economic
activity in 2011. House hold real estate holdings totaled $16 trillion
in the last quarter of 2011. After subtracting mortgage liabilities,
net real estate household equity totaled $5.9 trillion. In addition to tangible financial benefits,
home ownership brings substantial social benefits for families, communities, and
the country as a whole. Because of these societal benefits, policymakers
have promoted home ownership through a number of channels. Home ownership has
been an essential element of the American Dream for decades and continues to be
so even today. The purpose of this paper
is to review existing academic literature that documents the social benefits of
home ownership. Furthermore, this paper examines not only the
ownership of homes, but also the impact of stable housing (as opposed to
transitory housing and homelessness) on social outcomes, looking specifically
at the following outcome measures:
·
Educational achievement;
·
Civic participation;
·
Health benefits;
·
Crime;
·
Public assistance; and
Property maintenance and improvement
Trends in Home ownership
The prevalence of
home ownership is not universal. Across different demographic groups and even
within different regions of the country, the home ownership rate varies widely.
Many of these gaps are long standing. Therefore, the social
benefits of home ownership differ widely from community to
community.Less than half of Americans owned their homes at the beginning of the
20th century. Home ownership
remained fairly stable until the onset of the Great Depression, during
which many homeowners lost their homes. In the subsequent two decades, the
home ownership rate rose dramatically with the rate easily topping 60 percent by
1960. Modest gains were made during the 1960s, 1970s and 1980s. However, during
the early 1990s, the home ownership rate once again trended upward as mortgage
rates steadily declined and the economy expanded at rates not experienced in
many years. By 2004, 69 percent of Americans owned their homes a record high. The
home ownership rate has since declined to 66.0 percent as of the end of 2011.
Home ownership and Parenting
Though the home ownership effect on success of children has been
debated in academic literature, a recent study approached this question from a
different perspective. Instead of trying to account for unobserved
characteristics of homeowners, they examined whether there is a relationship
between home ownership and engaged parenting behaviors in the home, school, and
wider community for low to moderate income households. Researchers focused on
four variables: parental school involvement, frequency of reading to child,
child's participation in organized activities, and child's screen time
(television viewing and playing video games).Altogether, these measures reveal
parenting behaviors broadly believed to be associated with positive child
outcomes. The authors propose that home ownership provides for engaged parenting
practices in two ways: economic and psycho-social. The economic impact of
home ownership refers to the positive impact of nurturing neighborhoods. While
both home owners and renters may aspire to be engaged parents, home owners
likely live in neighborhoods with more opportunities for school involvement or
participation in neighborhood activities. The psycho-social component refers to
the idea that being a home owner may limit the severity of economic
hardships and the degree to which financial hardships result in psycho-social
stress and disengaged parenting.
This idea works through two channels. First, low- to moderate-income households that are able to buy a home have already found ways to manage
their limited finances in order to become eligible
for a mortgage. If such effective strategies are sustained, it could help reduce economic pressure. Second, they have greater access to formal
credit to sustain the household during times of economic hardship, putting less
strain on familial relationships and parenting. Home
owners in this study have higher adjusted net worth and liquid assets than renters. The authors, therefore, assume that home ownership promotes
parental engagement by giving parents more options
for managing financial hardships and reducing the severity of financial hardships when they do occur, thereby reducing stress and
disengagement from children. It is important to emphasize, especially
considering the housing crisis, that all of the homeowners
studied received prime fixed-rate 30-year mortgages with a 38% debt-to-income criteria. Therefore, these home owners have not experienced the financial
shocks of interest rate adjustments or the stress of
excessively high interest rates associated with many sub-prime mortgages. The results of the study suggest that children of selected
home owners are more likely to participate in organized activities and have less
screen time when compared with renters. However, home
owners were found less likely to read to their children than renters. There was no effect of home ownership on parental school involvement. On
the whole, their findings suggest that home ownership and financial stability
may create opportunities for parents to engage in
some positive parenting behavior. As noted, the group of home owners surveyed in this study was less likely than renters to report financial hardships.
The authors suspected that these financial stressors may
reduce the ability of renters to afford organized activities for their child. Screen time, on the other hand, is relatively inexpensive for most
families.
The intangibles are tough to measure, but there are other benefits you can quantify:
Financial investment:
Your monthly mortgage payment creates equity for you, not your landlord.
Your monthly mortgage payment creates equity for you, not your landlord.
The interest on your mortgage is a tax deduction:
While this isn't a reason in itself to buy a home, it's nice to get a break at tax time.
While this isn't a reason in itself to buy a home, it's nice to get a break at tax time.
Fixed monthly housing payment:
If you opt for a fixed-rate mortgage, the monthly rate of your mortgage won't change for the length of the term.
If you opt for a fixed-rate mortgage, the monthly rate of your mortgage won't change for the length of the term.
Look for a house you can stay in long-term; one that will “grow” with your family and needs. The financial benefits of owning increase over time.
Look for an agent who understands your lifestyle. Make sure the agent knows the neighborhoods you're interested in, and can answer questions you'll have about the location.
Tax-free gain:
When it's time to sell your home, you don’t pay taxes on the proceeds of the sale that are above what you paid (with some restrictions – see information on capital gains).
When it's time to sell your home, you don’t pay taxes on the proceeds of the sale that are above what you paid (with some restrictions – see information on capital gains).
Go to http://www.realtor.org/reports/social-benefits-of-homeownership-and-stable-housing for more information