Tuesday, July 23, 2013

The Benefits of Home Ownership

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.
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.
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.
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).

3800 N SADDLEBROOK PL 906 COLUMBIA, MO 65202

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