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How Homeownership Has Changed in America And Why You Shouldn't Give Up on Buying

In one short decade, home ownership has gone from being the Holy Grail of middle-class financial achievement to a very risky financial ball-and-chain.

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Changes in financing rules also fed an accelerating market. "Refinancing was unusual and generally expensive in the '70s," Baker continued. "In fact, many mortgages had large penalties for pre-payment. This was outlawed in the late '70s or early '80s, so it became much easier to refinance mortgages" -- which, in turn, encouraged people to view their houses less as cherished family homesteads and more as fat and growing piggy banks.

In addition, as the Boomers entered the housing market en masse in the late 1970s, houses started to appreciate faster than the rate of inflation, which launched the flipping mania that flourished right up until the 2008 crash. And alongside all of this, the Reagan-era assaults on both unions and public-sector jobs undermined the long-term employment stability of millions of Americans, further eroding people's willingness to become too attached to their homes.

(A side note: the intergenerational dislocations caused by this attitude shift were also the spark that launched the conservative tax revolt, which began with California's nefarious Proposition 13 in 1977. As the market heated up, the tax assessments on retirees' homes started rising so fast that their fixed incomes no longer covered their property taxes. They fought back by lining up behind conservative tax warrior Howard Jarvis, who sold Prop 13 with the argument that it would let seniors stay in the homes they'd loved and invested in their entire lives -- and which the Big Evil Government was now trying to take away.)

The upshot was that by the mid-'80s, the old expectation that a middle-class life would be defined by one job and one house had almost completely given way to a new, harder-edged view. A house wasn't anything to get emotional or romantic about, let alone to commit your life to. Beyond a certain point, you didn't make the place pretty or comfortable for yourself; rather, you focused on the improvements (an updated kitchen, a new deck) that would increase your profit at the next sale. It was just a financial instrument you bought, hung onto for a while while it appreciated, and then sold at a hefty profit so you could move on to something better.

And above all, we learned the lesson: do not fall in love or get all sentimental about it, because it will only hurt that much more on that inevitable not-too-far-off day that you change jobs, end this relationship, or find a better deal and decide to move away.

Back home again

Now that the boom has gone bust, a lot of Americans are left wondering if there's any reason at all to buy a house now. Seen from the perspective of the high boom years, home ownership now offers no value proposition at all. If it's not going to double your money in a decade, then what's the point? 

And yet, in spite of it all: some of us are still getting out there into the market, and closing deals. You have to ask: what in the hell are they thinking?

Despite the fact that homes are no longer sizzling investments, the bald fact still remains: you need a place to live. And in this deflated market, some people are doing the math and coming to the surprising realization that owning a home in today's market can be cheaper than renting.

Follow me here. First, there's the matter of the down payment. If you've got enough cash on hand for a healthy down, you're probably already painfully aware that there aren't many places to invest that much money these days that will yield any kind of reasonable return. So why not tuck it away into a comfortable place of your own that will, at the very least, make you a little happier every day that you're in it? It may not grow much -- but at least if things go to hell, you'll have a roof over your head, and you can call it your own.

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