Homeownership Equals Stability

America is emerging from a devastating housing crisis, with 5 million foreclosures and home prices declining 22 percent across the country. Yet today, there are 74 million owner-occupied housing units. The vast majority of Americans held their homes and made their mortgage payments throughout the crisis. Home prices have now recovered about 45 percent of their value and fewer than 10 million homeowners are now underwater.

Surveys show that Americans still strongly believe in homeownership. Nearly 9 in 10 either owns or aspires to own a home. About two thirds of older Americans who never graduated from high school are homeowners.

Homeowners have much more wealth than renters when they hit retirement age. The median value of assets owned by older homeowners is $273,000, with home equity representing about one-half of this wealth. By comparison, older renters have median assets of only $3,000, with 44 percent paying rent that makes up more than 30 percent of their income. Of course, homeowners have higher incomes and more nonhousing wealth than renters. Nonetheless, owning a home helps build equity, even if just by paying off the mortgage over time (only 30 percent of older owners have an outstanding mortgage). Retirement is a distant dream for most older renters without large amounts of government assistance.

Government assistance to support homeownership is important, but we need to be smarter. Government stability and liquidity for the mortgage market is important in times of crisis, but private capital should take the first losses to protect taxpayers. Programs to encourage saving for down payments and to make mortgages portable could also help. Finally, we need to change the rules to discourage younger homeowners from borrowing against accumulated home equity until retirement. With a new set of policies, we can learn from the crisis and continue to make homeownership accessible for future generations.

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