Home Values Are Down, and Not Just at the Bank

The federal government took direct action in the early 1930s to bail out the mortgage industry and help beleaguered homebuyers. Along with other federal initiatives, Congress chartered the Federal National Mortgage Association (FNMA, nicknamed Fannie Mae) in 1938 to increase the money available for mortgages through a more robust secondary mortgage market.

Still, it wasn't until after World War II that the percentage of homeowners in the United States began to climb significantly. The G.I. Bill, which guaranteed house loans taken out by veterans (of whom there were some 16 million), and large-scale construction techniques made it cheaper to buy a suburban cottage with a postage-stamp back yard than to rent in the crowded cities. Americans flocked to live in small ranch houses and Cape Cods built on slabs.

In 1950, for the first time in the United States, a majority of households -- 55 percent -- were owners. In the postwar era, the morality of home ownership took on many meanings. "No man who owns his house and lot can be a communist," declared the nation's largest home builder, William Levitt, because "he has too much to do." Others, including John Keats, author of "The Crack in the Picture Window," condemned the homeowners' march to suburbia as mindless and possibly dangerous conformism. The homeowners themselves took a practical view. Levittown, wrote the residents of that New York suburb in the Levittown Tribune in 1957, "is a veritable wonderland for raising children." To them, it was the baby boom, not the housing boom, that mattered.

In the last 30 years, during what may go down in history as the great bull housing market, homeownership became ever more popular, largely because the housing market was gushing money. In 1970, Fannie Mae went private, and Congress created the Federal Home Loan Mortgage Corp. (Freddie Mac) to offer some competition in the secondary mortgage market. Until recently, both were fabulously successful in buying mortgages from lenders, bundling them into securities and selling the securities to investors -- doing hundreds of billions of dollars of business. The federal mortgage-interest and property-tax deductions -- among the few deductions to survive President Ronald Reagan's 1986 income tax overhaul -- provided financial boons to homebuyers.

Meanwhile, those who made out well from the rising stock and bond markets and the high-tech boom now had spending money. The newly wealthy could afford the good life, and many found it by purchasing a fine house, with cost being little object. The American homeownership rate hit a record 64 percent in 1980. By 2004, the rate had climbed to an astronomical 69 percent. For upper middle-class Americans, renting came to be seen as socially deficient, like taking the bus or not holding a job.

But the experience of owning a home, that cherished ideal of Americans for two centuries, no longer engendered the regularity, good conduct and economy the Victorians had thought it would. Outright greed took hold. Ordinary homebuyers proudly spoke of "flipping" houses: buying a home -- maybe not even living in it -- and soon thereafter selling it for the quick profit. Others borrowed against their homes -- to finance still other purchases. As Presidents Bill Clinton and George W. Bush urged higher homeownership rates, real estate operators pushed subprime loans, no-document loans and hidden adjustable rates on the gullible and the avaricious. Virtually anybody could and had to own a home.

And now the party's over. So maybe we should rethink what it means to own your own home. It's not too late. We could return to treating a house as a shelter for the family or a sanctuary in troubled times rather than as an ATM. We could think of it as a source of emotional security instead of a collateral security. Or we could just rent.

Alexander von Hoffman, a senior fellow at the Joint Center for Housing Studies at Harvard, is writing a history of low-income housing policy in the United States.