Economy has shifted Americans' attitudes about homeownership and money

Lucia Olivera would like to fix up her condo but will save instead.
Lucia Olivera would like to fix up her condo but will save instead. (Steve Hay)
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By Sadie Dingfelder
Special to The Washington Post
Saturday, April 10, 2010

Since 2007, Americans have suffered through the worst economic conditions since the Great Depression. The real estate market collapsed, banks failed and unemployment became commonplace. As many people who lived through the privation of the 1930s developed lifelong frugality, we, too, may emerge from the recession with our beliefs about real estate and personal finance permanently transformed.

"Our attitudes, particularly toward homeownership and housing, are changing, and they are changing quickly," said Richard Florida, an urban studies professor at the University of Toronto, who explores the phenomenon in his book "The Great Reset," which will be released April 27 by HarperCollins.

In fact, the number of people who think that homes are safe investments has fallen 13 percentage points (to about 70 percent) in the past seven years, according to a poll released this week by Fannie Mae, a mortgage finance company that has operated under federal conservatorship since 2008. A survey by the National Foundation for Credit Counseling last year had dovetailing results, with about half of respondents saying that home ownership is not a realistic way to build wealth. And the American homeownership rate is on the decline, from a high of 69 percent in 2004 to 67 percent in 2009, according to the Census Bureau.

Florida is among a growing number of researchers who think that these are signs that the United States is becoming a nation of renters, and that the shift could be good for our pocketbooks, the e conomy and even our happiness. It's a radical idea, one that goes against nearly a century of tax policy, not to mention the fact that owning a home has long been central to middle-class American identity.

According to Florida, every time the country experiences a great financial upheaval, the way we house people changes. In the 1870s, following the hardships of the Civil War era, Americans moved from farms to cities in droves. In the 1950s, during the postwar baby boom, we populated suburbs and reenergized the economy by purchasing houses, appliances, cars and fuel. Now, he said, people are moving back to cities and renting rather than buying homes. That will free them up to spend money on things other than mortgages and gas, he said.

"To grow a new economy that is going to allow . . . people to buy new experiential goods, to consume more art, culture and leisure, and buy all these new technologies, we are going to have to enable people to spend less money on housing," Florida hypothesized.

Kara Arsenault, 29, may exemplify this trend. Although she and her husband could buy a home in the suburbs, they opted to rent in the city.

"We have been casually looking at places, but essentially for the neighborhoods we'd be really excited to live in, the houses that are for sale right now, we can't afford," she said. Arsenault said she loves living on U Street because she is surrounded by dozens of restaurants, theaters and music venues.

"We both have pretty busy work hours, my husband particularly, so the time we have to hang out together is pretty precious," she said. "We decided right now we want to spend that time going out to dinner and going hiking and enjoying D.C., rather than fixing up a house."

Though she has seen interest in homeownership decline in recent years, Marian Seigel, president of Housing Counseling Services, a D.C. nonprofit group, thinks it's a short-term trend.

"People are going back to buying a home as a place to live and a savings mechanism, perhaps," she said. "But ultimately, people are prone to making the same mistakes and . . . I wouldn't be surprised to see mass hysteria around home-buying happen again."

That said, Seigel hopes that today's more cautious attitudes toward homeownership persist. Instead of seeing homes as a surefire path to financial independence, today's home buyers have a greater appreciation of the downsides, including the commitment to maintenance and mortgage payments, the loss of flexibility, and the potential for loss of value.

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