Recession tales: Forget housing as an ATM

Will the American Dream of home ownership go the way of the myth that our streets were paved in gold?

Home ownership has long been a milestone rung on the ladder of success. Much as we use birthdays to measure our personal progress toward life goals, buying a home of your own has been the way we announce to the world that we have arrived.

Throwing in tax incentives like mortgage interest and property tax deductions just sweetened the pot. If you wanted to keep up with the Joneses, you added a bigger deck whether you needed one or not.


But will that remain true as the country heads into the future? Will the banking system right itself enough to actually start making mortgage loans again? Will we become a nation of renters because required down payments are more than an Average Joe can accumulate in one lifetime?

And perhaps an even bigger culture change will contribute to the dream's demise: Will the public be content with a house merely being a home and not an ATM machine from which it pulls out equity for vacations and new boats?

Those and other questions will determine whether home ownership is a phase that our country passed through like Prohibition or whether the country's very value system is founded on the premise that we all need to own our domicile, as two-thirds of us already do.

But make no mistake, whatever happens, it will be the government's doing. Our government has shaped the housing industry from the very beginning, propping it up with low-interest GI loans after the war, social engineering us with those first FHA loans that emptied our cities and built up newly created "safer" suburbs. And even today, the government is the giant hand that keeps the mortgage industry in motion.

Thomas J. Sugrue, University of Pennsylvania housing expert, wrote in the Wall Street Journal this summer that for many people, the new American Dream should be renting. He is writing a book on the history of real estate in American and quotes mass suburbia builder William Levitt -- remember all those Levittowns post World War II? -- saying "no man who owns his own house and lot can be a Communist."

That Cold War attitude was certainly shared by many politicians, for whom expanding ownership of homes was critical to the nation's identity.

Some argue that President Obama doesn't share those politicians' passion for having us own our palaces. As Candace Evans, editor of DallasDirt, a Dallas-based real estate blog, wrote, critics say he has put more resources into the housing rental market and promulgated policies that have allowed people to lose their homes in foreclosures while tightening standards in mortgage lending.

It's certainly true that the current tough love lending standards are keeping a lot of people out of the jumbo market -- that is, stopping them from buying million dollar homes. If you have to put down 30%, who would want to tie up $300,000 in a house that isn't likely to appreciate in value?

But still, most of us still love our homes. Nine out of 10 homeowners in a Pew survey said their homes were a comfort in their lives. It may be that owning your own home provides a sense of security that renting just doesn't give you. It may just be an ilusion, but owning your own little slice of lawn provides a personal sanctuary that can't be found in higher-density housing.

And, history shows us that we've walked down this road before. Half of all U.S. mortgages were in default during The Great Depression, which is when Herbert Hoover and Franklin Roosevelt created government programs to help save homeowners from foreclosure. So for now, all eyes should be on Washington.