Tuesday, February 7, 2012 / by Nathan Clark
Recently, however, home builder sentiment picked up. On average, builders across the United States are more optimistic about the market now than they’ve been in over four years.
I had a conversation recently with someone in the home building industry, and he said that builders have held on to land even if they’re not building homes on it. This is different than how the business typically goes, as in a normal market, the carrying costs of holding the land have traditionally make it less profitable to buy, build and sell.
Builders, the man said, are waiting now for demand to become stronger before they build new homes on land they have. They do, however, expect to be busy when demand returns. It was interesting that he added demand WILL return because, he said, “homeownership still matters to people.”
It would be hard to find a real estate professional who wouldn’t agree; just about everybody in the business believes that homeownership matters, or else they wouldn’t be in the business. Sometimes, though, it’s hard to remember that as homeownership rates dip below normal levels, as they are now.
But even as homeownership rates are lower than normal, surveys indicate that people do still want to own homes. In fact, it’s often the sentiment of an overwhelming majority of people who respond to the surveys. Homeownership does still matter.
It matters in part because for most, it still remains part of the “American dream.” The real estate bubble and financial crisis might have blurred the vision of white picket fences and pies cooling on window sills, but the vision is not obliterated.
Why? Well, aside from the kind of intangible “pride of ownership” feelings that have always been used so frequently, there are still kids who need yards to play in, and solid school systems to attend. There is still a recognizable feeling of community in neighborhoods that are full of homeowners. There are still tax deductions to be had, improvements of your own to make, and the “forced savings” that paying down a mortgage and gaining equity provides.
If anything, the real estate bubble was caused by a heightened attitude that homeownership was a get-rich-quick vehicle, fueled by rapid appreciation and the ability to cash out equity almost at will. Those things aren’t so present in most markets today, yet the attitudes of people toward homeownership haven’t seemed to waver much.
In other words, dollar signs might have contributed to a spike in ownership that was above normal levels – nationwide it peaked around 70 percent – but it’s the other things that have remained that make people continue to believe in the concept of being a homeowner.
And even after the foreclosures and price drops, the majority of people surveyed still describe buying a home as a good investment. Which means that even though the idea of quick money that drove up the homeownership rate is gone, it’s not as if people are saying that buying a home is a bad investment. The reality is that it’s still a good investment, but financial reasons aren’t the only things driving attitudes about homeownership’s benefits.
And that’s the way it should be.
Homeownership does give you certain freedoms. It does allow you to plant your roots in a community you choose. It, as corny as it sounds, does provide a sense of pride and sharing in the American dream for many people.
In the words of the man in the home-building industry, homeownership does still matter to people.