Everyone has to live somewhere, and where and in what kind of housing you choose is crucial to your quality of life, your kids’ education and your ability to save for retirement. And because so many resources are devoted to sheltering the 320 million-plus Americans, the industry makes up a significant part of the economy.
Before we go further, I am not advocating an expansion of home ownership as a government policy. But I will say this: given the state of the economy, housing prices and historically low interest rates, many people should buy a home.
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A little history: The post-World War II suburbanization of America, along with car culture and housing envy, helped to drive home ownership rates to a postwar peak of 65.8 percent in the late 1970s and early 1980s. That seemed like a reasonable balance between renters and owners, relative to factors such as employment, credit availability and the scale of the housing stock.
Following that peak, a severe recession and sky-high mortgage interest caused ownership rates to fall to about 64 percent; ownership rates wouldn’t pass their previous high until 1997. As the economy took off during the 1990s tech boom and the Federal Reserve continued lowering interest rates as inflation abated, home ownership surged.
Then, after the dot-com bust, the Fed under Alan Greenspan lowered rates even more. That, along with lax lending standards and a public wariness of investing in the stock market, helped to kick off a real-estate driven economic expansion.
Millions of people who had been renters suddenly were able to obtain mortgages. Home ownership rates skyrocketed to more than 69 percent.
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