Why Housing Will Come Back

Homeownership has long been an icon of the American way of life. However, in light of the burst of the housing bubble, many are starting to question whether homeownership is economically viable and whether Americans should still aspire to own a “piece” of the American dream.

Homeownership has risen from 44% in 1944 to nearly 70% at the height of the housing bubble, indicating not only social achievement but preferences favoring suburban single-family lifestyles. While such strong associations between homeownership, property, and democracy will likely deter any major change in homeownership patterns, housing inflation poses a major problem for affordability. Between 2006 and 2008, barely 2% of families with a median income in Los Angeles could afford to buy a median priced home. However, after market correction, the affordability number, or “Housing Opportunity Index”, for Los Angeles is 34% -- 17 times better than two years ago. These lower prices will likely lure new buyers to places with drastically improved housing affordability, but many wonder whether these locations will become overrun with “the next slums”.

Joel Kotkin at Forbes states that the importance of re-establishing homeownership as less of a gamble than a long-term lifestyle choice will soon become apparent. By the year 2050, the American population is predicted to grow by 100 million and the demand for homes will be excessively high. At the same time, the Millenial generation (born after 1983 and now entering their late 20s) are “family-oriented young people who value homeownership even more than their boomer parents”. They also subscribe more strongly to the American ideal of suburban living than the previous generation. These factors should lead to an increase of home buying starting later this decade, a resurgence that has the potential to not only save our economy but restore traditional American values centered around the home.

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