Friday, June 19, 2009

"American Dream" Element of Owning a Home Found Not to Apply

Those glib guys over at The Business Insider have an eye-catching headline: "Female Homeowners Sadder, Fatter Than Renters."

Under discussion is a study, conducted by Grace W. Bucchianeri of The Wharton School of Business, that found female mortgageholders were 12 pounds heavier than renters, and not as happy. Even when controlling for other factors.

But the study goes deeper than just the above two points:

An interesting portrait of homeowners emerges from my analysis. While homeowners report higher life satisfaction, more joy from both home and neighborhood and better moods on an unadjusted basis, these promising differences become insignificant and much smaller in
magnitude once I control for a basic set of confounding factors: household income, housing value and health status. Overall, I find little evidence that homeowners are happier by any of the following definitions: life satisfaction, overall mood, overall feeling, general moment-to-moment emotions (i.e., affect) and affect at home. The average homeowner, however, consistently derives more pain (but no more joy) from their house and home. Although they are also more likely to be 12 pounds heavier(iii), report a lower health status and less joy from health, controlling for the less favorable health status does not change the results. My findings are robust to controlling for financial insecurity. Therefore, unadjusted differences in homeowners’ well-being might have played an important role in establishing the popular beliefs about the American Dream.


To help understand these surprising results, I investigate the homeowners’ time use pattern, family and social lives. The average homeowner tends to spend less time on active leisure or with friends, experience more negative affect during time spent with friends, derive less joy from love and relationships and is also less likely to consider herself to enjoy being with people. My results support neither the perception of gregarious homeowners nor that of housework-burdened homeowners. In this paper, homeowners are also shown not to be significantly different in terms of civic participation or social connectedness.

(colors, italics ours)

This is hardly a description of the Amercan Dream. Which is to say: homeownership should not be associated with the qualities or achievements that comprise "The American Dream." (A classless society, upward social mobility, and the ability to be anything and make wads of money through hard work have already been X'd off the list, too.) Rather, taking on a mortgage is often a matter of expensive practicality.

Nowadays
, a house is typically not an investment. In many cases it's not even an asset. It's a place to keep your stuff, sleep, have a social life, raise the kids. You know, all the important stuff. Which all may be done more cheaply by renting.

Especially in Charlottesville/Albemarle area, where prices remain beyond the historic metrics associated with housing costs (price-to-income and price-to-rent ratios). And especially in this housing bubble bust, the national recovery from which is expected to take a long long time.

The idea of housing should be disconnected from anything other than the need for a roof over one's head.

This area is at least a year away from its bottom in terms of price reductions and inventory clearing. The buyers, at all prices, simply aren't here (yup, check back into this post in June 2010 or, more realistically, 2011. "Hey! Those guys were right!").

For buyers who are going forward now, the intangible, romantic notion of "The American Dream" should be taken out of the equation as motivator or benchmark. Anybody suggestion otherwise is, IOHO, irresponsible. And besides, there's already enough to worry about.

See:
"The American Dream or The American Delusion? The Private and External Benefits of Homeownership" - Grace W. Bucchianerri, Wharton School of Business
"Female Homeowners Sadder, Fatter Than Renters." - Business Insider

Related Reading:
Gen Y Priced Out of the Cville Market
Lack of Move-up Buyers in Cville Area
Virginia Housing Development Authority Forecast For Regional Market
The Five Waves of the Housing Collapse - T2 Partners Via Business Insider
Baby Boomers and Housing Bubble Bust - CEPR
House Price Puzzle: Mid-to-High End - CalculatedRisk
The Real Housing Crisis Has Yet to Begin - Minyanville

2 comments:

Pavel said...

This reminds me of a study someone forwarded to me six years ago after he found out my wife and I were going to have a baby. The conclusion of that study was that couples are not as "happy" after having children.

Real C'ville - The Bubble Blog said...

Pavel, if you didn't disbelieve this, you wouldn't be a good Realtor. That study probably outlined the ways in which couples are unhappy, which can help couples avoid the "pitfalls," though, right? Ditto this study...but rule #1: Don't pay too much for a house. :0)