Mother's Day. Apple pie. Baseball. Homeownership.
All good, right?
Indeed. Because those things are both traditional and much-beloved in the United States—and elsewhere in the world as well.
Among them, homeownership best speaks to the American ideals of pride, freedom, family and community. It's even an important part of what many people consider to be the American Dream.
Owning a home is valued so highly in part because homeowners can get a lot of benefits. These benefits include:
- Freedom from eviction.
- Freedom from rent increases.
- Income tax deductions.
- Opportunities to build and borrow against equity.
- Freedom to redecorate and remodel.
- Freedom from pet restrictions.
- Private parking.
- Storage space.
- Outdoor space such as a front, back or side yards or courtyard, patio or balcony.
Owning a home can be one of the best ways that individuals and families can create wealth over time. According to Harvard University's Joint Center for Housing Studies, homeownership is one of the most effective methods if wealth building, especially for minorities and low income households. That's because paying the mortgage every month creates "forced savings" in a form that, unlike a savings account, is hard to raid. The Center for Responsible Lending found that the net worth of homeowners was nearly $200,000 higher than that of renters.
Homeowners who make a long-term commitment can eventually own their home free and clear without a mortgage, giving them a place to live, rent-free, for the remainder of their lives. A paid-off home or one with a small mortgage can be a valuable asset for a homeowner's children or other heirs.
Homeowners can also borrow against their equity through a home equity loan, home equity line of credit or home equity conversion mortgage, also known as a reverse mortgage. These loans can be used to pay for college tuition, travel, medical expenses, remodeling—virtually any need or want imaginable.
In some U.S. cities, a limited supply of affordable rental housing and low mortgage interest rates make owning a home cheaper than renting.
The U.S. government encourages and supports owning a home through federally backed mortgage guarantees and a tax code that's favorable to homeowners.
Government-supported mortgage programs include:
- Conforming loans that meet Fannie Mae or Freddie Mac guidelines
- FHA loans insured by the Federal Housing Administration
- VA loans guaranteed by the U.S. Department of Veterans Affairs
- RD or USDA loans backed by the Rural Development division of the U.S. Department of Agriculture
Many homeowners deduct mortgage interest, property taxes and certain other costs of homeownership from the income they report on their federal tax returns. Those deductions can result in very significant tax savings that lower the after-tax cost of owning a home.
Many states and local communities support owning a home through their own mortgage interest tax deductions and down payment assistance programs.
Nation of Homeowners
The U.S. homeownership rate declined in the aftermath of the 2008 economic recession, dipping as low as 64.4 percent of the nation's households in the third quarter of 2014. But at the height of the housing boom in 2004-05, when financing was more easily available, the rate of U.S. housing ownership climbed to more than 69 percent.
The rate is and always has been higher than the national average in the Midwest and South, where housing tends to be more affordable, and lower than the national average in the Northeast and West, where housing can be more costly.
Despite those fluctuations and variations, the U.S. rate of housing ownership rate has never dropped lower than 63 percent since the U.S. Census Bureau began to keep records of it in 1965. That means more than six of every 10 U.S. households have chosen to be homeowners for the last 50 years and counting.