What To Say To People Who Tell You Now's A Great Time To Buy A House
Woe unto the person who is young and single and makes a reasonable amount of money and yet for some reason does not own a home. As soon as your status as a renter is revealed to a friend, relative, neighbor, or cashier, inevitably it starts: “But now is such a great time to buy. Don’t you want to build up some equity? Aren’t you tired of throwing your money away?”
Whenever I heard this in the past, I would always smile politely and say that, sure, someday I hoped to own a house. But the economy being what it is, and journalism being what it is, I couldn’t justify taking the risk of being pinned down in a city that might not have a job for me. This response never satisfied my friends and cashiers, of course. And I never really knew what else to say. Until now.
Richard Florida, the influential author of Rise of the Creative Class, had many provocative things to say in his terrifying look at America post-whatever-the-F-this-is. But the one that caught my attention was his point, persuasively argued, that our focus on homeownership is a large reason why we found our way into this mess to begin with. Says Florida:
“The solution begins with the removal of homeownership from its long-privileged place at the center of the U.S. economy. Substantial incentives for homeownership (from tax breaks to artificially low mortgage-interest rates) distort demand, encouraging people to buy bigger houses than they otherwise would. That means less spending on medical technology, or software, or alternative energy—the sectors and products that could drive U.S. growth and exports in the coming years. Artificial demand for bigger houses also skews residential patterns, leading to excessive low-density suburban growth. The measures that prop up this demand should be eliminated.
If anything, our government policies should encourage renting, not buying. Homeownership occupies a central place in the American Dream primarily because decades of policy have put it there. A recent study by Grace Wong, an economist at the Wharton School of Business, shows that, controlling for income and demographics, homeowners are no happier than renters, nor do they report lower levels of stress or higher levels of self-esteem.
And while homeownership has some social benefits—a higher level of civic engagement is one—it is costly to the economy. The economist Andrew Oswald has demonstrated that in both the United States and Europe, those places with higher homeownership rates also suffer from higher unemployment. Homeownership, Oswald found, is a more important predictor of unemployment than rates of unionization or the generosity of welfare benefits. Too often, it ties people to declining or blighted locations, and forces them into work—if they can find it—that is a poor match for their interests and abilities.”
