U.S. homeownership rates have declined and will undoubtedly go lower. This is a bad thing for the individuals and neighborhoods involved; but is it bad for the country as a whole? This is a difficult question. A good part of its difficulty resides in the fact that many of our attitudes have been shaped by beliefs that are not wholly accurate.

In April of this year, Lawrence Yun, Chief Economist for the National Association of Realtors® (NAR), reported that home ownership had declined in the first quarter to 66.5%. That marked a “broad continuing decline since the peak bubble year in 2005, when 69 percent of households were homeowners. The current homeownership rate matches figures from 1998.” The number of homeowners has dropped by about one million over the past six years. Typically, the number grows by about one million each year.

At the same time that the number of homeowners is declining, a variety of legislative measures are being considered that would quite likely make it even more difficult to obtain home mortgage financing. We have discussed some of those in these pages (May 24, 2011), and we have also discussed the fact that Realtors ® are being called upon to lobby their legislators against proposals that seem likely to exacerbate the already-downward movement in homeownership rates.

As the debates involving housing policy pick up steam, there are three often-repeated claims that deserve examination: (1) that the U.S. has the highest or one of the highest homeownership rates in the world; (2) that government and government-supported programs have created our high homeownership rates, and that without them those rates could not be sustained; and (3) that homeownership is the centerpiece of the American Dream. We look at each claim in turn.

1. It is difficult to find comprehensive, apples-to-apples comparisons of homeownership rates throughout the world. There is no doubt that the U.S. ranks high when all countries – including undeveloped ones – are included. Nonetheless, data taken from developed countries tend to show that the U.S., with homeownership rates in the high 60s percentiles – is in about the middle. According to Wikipedia, for example, Ireland (83%) and Spain (78%) would be significantly higher, with France (55%) and Germany (42%) considerably lower.

2. While there is no doubt truth to the assertions that U.S. policies – embodied in such institutions as FHA, Fannie Mae, and Freddie Mac – have been instrumental in creating our homeownership rates, it cannot be said that such policies are essential. They don’t exist in Brazil (74%) or Palestine (84%!).

Last year (March 2010), Alex Pollock, writing for the American Enterprise Institute, compared the U.S. and Canada, which have very comparable homeownership rates. He noted similarities in the countries (rich, advanced, stable, sophisticated finance systems, pioneer histories, and ocean-to-ocean breadth), and he also pointed out highly relevant differences. Canada has no housing GSEs [such as Fannie Mae or Freddie Mac]. Mortgage interest is not tax deductible. It does not have 30-year fixed rate mortgages. Mortgage lending is more conservative and it is much more lender-friendly. And, though Canada didn’t avoid the recession, for whatever reason(s), mortgage delinquencies have so far remained much lower than in the U.S. Delinquencies of 90 days or more are about one-tenth the U.S. level.

3. Finally, there is that “American Dream” business. This is more a rhetorical issue than an empirical one. It’s worth mentioning, though, that homeownership has not always been recognized as a component of the American Dream. While not unique to him, the phrase “American Dream” was popularized by the early-20th century historian, James Truslow Adams. He wrote, “The American Dream is that dream of a land in which life should be better and richer and fuller for every man, with opportunity for each according to ability or achievement.” While owning a house – or a car or a plane – may be a part of the ambitions of many, it is not essential to the Dream. The American Dream is one of living in a country where there is freedom and opportunity to acquire and/or to become, regardless of where or how you started.

The Los Angeles Times recently published an article featuring some of Silicon Valley’s “rising stars” and the ways in which they are employing their wealth (primarily, to charitable causes). The piece begins with a thirty-something executive of a software firm who had sold his start-up company for $170 million. He still chooses to live in a 600 square foot apartment and drives a modest car. No homeownership, no accumulation. But has he lived the American Dream? You bet.

Don’t get me wrong. I think homeownership is great, and I believe that it strengthens our social fabric. It would be crazy, I think, to be actively opposed to it. But when arguing in its support, we need to have our facts straight. And we do well to remember that, while home ownership can be a consequence of the American Dream, it is not the essence of it.

Published: June 21, 2011

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Bob Hunt is a former director of the National Association of Realtors and is author of the recently published book, "Real Estate the Ethical Way." A graduate of Princeton with a master's degree from UCLA in philosophy, Hunt has served as a U.S. Marine, Realtor association president in South Orange County, and director of the California Association of Realtors, and is an award-winning Realtor. Contact Bob at .