Despite a bruising, five-year drop in U.S. home prices, eight in ten Americans still believe that home ownership is the best long-term investment they can make, according to a new survey.
Apparently, hope springs eternal.
After a dramatic run-up in U.S. home prices the 1990s and early '00s — fueled by easy lending standards and the encouragement of Wall Street — the market began its sickening plunge in July 2006. The average metropolitan home has lost roughly a third of its value since then, according to the latest reading from the S&P/Case-Shiller Home Price Index.
The convertible was once one of the dominant automotive body styles, but in recent decades it has become little more than a minor niche. Still, some see a revival on the horizon.
Generous tax breaks for home buyers temporarily halted the slide last year. But with those incentives gone, home prices are headed lower again.
But the allure of the American Dream — and the fresh memories of those double-digit gains during a once-in-a-lifetime boom — are apparently offsetting the stinging losses brought by the bust, according to the survey by the Pew Research Center's Social and Demographic Trends project. The survey found that 81 percent of adults believe "buying a home is the best long-term investment a person can make."
The findings, released this week, are based on a telephone survey conducted among a nationally representative sample of 2,142 adults from March 15 to March 29.
The drop in home prices represents more than just a paper loss. Among homeowners who reported that their home is worth “a lot less” now than it was before the recession, roughly two-thirds said their finances are in worse shape than before the housing bubble burst.
Nearly half of all homeowners reported that their home is worth less now than before the recession began. Of those, the overwhelming majority say it will take at least three years for values to recoup their losses, while nearly half say it will take at least six years to recover.
Returns like that would give a gold bug second thoughts. But apparently few people have shaken the conventional wisdom, handed down for generations, that homeownership is a risk-free road to wealth. Some 37 percent of those surveyed "strongly" agreed that a home is the best long-term investment a person can make, while 44 percent "somewhat" agreed.
No word on how long they think it will take to again see multiple buyers showing up on the first day of a listing and waging cellphone bidding wars on the front lawn. Or condos flipped in six months for a 100 percent profit.
Some homeowners do have regrets about buying. Nearly a quarter said that if they had it to do all over again, they would not buy their current home. But most of those said they had buyer’s remorse because they don’t like the house itself or the location. Only a third said they regret buying their house because it was a bad investment.
On Tuesday, the CEO of one of the nation’s biggest mortgage lenders, Bank of America, sought to set homeowners straight on the wisdom of buying a house as an investment.
“It's sobering to think, but some people shouldn't be thinking of (their home) as an asset," Brian Moynihan told a gathering the National Association of Attorneys General, who are trying to work out a deal with bankers like Moynihan to help stem the tide of foreclosures. "They should be thinking of it as a great place to live."
Investment returns aside, pursuit of the American Dream — with homeownership as its core — still has a strong hold among 80 percent of Americans surveyed, along with “being able to live comfortably in retirement.” Some 73 percent include paying for their children’s college education on that list. And about half said the same about leaving an inheritance for their children.
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