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The notion that homeownership is an unalloyed good is deeply ingrained in policy and politics. Powerful interests - homebuilders, the real estate industry, minority advocates - promote it. Congress, especially, seems in thrall to these lobbies and to their myth that homeownership is a ticket to the middle class.

This “American Dream” ideology has led to a massive real estate bubble and financial catastrophe in the past decade, and works its dark magic today. It’s surely one reason why Congress refuses to reform Fannie Mae and Freddie Mac, the mortgage market mainstays that, by one Congressional Budget Office estimate, could end up costing the taxpayers $389 billion to bail out. Others put the figure as high as $1 trillion.

Fannie and Freddie got into trouble because they lowered their credit standards, with government’s blessing, and tried to convert too many renters into homeowners.

Even now, as they try to clean up their portfolio, they are favoring potential homeowners over investors - that is, would-be landlords. Fannie Mae has a policy of not accepting offers from investors in the first 15 days that one of its foreclosed properties is on the market. The Dream dies hard.

It’s time for some politicians with backbone to start asking, publicly, what’s so wrong with investors snapping up foreclosed homes. If the market is allowed to work, we would expect perhaps several million Americans to become renters - and quite possibly see their living costs go down.

Federal, state and local codes, land use, taxes, subsidies double the price of basic, utilitarian housing.

Allowing the sub-prime mortgages to happen was one of the biggest mistakes of the mid-2000s.

Nice post - well articulated & reasoned, which seems to be a quality sadly lacking these days. One nit - I would reverse the process of identifying the underlying cause.

First & foremost is the power of the banking cartel to expand lending activities into all facets of private & public life. Once the issue is framed in terms of policies that favor debt merchants (why not, they bought the best representation they could, starting with Goldman's backing of Hussein), housing turns out to be just one of many avenues taken.

It's easy to make a list - it includes just about everything one produces and/or consumes. Government, housing, education, etc. About the only thing missing is the oxygen we breath, but that can be taken care of by cap n' trade.

If the USA is to survive as a political entity, we must address the banking interests. Jackson had the balls to do so 180 years ago. The country suffered a 10 year depression (called a panic in those days), but ultimately emerged stronger & healthier.

Of course, once the host was reformed, the parasites had a more vibrant victim in which to resume sapping. Still, that is our matter; we can either begin to address it now, or we can deal with it when the Union comes apart at the seams.

This “American Dream” ideology has led to a massive real estate bubble and financial catastrophe in the past decade, and works its dark magic today. It’s surely one reason why Congress refuses to reform Fannie Mae and Freddie Mac, the mortgage market mainstays

Fannie Mae and Freddie Mac are indeed flawed and need complete overhaul. Fannie Mae and Freddie Mac along with their criminal overseers including Barney Frank, are largely responsible for many of the credit problems America finds itself in today. Another component of the current fiscal problem involves many Americans who consciously jumped into housing purchases that were much larger then they could realistically afford. In short, Americans bought much more house then they could afford. However, this seems to be a totally separate issue from Americans owning their own homes because it involves purchase practices as well as lending (mortgage) practices rather than home ownership in of itself.

None-the-less, the title and the article discuss the term "dream". In my opinion, owning more equity offers a better fiscal position. Asking about the American Dream of home ownership seems to be akin to asking if Americans should aspire to better themselves ? For almost all Americans, the family home is the largest single purchase they'll ever make. The family home represents enormous equity. In this light, the question in the title instead seems to be, 'Should Americans aspire to own equity ?'.

If the question is instead asked in this light, then in my opinion, the answer is yes.

“This “American Dream” ideology has led to a massive real estate bubble and financial catastrophe in the past decade...”

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I disagree.

The “American Dream ideology” was that the miracle of America meant that one could SAVE, SACRIFICE and delay gratification in order to afford a home.

What led to the real estate bubble was individuals and institutions cheating, via greed, government interference in the marketplace, outight racism, and non-accountability, on the basic rules that had governed home ownership.

There is nothing wrong in principle with people wanting to own their own piece of property. The Founders understood implicitly that those with a physical stake in governance could best be entrusted with the process of governance. It is elementary that on the whole, homeowners pay attention to a lot of things that renters freely ignore. Responsible home-ownership is something to be encouraged for a host of reasons.

The distortions generated by the government the last twenty odd years are the problem, and the perfect storm of the subprime mortgage scams. There were no good guys in that disgrace. And a lot of people ended up with untenable loans that never should have happened. But that should not be reason to discount the importance, for a variety of reasons, of citizens holding a stake in their communities.

Even now, as they try to clean up their portfolio, they are favoring potential homeowners over investors - that is, would-be landlords.

When a house goes to rental, the landlord has to work like hell to keep it from getting trashed, and losing the equity that would keep his loan above water.

Even if he's selective in his potential renters, he's rolling the dice. And guess what the gubmint calls 'being selective in your potential renters?'

Of course, when Fanny/Freddie or some other lender is 'favoring the [resident] homeowner' over the investor, they're all too often going to get the type of owner that a wise landlord would reject anyway.

I guess what I'm saying is, it's a mess. ≤}B^)