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By Alan Oakes

Does home ownership still make sense?

f, rrrn ABour FouR yeans of depression in our industry.l must admit I am beginning to lA.wonder what is going on in the housing market. Are we seeing a fundamental shift by the next generation away from the long-held mantra that you have to own your own house?

For decades, politicians of both persuasions have made it a feature of their policy that home ownership is a fundamental right, a sound investment, a sign of stability, a necessity to build community. Many of late have learned the hard way that this simply is not true and are now taking a different path. And, in light of a growing chorus to eliminate the mortgage tax deduction,I am concemed what these trends might mean for our industry.

Like many of you, when I got married, it was my first dream to own my own house. We bought our first house in the U.K. at the age of 22.In the next five years, we bought and sold two more times. I was taught not to throw money away on rent (especially since interest was deductible) to maximize the mortgage to save taxes, and to move over and over again as things got better financially. That worked each time in the U.K.

I have to say, as I now look back over the last 25 years and seven moves here in the U.S., I think that philosophy has not held true unless you sold at the peak of the market, did not buy elsewhere, and got out while the going was good. In the last three to four years, few areas have been spared at least a 4OVo cut and most likely 5OVo or more.

The notion that everyone is entitled to their own house (interpreted by some as two or three when they could not afford even one) has caused many of the issues we face today. I am truly sorry for those people who lost their homes through no fault of their own. But it is the pain I see on television and in newspapers day in and day out that makes me wonder if there has been a paradigm shift in home ownership. As examples, both my children have stayed in their homes for eight to nine years already and have no thought of relocation. At their age, I had moved 10 times-admittedly, mostly corporate moves. Yet, according to a recent report, today only 64Vo think that home ownership is a good or safe investment, compared to 83Vo in 2003 and 867o in 1996.

Of course, I hope I'm wrong. I know that when oil prices rise, auto sales move to smaller cars. Then when oil prices fall, everyone returns to buying bigger cars. It is possible we are going through a similar process in home ownership. Knowing that the national collective memory can be short, things could change in a couple of years. But I see signs that a change of thinking may be under way, perhaps caused by this prolonged recession, that might not change even when things get better.

Owning a house was where we built wealth, an asset we could pull money out of to improve it and increase its value. That certainly has not been true for the past few years and a return to that in the near future is unlikely. Indeed, an estimated 25Vo of all homes are underwater. Along with homeowners who are in foreclosure and those who want to get out but can't, there is an estimated "shadow" inventory of 8 million+ homes. And, here is the crux of the matter: Most of us are not good savers, but home ownership was a coercion if you will, to save money. We put our kids through college with it and hopefully in the end retain enough equity in it to retire with. Today it is estimated that one{hird of us have less than $25K to retire with, excepting Social Security. Not good news.

History has shown that the system works when home values increase. But when they fall, well, we all know now what that means! Also consider that often homes are purchased with little or no money down. That leverage has contributed to the mess we are in today.

I think that home ownership, if you are financially secure, pay a price you can afford, and have longevity in a property, still makes sense. On the other hand, short-term ownership driven by the need to be mobile for career purposes likely will decrease. Consider that other countries seem to have stronger economies than us with lower home ownership (e.g., France 57Vo, Switzerland 37Vo, and Germany 46Vo, compared to 67Vo here). Few would argue that their communities look worse than ours.

So ifI am right, the rental business should continue to grow, remodeling will continue to climb, but home sales may be stagnant for a long time to come. As I read the other day, "our goal should be to put families not in the houses of their dreams, but rather in a house they can afford."

Alan Oakes, Publisher ajoakes@aol.com

Bpii

Building Proilucts lligest

www.building-products.com

A publication of Cutler Publishing 4500 Campus Dr., Ste. 480, Newport Beach, CA 92660

Publisher Alan Oakes ajoakes@aol.com

Publisher Emeritus David Cutler

Director of Editorial & Production

David Koenig dkoenig@building-products.com

Editor Karen Debats kdebats@building-products.com

Contributing Editors

Carla Waldemar, James Olsen, Jay Tompt

Advertising Sales Manager Chuck Casey ccasey@building-products.com

Adminishation Director/Secretary

Marie 0akes mfpoakes@aol.com

Circulation Manager Heather Kelly hkelly@building-products.com

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BUILDING PRODUCTS DIGEST is published monthly at 4500 Campus Dr., Ste.480, Newport Beach, Ca. 92660-1872, (949) 852-1990, Fax 949-852-0231, www.buildingproducts.com, by Cutler Publishing, Inc. (a California Corporation). lt is an independently owned publicaiion for building products retailers and wholesale distributors in 37 states East of the Rockies. Copyright@2011 by Cutler Publishing, Inc. Cover and entire contents are fully protected and must not be reproduced in any manner without written permission. All Rights Reserved. BPD reserves the right to accept or reject any editorial or advertising matter, and assumes no liabilitv for materials furnished to it.