Does Housing Belong on Your Balance Sheet or on Your P&L?

Even before the housing bubble, economists had been saying for a long time that American household wealth was way over-invested in personal residences and under-invested in commercial assets. In financial terms, the American middle class preferred to put housing on viagra cialis online its balance sheet (ownership), rather than on its P&L (renting). For a few generations, the choice was favorable. Homes went up in value and mortgage payments were tax-subsidized, which essentially conferred free rent upon homeowners and grew their equity as well. The housing crash turned conditions upside down. American homeowners have lost over $5 trillion in wealth since the housing bust in 2007, while at the same time rents have risen rather slowly, or not at all, in the economic recession.

For historical and cultural reasons, home ownership is a bigger deal in America than anywhere else in the world. It cialis trial probably goes back to the unprecedented opportunity in the 17th and 18th centuries for ordinary people acquire private homesteads. “Life, liberty and property” were at the heart of Enlightenment political philosophy, and for ordinary people, property was much does cialis lower blood pressure more easily come by in North America than in Europe. Through this legacy, home ownership came to be at the center of our whole way of life — the American dream.

The question now is whether the dream still includes free rent. Do Americans still want to put housing on their balance sheets? We think so.

  1. First of all, it’s a lovely dream. Americans love our mortgage interest deductions, we love to bargain-hunt amidst an over-supply of homes, and we don’t love our landlords.
  2. Second, inflation will recur, though it is not here today and may be a while returning. The worst time to rent, and the best time to own, is during an inflationary period.
  3. Third, the next generation in line to buy homes has been raised by homeowners or in admiration buy generic cialis online of homeowners.
  4. Fourth, there are huge industries based on keeping the dream alive — home building, real estate brokerage, mortgage lending, home improvement.
  5. Fifth, our local communities depend on property taxes to fund essential services, plus sixth, homeowners vote disproportionately among the population at large, so there is a manifold political incentive to sustain home values and encourage ownership.

On the other hand, the factors currently suppressing home buying have to do with uncertainty of employment, deleveraging of consumer debt, impaired credit and/or less liberal credit terms, and

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time to work through those obstacles — obviously. Taken together, they basically

constitute a confidence-building project, but at the end of the day, confidence is in the American grain as much as home ownership.

They may be much the same thing.

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