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Posted by on Jul 19, 2012 in Market Conditions | 6 comments | Print Print

Attitudes About Homeownership

From MND:

The Federal Reserve Bank of Boston has released a Public Policy Discussion Paper by two of its economists titled Shifting Confidence in Homeownership:  The Great Recession.  The paper, researched and written by economist Anat Bracha and senior economist Julian C. Jamison sought answers to whether American attitudes toward homeownership had been affected by the sharp drop in home prices during the recession.

The study involved answers to several questions added to the monthly Michigan Survey of Consumers in July and August 2011.  In particular, the 986 individual respondents were asked about attitudes toward renting versus buying a home, about commuting, and about how much a family should be willing to spend on a mortgage.

The responses were matched to data on housing prices and the extent of their decline and analyzed by sex, age, homeownership, and a number of other variables including whether or not the respondent had suffered directly from the effects of the housing downturn or merely knew of its effects from the news or other sources.

The authors matched answers from individuals to the decline in the housing price index in the zip codes where the respondents’ lived and analyzed them to determine if the decline affected attitudes toward buying versus renting a home, paying a mortgage, and commuting to work to reduce housing expenses.

They found that recent housing market conditions had little effect on individuals if their exposure to the housing downturn had come through information only such as newspaper or television stories as opposed to personal experience.  Individuals who had not been impacted nor anyone in their close circle been impacted by foreclosure or lost large amounts of money on real estate also had no change in attitudes toward the financial soundness of homeownership or their willingness to undertake a commute to reduce housing expenses.

There was, however, a link between a decline in housing prices and the amount these “information only” respondents thought a family should spend on a mortgage.

Where respondents or a family member had been personally affected by the housing crisis there were changes in attitude but the affect varied by age group.  The greater the drop in home prices in their location the less confident those under 58 years of age were in the soundness of buying a home.  Those over that age, even with personal experience in the crisis, had more confidence in the wisdom of buying.  Furthermore, this confidence grew with the decline in home prices in their location.

The authors conclude that, as those with full information about the recession but no direct negative experience with it did not experience a shift in attitude, it may point to a more general rule; information alone is not sufficient to change attitudes, only actual experience is.  Furthermore, the crisis’s effects seem to be confined to attitudes toward buying a home and do not spill over into attitudes related to other homeowner decisions such as how much money one should spend or to commuting decisions.

That the decline had a negative effect primarily on younger person’s attitudes is consistent with the idea that older persons have a fixed set of beliefs and interpret the crisis as a temporary deviation from a known trend.  Younger individuals and their lowered confidence would be consistent with the idea that their beliefs are still flexible and can change over time.


  1. In other news people that were burned by touching a hot pan tend to stop touching hot pans.

    This is why foreclosure is so important. If deadbeats learn that they can buy a house, stop making payments, live in that house for several years, and be painted in athe media as the victim of a “preditory lender”…

    What do you think they’ve learned?

    Did they learn not to touch hot pans? Or, did they learn that touching hot pans can be very comfortable?


  2. It doesn’t surprise me that this is how the results panned out. If you bought your first home 10,20,30 years ago you’ve probably had a significant amount of appreciation and success with that purchase. It would come as surprise if things didn’t eventually didn’t come back to their previous peaks. Once someone believes in something it probably takes multiple occurrences of the opposite thing happening before they question that belief.

    Of course there’s a new generation that’s been burned by the stock market, burned by the housing market, burned by college debt that are the next wave of producers. Those producers are the ones you’re going to need to sell too and if they don’t value assets the same way you do it might be hard to get top dollar.


  3. renting always has, always will have a stigma attached to it. for some reason you are somebody in our society if you are renting from the bank.


  4. @Avgjoe

    “renting always has, always will have a stigma attached to it. for some reason you are somebody in our society if you are renting from the bank.”

    Tragic, but true.

    However, ironically I want to buy because having lived in rentals for the past 20 years I am sick to death of low flush toilets, horribly outdated kitchens/baths, and those dreaded vertical blinds. I can’t do anything about them. Hearing vertical blinds clatter when the wind blows is like water torture. In case your wondering, the landlord won’t let me change them out.

    Pretty lame excuses to justify buying, but seriously…I hate those damn blinds!!


  5. @just some guy

    I have rented in the past too. I just hate throwing money down the tubes and not gaining any equity. With owning you have the opportunity to make some money with improvements and market gains.Sometimes it does make sense to rent for a short period. I like the pride of ownership and having a place to call home.


  6. Rent vs Own, you can debate that till you’re blue in the face. Seems like the bank will leave you alone if you make your payment. The relationship with the landlord may be a bit more complicated. I will stick with owning.



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