Homeownership, long trumpeted as the American dream, has turned into a nightmare for many, especially those on whom life has inflicted unexpected blows.
Secure in their jobs, with plenty of savings and good health when they bought their homes, millions of Americans are now fighting to keep them — leading a growing number of economists and real estate experts to ask whether the national obsession with homeownership is healthy.
Two economists question even the basic financial arguments for homeownership and say the government has oversold the economic case for subsidizing it.
"One thing that is certain is that homeownership is not for everyone, and thus, based on the economic benefits, the case for trying to achieve a nation of homeowners needs to be rethought," say Wenli Li and Fang Yang, authors of a study published recently by the Federal Reserve Bank of Philadelphia.
Li, a Fed economist, and Yang, an assistant professor at the State University of New York at Albany, conclude that homeownership as a means of saving and investing is no longer valid.
The main economic argument for homeownership, the authors of the Philadelphia Fed study say, is that it is the best way for most families to accumulate wealth, since paying off mortgages and increasing equity "forces households to save more than they otherwise would."
But today's economic realities offer contrary evidence.
People don't save enough, although they know they should. "Short-run preferences for instant gratification" often undermine long-term plans requiring patience, Li and Yang say.
A single household can be of two minds, they say: a patient one that thinks about long-term planning, and an impatient one that acts more impulsively when it confronts an immediate choice.
When job loss or illness disrupts everyday life, even homeowners who try to save can face a constant struggle for financial survival.
That includes homeowners such as Mary Kay Cifaldi and her family, who have lived in their Sicklerville, N.J., home since 1996.
"It is in a great neighborhood, safe and clean," Cifaldi said. "I have two children, and it is very important for me to raise them in a safe environment. We love our house and hope to stay in it."
The problem: Her husband, Anthony, was out of work for a year. They continued to pay their mortgage on time and all their other bills as well, she said, "but things snowballed, and we found ourselves in debt."
Cifaldi approached lender Wells Fargo to refinance their mortgage and home-equity loans at today's lower rates. The lender refused, suggesting they try the federal mortgage-modification program. But that route also was denied them.
The reason: "We paid our bills on time and were not delinquent," Cifaldi said. "I guess they want to wait until we miss a payment, then foreclose on us."
She cited one of the perceived social benefits of homeownership: a positive effect on children, who, the Fed study says, purportedly "are more successful, measured by such factors as lower teenage-pregnancy rates and higher educational attainment" than those of renters.
Homeownership is supposed to have other social benefits, such as stabilizing neighborhoods because owners move less often than renters and maintain their properties to increase value.
Yet a study by Wharton Business School assistant professor Grace Wong Bucchianeri, reported in the online newsletter Knowledge@Wharton, found scant evidence that homeowners were happier than renters.
Bucchianeri's data — collected in 2005, a period of optimism about housing as a financial investment — suggest that homeownership does not necessarily represent fulfillment of a dream.
She found little evidence that homeowners are happier by any of the following definitions: life satisfaction, overall mood, overall feeling, general moment-to-moment emotions, and effect at home.
"The average homeowner, however, consistently derives more pain, but no more joy, from a house and home," Bucchianeri said.
Data cited by the Philadelphia Fed study's authors, Li and Yang, show that home equity as a share of a household's net worth has declined during the recent economic downturn, as it did from the mid-1980s to the late '90s.
That is because the ratio of mortgage amount to home value has risen since the mid-1980s. In addition, there has been an increase in cash-out refinancing, resulting in many homeowners' taking out more money than they actually owed on their houses.
Even the argument that "housing is a relatively safe asset that pays off in the long run" has its problems, Li and Yang's report says, because of the volatility of local markets.
As the past few decades have demonstrated, some neighborhoods can become hot fairly quickly, while others lose value.
In housing, unlike the stock market, there are fewer opportunities to diversify, the Fed study's authors say.
So although it's true that volatility in local markets means you can win big, it also means you can lose big.
Heavens writes for the Philadelphia Inquirer. Distributed by McClatchy-Tribune Information Services.