In the early days of American history, society was primarily agrarian. Private land ownership was a cornerstone of U.S. culture and specifically protected by the Constitution. Farmers owned land and homes built on the land.

In the early 1800s, people needed a lump sum to purchase a home because banks wouldn’t lend money to average individuals to buy homes. Home mortgages didn’t become readily available until the 20th century. These early mortgages were as short as five years and could be renegotiated annually.

When home mortgages were structured differently, the housing market boomed. Half of Americans owned their homes by 1950. The law of supply and demand controlled the market. As the demand for housing increased, so did prices.

According to an article on the Zebra, an insurance comparison website, titled “How Housing Has Changed Since 1960,” homes have become less affordable.
In 1960, 68 out of 100 Americans could afford a home. Today, only 43 out of 100 can afford one.

According to an article by J.D. Roth on the Get Rich Slowly personal finance website titled “A Brief History of U.S. Homeownership,” the largest decrease in the number of households owning their own homes in the U.S. occurred between December 2007 and June 2009 — a period generally referred to as the Great Recession. Individuals and financial institutions took on too much debt. Financial institutions developed risky lending practices. To qualify for mortgages, many individuals accepted mortgages with balloon payments. When larger payments came due, borrowers couldn’t afford their payments. Foreclosures increased. Banks lost money.

The end result was different for banks than for homeowners who lost their homes. The U.S. government bailed out financial institutions. Carol Roth, author of “You Will Own Nothing,” was quoted in the New York Times Magazine: “From 2007 to 2011, 4.7 million households lost homes to foreclosure and a million more to short sale. Private equity firms developed new ways to secure credit, enabling them to leverage their equity and acquire an astonishing number of homes.”

According to Roth, this epic transfer of wealth put a glut of foreclosed homes into the market, upsetting the balance between supply and demand. Overbuilding prior to the recession and foreclosures during the recession resulted in a cycle of underbuilding from 2010 to 2019. This contributed to the escalating home prices of today.

Roth said institutional landlords never existed until 2010, when large corporations bought foreclosed homes and turned them into rental units. She said this practice continues. Data for the fourth quarter of 2021 reveals corporations bought 80,000 homes — about 18 percent of single-family homes sold during that quarter.

Today, potential homebuyers contend with wages that don’t keep up with inflation, making saving for down payments and affording mortgages difficult. Large corporate buyers that have access to capital make daunting competitors for individual homebuyers.

A June 2023 report by Caitlyn Young, Amalie Zinn and Jung Hyun Choi for the Urban Institute examined the benefits of homeownership. Among them were a sense of anchored community, tax breaks, enhanced opportunities to build credit and stable monthly payments. Beyond home appreciation, homeownership provides financial benefits unique to the U.S., such as mortgage interest deduction, 30-year fixed-rate mortgages and the ability to refinance without a penalty.

Despite the advantages of homeownership, the hurdles become higher. Data reported by the Urban Institute from the American Community Survey and U.S. Department of Housing and Urban Development show median home price to median income ratios have gone up significantly, making homeownership more challenging even for those who earn moderate incomes. High home prices require high down payments. Interest rates are higher, too.

Government interference — allowing bank subsidies, devaluing the dollar by printing money to accommodate spiraling debt, artificially increasing or decreasing interest rates and imposing costly regulations — distorts the market. Citizens lose homebuying opportunities.

In a free market, the forces of supply and demand determine the price of housing. Homeownership offers the easiest way for average workers to create wealth. The bedrock of the American Dream is homeownership. The American people should be concerned about this overt attack on their financial lives and the security of their futures.

Phyllis Hunsinger is founder of the Freedom & Responsibility Education Enterprise Foundation in Grand Junction. The FREE Foundation provides resources to students and teachers in Western Colorado to promote the understanding of economics, financial literacy and free enterprise. A former teacher, principal and superintendent, Hunsinger wrote “Down and Dirty: A ‘How To’ Math Book.” Reach Hunsinger by email at phyllis@free-dom.us.com. For more information about the FREE Foundation, log on to www.free-dom.us.com.