Homeownership in the New Millennium

As the first decade of the new millennium draws to a close, many homeowners are left wondering if homeownership is still the American dream it once was. Many of our grandparents who owned homes stayed put in them for 30-40 years or more. They paid off their mortgages and owed nothing at the time of their retirement. In the days post WWII, the rate of homeownership was around 35% (US Census Bureau).

With families spending an average of 7 years in the same house today, it leads us to look at several views of homeownership over the past decade.

Over the last 10 years, we have seen a rollercoaster of loose mortgage guidelines, beginning with buyers putting little or no money down. The down payment and the length of ownership are quite intertwined. A small down payment with a small length of ownership is the most risky. A small down payment with a longer length of ownership can still be a great strategy for a first time homebuyer. Conversely, a larger down payment provides security and makes even a small length of ownership feasible.

The years from 2003-2006 many Americans invested or over-invested in their residences to take out equity as prices were rising faster than closings could take place. A shift of thinking took place, that our homes were suddenly equity machines capable of producing  cash as we needed it.

Today's mortgage process has swung the other direction with extremely tight mortgage approval criteria with banks requesting paperwork verifying each and every deposit at times. 

But in 2010 the attention focuses back on the true benefit of homeownership-especially during this time of year. Our home is the place where memories are made, where we wish to live, long-term, establish roots, and raise our families.

According to a National Housing Survey conducted by Fannie Mae earlier this year, the four top reasons for buying a home were non-financial benefits which included

• Having a good place to raise children and provide a good education
• Having a physical structure where you and your family feel safe
• Allowing you to have more space for your family
• Giving you control over what you do with your living space

Joey Healey, Jr. of Port Jefferson Station grew up in the house owned by his Grandfather and sold to his mother and father in the 1980s. His grandfather originally paid $19,500 in 1965, and the home is currently assessed at over $400,000.

After leaving Long Island to go to college in Rhode Island, Healy returned the house occupied by three generations of family. Healy and his Dad agree that there is a different sense of pride in owning rather than renting.

Joe Sr. says they have had a tremendous sense of accomplishment throughout the years as they made various home improvements and virtually turned the house around completely. He also says they felt the community benefits of being more involved at the schools and youth sports programs. Joey Jr. says he certainly wants to own his own house regardless of any monetary benefits in homeownership. 

But has the downturn of the last three years wiped out the financial benefit of owning a home?

Most certainly not in Port Jefferson and Port Jefferson Station.

Despite recent declines in prices, local residents who have owned a home for the last decade have seen gains of 8.7 percent annually in the 11777 zipcode* and 6.5 percent annually in the 11776 zipcode*.

There are still tax benefits as well. According to Danielle Hale, a research economist for the National Association of Realtors, the average taxpayer saved $3,050 in taxes by claiming the mortgage interest deduction and the average taxpayer saved $1,020 in taxes as a result of the real estate tax deduction . 

In Port Jefferson and Port Jefferson Station, the rate of homeownership according to the 2010 census was greater than 70 percent. That is over 10 percent higher than the national average proving the American dream is still alive.

Perhaps there is a new, more realistic version of the dream as we approach the next decade. Buying a home isn't for everyone, but excellent housing opportunities exist for those who plan to stay in their home for the years to come.

* Data taken from the Long Island Multiple Listing service for Residental Listings sold from 1/1/2000-12/31/2000 and 1/1/2010-12/31/2010.

Amanda Eckart is a senior real estate agent at in Port Jefferson. You can contact her at 631-404-2215 or by email at amanda@jprealtor.com. Visit her online at www.pjvillagehomes.com