Professional Documents
Culture Documents
Brandon Parks
ENG 1201-215
Prof. Cassell
6 November 2018
In 2014 I decided to try to take that next big step, the golden standard of adulthood:
Home Ownership. I had been investing money in my stock portfolio and while my income was
not high I had done sufficiently well with my investments that I could sell it all and put a
generous down payment on a house, thus making it much more likely I could get a loan at a
decent interest rate even without mortgage insurance. At the time I decided to start looking I was
living in a crappy apartment that had very thin walls, noisy neighbors, and a small bullet hole
was aerating my kitchen from the “accidental cleaning discharge” of my neighbor. All that being
said, I was not in any real hurry to move as the rent was cheap, I had no kids and no spouse, and
With no real urgency to move and just a thought that it would be nice to have a place of
my own that I could call mine, I started looking into the area and was surprised, as I always am,
at the prices that were being asked. I always am shocked by prices, whether it be for clothes or
at homes, the prices are seeming entirely unreasonable and I have no urgent need to purchase so I
decided to put the home search on the back burner for a while and forgot the whole thing.
Fast forward to 2017, I now have a wife, a stepdaughter, a newborn daughter, and we’re
looking for a new place to live. We have the option of renting a house from a relative of my wife
but I would much rather purchase our own place and begin to build equity so I quietly being
looking around for any homes that might be available and would be suitable for our growing
family. I am even more shocked than I was in 2014. The prices of homes, even so called “starter
homes” has increased even more dramatically. I am dismayed, there is no way we can afford
these houses currently. Perhaps I am just looking in more expensive areas, I had previously
limited my search to the Northmont area (Englewood, Union, Clayton). I go back to that area just
to do a little comparison shopping. Same results, all the houses in the areas I had previously
looked at, and even a few of the same houses, were radically more expensive. How could this be
I ask myself? The homes have only gotten older, more used, require more upkeep as they age.
There have been no significant improvements; no new rooms added on or sudden increases in the
size of the lots. What could be causing this upsurge in prices for the same item without any
additional value?
I know that my car I have been driving for the last few years has certainly not increased
in value as I have added miles onto it. My collection of movies has not become more valuable as
I have watched them repeatedly. I am a follower of the national news, and I recalled seeing
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stories of increasing prices in major cities and of seemingly outrageous asking prices far beyond
the means of ordinary citizens but I had no idea that this wasn’t more than just a few overpriced
and highly sought after cities. Then it hit me, everyone is wanting to buy a house. Everyone I
know has been told all their life that they should buy a house, that buying a house is part of
becoming an adult and contributing member of society. Home ownership is built into our
upbringing as a life goal, and I myself was buying into it. I could rent a house just fine, the cost
was exactly the cost of the mortgage on the property (renting from relatives can be a very good
cost savings). But I wanted my own house, for reasons I couldn’t even fathom myself beyond a
sense of “ownership.” This is going to be a problem for our country going forward. One we are
beginning to grapple with now and our children certainly will. Although the housing market is
very complex and can vary wildly between different localities, a nationwide trend of increasing
home prices is leading towards another market bubble. There are many factors that affect prices
but a societal change will be needed to help prevent another bubble from leading to economic
recession.
The concept of homeownership has been incorporated into American society slowly over
the generations. It has become part of what is known as the “American Dream,” a phrase coined
by James Truslow Adams in 1931 in his book The American Epic. He wrote “that dream of a
land in which life should be better and richer and fuller for everyone, with opportunity for each
that is known throughout the world as being a purely American ideal. Over time that concept of a
life that is both richer and fuller came to embrace the idea that a person’s home should be
considered their own personal sanctuary, an oasis away from any woes of society and their place
of ultimate freedom of expression. This then led to an increased interest in the purchasing of
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homes, something that has not always been seen as commonplace and required of citizens. At the
start of the nation, only farmers and wealthy urban dwellers were likely to own a home as it
wasn’t seen as a necessity of life to own property. This increased during the Industrial
Revolution when the increased efficiency seen in factories around the world led to an increase in
wages and allowed more of the lower classes to begin to purchase property, thus leading to the
By the 1890’s, home ownership had increased to 47.8% of the nation, according to the
US Census Bureau (Roth). At this time, the banking system had been stabilized and banks were
experimenting with the concept of home mortgages for average citizens, although these
mortgages were very different than those that are available today. They required a 50% down
payment and only had a term of 5 years so they were not accessible to the majority of the
population. This changed during the Great Depression when banks were unable to loan out
money due to a lack of income from long term investments, thus leading to the modern 30 year
mortgage. This allowed banks to receive interest for very long periods of time and ensure a
steady revenue stream, and allowed many more people access to credit as they no longer needed
a 50% down payment and could repay the loan over a much longer period.
By the 1950’s home ownership had risen to 55% largely thanks to World War Two and
the GI bills that helped returning soldiers with home loans, leading to a huge boom in home
construction and the invention of the suburbs, homes that surrounded metro areas and were
bordered by more rural areas (Roth). Naturally this increased demand led to prices increasing;
however, they did so at a slow and predictable level as they were driven purely by demand in
particular areas and as construction added new homes to the supply the prices were kept low. As
the nation entered the 1970’s economic and social unrest led to a decline in the construction
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industry, slowing the supply of new homes entering the market. The supply of new homes has
remained steady since then, although the size of homes has increased “home sizes are ballooning
even as households are shrinking. The average household had 2.9 people in 1973. In 2016, the
average household had 2.5 people. Let's run the numbers: Forty years ago, we had 526 square
feet of living space per person; today, we have 969 square feet of living space per person”
(Roth). This increase in home size has naturally led to an increase in price as the additional space
Home ownership is a complicated process and involves many different people at many
different steps in the process. There are loans to be considered, credit to be checked, assessments
requirements. Each step in the process adds to the price as each step requires some form of
personal involvement and payment made for the work being done. Steven Stelk and Leonard
Zumpano conducted a study on the involvement of real estate brokers, those licensed individuals
who act as intermediaries between the buyers and sellers of homes. They assist with the
documents involved in the sale, schedule inspections, and assist in the marketing of the home.
They essentially are both buying and selling the home for the two parties involved and making
the process easier for those who are not knowledgeable about the various rules and regulations
involved. They also add considerable fees as their time and expertise is being used for the sale.
The study found that those who use a broker will realize an increase in the price of the home sale
“in both a seller's market (2006) and a buyer's market (2009). In both years, homes sold with
brokerage assistance realized higher prices when compared with homes sold without the aid of a
broker, even after controlling for selection bias in the seller's choice to use a broker” (Stelk,
Zumpano). This means that regardless of whether the current housing market favors the sellers of
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the home or the buyers, the price will be increased simply by the involvement of a broker.
Although some increase in price is to be expected in order to recoup the fees charged by the
broker, they found that the price increase was actually 29% on average above the amount needed
to cover brokerage costs. This means that the broker was causing an increase in the price of the
home simply by their involvement, with nothing of value being added to the home itself.
Extrapolating this finding out further, the more often the home was sold with broker
involvement, the higher the price would become. As other homes in the same area were also
sold, presumably with broker involvement, their own prices would increase which would only
further drive up the general prices in the area. This is not the only example of home prices being
In a study conducted in Duval County, Florida, researchers were trying to determine what
factors might increase interest in one area of housing over another. There were many variables
areas, etc. The researchers found many different factors can influence a homebuyer’s decision
but an unusual one was found. Property taxes are taxes levied by local governments based upon
the value of homes and used to fund local public interests, such as roads and schools and
hospitals. Areas with lower property taxes are generally looked upon as more favorable to buyers
as they will have to pay less for the home over the years that they own it. This can actually drive
up prices as the lower taxes increase the demand for the properties. It was also found that
membership in a Home Owner’s Association (HOA) could also increase the prices of homes in
an area. HOA’s are organizations of property owners in designated areas that pay fees for use of
common property such as pools, tennis courts, and clubhouses. Membership in these
organizations also generally requires the members to follow certain rules on their property such
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as where trash cans can be stored and how long grass can be. They can even stipulate the colors
of paint allowed on exterior walls and how many guests are allowed to stay in a house at any
given time.
The common understanding of HOA’s is that they are well intentioned but can often be
stifling as their rules limit the use of a home and can actually decrease the enjoyment of one’s
own property. The study found the exact opposite, that “the real price was negatively impacted
by real city and county property taxes, but positively affected by membership in an HOA”
(Angjellari-Dajci). This finding can possibly be explained by the rules and stipulations of HOA
membership. Maintenance and upkeep are regulated within the entire neighborhood and any
violations are punishable with fees, thus giving homeowners financial incentive to keep their
homes well maintained and with excellent “curb appeal” (the attractiveness of the exterior of a
property as seen from the street). This leads to increased home prices as homes that are all
uniformly maintained and attractive are seen as desirable by potential buyers who will want to
The availability of credit has increased greatly over time as banks have been able to loan
out more money to individual consumers instead of just to large corporations. Government
programs have also assisted with purchasers looking to find lenders for their own individual
needs. Interest rates have been at historic lows which has made home buying more attractive
with less interest being paid out over the life of a mortgage loan. In a study by Zigan Wang and
Youwei Zhu, they used statistics to “simulate the model and produce dynamics of housing
supply, housing demand, housing price and mortgage rate over time” (Wang, Zhu). The collapse
of the housing market in the late 2000’s led to a number of regulations being passed to help
protect against predatory lenders and financial instruments that were not optimal for home
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buyers. Their study found that without any outside interference from governments or the
financial sector, that the availability of credit will only become more and more accessible and
will likely lead to another housing bubble that will burst and send the markets into recession
again. With the recent attempts to roll back the Dodd-Frank Act, a massive piece of financial
reform legislation passed by the Obama administration in 2010 as a response to the financial
crisis of 2008, the study concludes that inevitably market forces would repeat the same cycle and
Home ownership has always been more prevalent with the wealthy and societal elites
than with those deemed low income. The framers of the Constitution wrote in that only white
male land owners could vote, as those were deemed to be those with the best education and most
able to lead the country. This view has obviously evolved over the centuries but it still remains
that citizens with the most income or accumulated wealth are seen as more valued than others.
This is also a common view in the housing market. Construction of new homes has become more
expensive over time as the size of homes and lots has increased. This increase in construction
costs, coupled with the rises in home prices, has led many developers to focus on the market
segments most likely to earn them a larger profit. This leads to few modest sized homes being
built and keeps prices high as the supply of homes might increase, but not the supply of
Wages have been stagnant in the United States for decades and the purchasing power of
the consumers has decreased dramatically. In January 1950, one dollar had the same purchasing
power as $10.55 in January 2015 (CPI Inflation Calculator). This means that a home is 10 times
more expensive today, without any other factors, than it would have been in 1950. This puts
homeownership out of the price range of many low income and minority populations. A study
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conducted by William Clark concluded that “the impacts of the debt burden and negative equity
on ownership and conclude that they will have long-term impacts on the ability of low-income
and minority households to enter the housing market or even to keep their homes. The policy
As prices have increased continued to increase both in the construction and sale of
homes, it has created markets where homes have commanded increasingly astronomical prices.
Two bedroom homes in major metro markets are being sold for millions of dollars. This has
created a self-perpetuating cycle that causes further increases in the prices of the homes.
However, some of these areas may be hitting a pricing plateau as the market dries up with prices
In southern California “new-home sales continue to run well below historically normal
levels, with the sales through May of this year 37 percent below the average number sold during
that five-month period over the past three decades,” noted LePage. “Also, most of the new
homes sold this year were aimed at mid-market to high-end buyers, with almost two-thirds
selling for $500,000 or more and 15 percent selling for less than $400,000.” (Olick). This
indicates that many areas are pricing themselves out of the market, which will cause a vast fall in
home values as the market corrects itself back to affordable levels. This will leave many current
homeowners with very large mortgages for homes that have fallen drastically in value. This type
of market crash is what led to the recession of the late 2000’s with record numbers of
foreclosures as owners were left with homes well below the value they purchased them for.
Although there are many factors that affect home pricing, both naturally occurring
in market settings of supply and demand as well as those placed artificially for the financial
benefits of third parties, there remains the single driving force behind home buying: Society
demands it as part of becoming a functioning adult. Parents and grandparents, most of whom
purchased their homes in much better economic times with more reasonable costs, continue to
raise the next generations with the expectation that they will someday build a family in their own
home. Young adults are currently being burdened with record levels of debt before they even
leave their parent’s household and are entering an evolving job market that is demanding higher
levels of technical skills while withholding the traditional wage increases that accompany such
an increased demand of specialization. Adding in the economic uncertainty that is becoming the
new norm in a global marketplace and the ever looming crisis of political unrest as generational
values clash, the prospect of another housing bubble crashing the housing markets and creating
another recession is very frightening. It will take a societal shift away from demanding home
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ownership for every citizen, and a redefining of the American Dream, in order to avert this crisis.
This change will not be simple or accomplished overnight. There are vast financial and political
implications to consider, as well as attempting to change the minds and values of generations that
have taken for granted that their way of life is the only one that can lead to happiness and
prosperity. This change will not happen overnight and will not occur without dedicated forces
devoted entirely to the cause. In short, it will be an uphill battle while facing constant pressures
and attempts to return to the status quo but it is the only way to avoid history repeating itself and
millions of people being forced out of their homes and sent into both economic and emotional
depression. Home ownership in the United States must return to its former status as a goal to
attain and a dream to realize, not a requirement that will only lead to despair.
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Works Cited
“CPI Inflation Calculator.” U.S. Bureau of Labor Statistics, U.S. Bureau of Labor Statistics,
data.bls.gov/cgi-bin/cpicalc.pl?cost1=1.00&year1=195001&year2=201801.
Angjellari-Dajci, Fiorentina, et al. “The Impact of Taxes and HOA Fees on Single-Family Home
Prices.” International Advances in Economic Research, vol. 21, no. 2, May 2015, pp.
201 – 211.
http://sinclair.ohionet.org:80/login?url=https://search.ebscohost.com/login.aspx?direct=tr
ue&db=bth&AN=102202679&site=eds-live.
Clark, Jonas. “In Search of the American Dream.” The Atlantic, Atlantic Media Company, 1
dream/3059.
Clark, William A. V. “The Aftermath of the General Financial Crisis for the Ownership Society:
Housing Policy, vol. 13, no. 3, Sept. 2013, pp. 227 – 246.
http://sinclair.ohionet.org:80/login?url=https://search.ebscohost.com/login.aspx?direct=tr
ue&db=a9h&AN=90258972&site=ehost-live.
Mybudget. “Housing Bubble.” The Housing Bubble Is Getting Ready to Implode, 2015,
www.mybudget360.com/housing-bubble-set-to-pop-home-values-in-housing-bubble-
real-estate-inflated/.
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Olick, Diana. “The Housing Shortage May Be Turning, Warning of a Price Bubble.” CNBC,
turning-warning-of-a-price-bubble.html.
Roth, J.D. “A Brief History of U.S. Homeownership.” A Brief History of Homeownership, Get
Stelk, Steven, and Leonard V. Zumpano. “Can Real Estate Brokers Affect Home Prices Under
Extreme Market Conditions?” International Real Estate Review, vol. 20, no. 1, Spring
2017, pp.
51 – 73.http://sinclair.ohionet.org:80/login?url=https://search.ebscohost.com/login.aspx?
direct=tr ue&db=bth&AN=122477178&site=eds-live.
Zigan Wang, and Youwei Zhu. “Housing Bubble in the United States.” Journal of Accounting
& Finance (2158-3625) , vol. 18, no. 3, July 2018, pp. 10– 25.
http://sinclair.ohionet.org:80/login?url=https://search.ebscohost.com/login.aspx?direct=tr
ue&db=bth&AN=131505091&site=eds-live.