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April 23, 2014

Did the Housing Crash Affect Home Ownership Views?

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Did the Housing Crash Affect Home Ownership Views?

Depending on how Americans' experienced the housing crash—whether they were a home owner or a bystander reading about it in the news—as well as their age influenced their perceptions of home ownership today, according to a new study by economists at the Boston Federal Reserve.

Two-thirds of Americans who did not personally suffer a loss directly from the housing crisis and who knew of the housing crisis merely from the media have not changed their views toward home ownership. They still place a high value on the American Dream, the study finds. 

However, younger home owners who experienced the housing crisis first-hand saw the most after-affects in their views of home ownership, the study found. About one-third of individuals who suffered directly from the housing crisis, such as through foreclosure or seeing their home values fall, had their confidence in home ownership shaken. However, older Americans who also suffered direct losses still mostly retained their confidence in home ownership and say they’d still choose to buy over rent. 

Nevertheless, the study found that the majority of Americans still say buying a home is better financially than renting a home. 

“We find that recent housing market conditions had little effect on individuals whose exposure to the crisis came through only, such as media accounts,” the authors wrote in the report, Shifting Confidence in Homeownership: The Great Recession. “For individuals who were not foreclosed on, did not lose a substantial amount of money in real estate, and did not have anyone close to them who did, attitudes toward the financial soundness of buying as opposed to renting were unchanged by the magnitude of the house price decline in their area. Information alone may not be sufficient to change attitudes; rather actual experience is necessary to change attitudes. 

Furthermore, the effects of the crisis seem to be confined to attitudes toward buying a home, and do not extend to attitudes to other home ownership decisions, such as ... general risk aversion.” 

Source: “Boston Fed Study: Home Ownership Values Unchanged Among Most Americans,” RISMedia (Aug. 5, 2012)

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