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6 - Flawed Premises

Published online by Cambridge University Press:  05 July 2014

Mechele Dickerson
Affiliation:
University of Texas, Austin
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Summary

In 2003, Franklin Raines, then Chair of Fannie Mae, declared that “[t]he American Dream of homeownership has never been a more powerful lure, nor has it ever been so achievable.” According to Raines,

[i]n almost every respect, 2003 was the greatest year for housing in America’s history. Housing sales were at all-time highs. Mortgage interest rates dropped to their lowest level since the late 1960s. Mortgage originations were up more than 40 percent from just the year before, coming in at a remarkable $3.7 trillion, as consumers bought homes or refinanced their existing mortgage.

Because interest rates were lower than they had been in almost forty years and housing prices had soared, homeowners “felt” wealthy and they refinanced their mortgages to cash out some of this perceived wealth. The year 2003 was definitely a banner year for housing sales and housing financing: corporate profits for the financial services sector and for the real estate industry soared. The year 2003 was not, however, a banner year for the cash-strapped customers who were being lured into buying homes or refinancing their mortgages in order to tap into their housing wealth.

The dramatic disconnect between soaring corporate profits and sinking household finances should have been a warning sign that something was amiss with the Happy Homeownership Narrative. But because U.S. leaders ignored the warning signs, the disconnect between the boardroom and the living room persists to this day. Political leaders still refuse to admit or accept that the Happy Homeownership Narrative is based on flawed premises and assumptions that are no longer valid for many low- and moderate-income (LMI) Americans. Political leaders may refuse to acknowledge the disconnect between the premise and the reality, but those considering buying a home must understand that they are being encouraged to do so not for their own financial well-being but for the good of the U.S. economy and moneyed constituent groups who support U.S. political leaders.

Type
Chapter
Information
Homeownership and America's Financial Underclass
Flawed Premises, Broken Promises, New Prescriptions
, pp. 114 - 144
Publisher: Cambridge University Press
Print publication year: 2014

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References

Van Zandt, Shannon & Rohe, William M., The Sustainability of Low-Income Homeownership: The Incidence of Unexpected Costs and Needed Repairs Among Low-Income Home Buyers, 21–2 Housing Pol’y Debate, 317–41 (2011)CrossRefGoogle Scholar
Blank, Rebecca, Economic Change and the Structure of Opportunity for Less-Skilled Workers, in Changing Poverty (Cancian, Maria & Danziger, Sheldon H. eds., Russell Sage Press, 2009)Google Scholar
Haughwout, Andrew et al., The Homeownership Gap, 15–5 Current Issues in Economics and Finance (May 2010)Google Scholar
Rohe, William M. & Stewart, Leslie S., Homeownership and Neighborhood Stability 7–1 Housing Pol’y Debate43 (1996)Google Scholar
Fennell, Lee Anne, Homes Rule, 112 Yale L. J. 617 (2002)Google Scholar
Greenspan, Alan & Kennedy, James, Sources and Uses of Equity Extracted from Homes, 24–1 Oxford Review of Economic Policy120–44 (2008)CrossRefGoogle Scholar
Nettleton, Sarah & Burrows, Roger, When a Capital Investment Becomes an Emotional Loss: The Health Consequences of the Experience of Mortgage Possession in England, 15–3 Housing Studies463–79 (2000)CrossRefGoogle Scholar

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  • Flawed Premises
  • Mechele Dickerson, University of Texas, Austin
  • Book: Homeownership and America's Financial Underclass
  • Online publication: 05 July 2014
  • Chapter DOI: https://doi.org/10.1017/CBO9781139839280.006
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  • Flawed Premises
  • Mechele Dickerson, University of Texas, Austin
  • Book: Homeownership and America's Financial Underclass
  • Online publication: 05 July 2014
  • Chapter DOI: https://doi.org/10.1017/CBO9781139839280.006
Available formats
×

Send book to Google Drive

To send content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about sending content to Google Drive.

  • Flawed Premises
  • Mechele Dickerson, University of Texas, Austin
  • Book: Homeownership and America's Financial Underclass
  • Online publication: 05 July 2014
  • Chapter DOI: https://doi.org/10.1017/CBO9781139839280.006
Available formats
×