Lawmakers Seeking Ways to Revive the American Dream

Filed in Economics, Homeownership, Housing Trends by on November 24, 2015 0 Comments

keytomoneyRising home prices, escalating rent and burdensome student debt are just some of the barriers deterring a growing number of young people from buying their first home.

During the past 10 years, the percentage of home owners between the ages of 25-34 has fallen by 7%. The drop is even greater among those age 35-45, plunging 11% since 2005. Homeownership for these age groups seems less like an American dream, and more like a fantasy.

What they need is a boost, according to NAHB Chief Economist David Crowe.

“It’s clear that buying a home has becoming increasingly difficult for younger people,” Crowe said. “Our studies show that for many of them, they’re greatest desire is still to own a home. Yet, without [sufficient] means of accumulating a downpayment, homeownership among this group will continually be deferred and maybe never achieved.”

Rep. Sean Patrick Maloney (D-N.Y.) and Rep. Jim Renacci (R-OH) recently proposed new legislation to help more would-be home buyers get a seat at the closing table. On Nov. 19, Maloney unveiled a bill that would give people the ability to use more of their tax-free IRA savings toward the purchase of their first home.

Since the adoption of the Taxpayer Relief Act of 1997, the maximum allowance of IRA savings that could be withdrawn without penalty and used for the purchase of a home has stayed at $10,000. Maloney’s bill proposes an immediate increase in that allowance to $25,000 and includes provisions to adjust for inflation.

“The dream of homeownership is slipping away for many Americans,” Maloney said. “But if we can encourage more people to save for a good downpayment, we can help them achieve the goal of wealth through capital appreciation.”

Maloney described the dramatic wealth gap that currently exists among middle-class Americans. According to the 2013 Federal Reserve Survey of Consumer Finances, the median family net worth of a homeowner is $195,400, compared to just $5,400 for renters.

“The access door to middle-class wealth leads through homeownership,” Maloney said. “When a family walks through the door of their own home, they’re walking into a life of increased financial security – if they do it the right way and buy a house they can afford.”

Soon after he officially introduced the bill in the House of Representatives, Maloney was joined by Crowe on a conference call with the media.

Crowe listed many of the positive effects that can stem from homeownership, including the owners’ increased participation in civic activities and improved financial stability. Their children are also more likely to be successful in school.

Though the desire to own a home remains strong, the financial ability to do so has diminished significantly. According to the U.S. Census Bureau, 90% of millennials say they would prefer owning to renting, but the percentage of people under the age of 35 who own their home is just 36% – the lowest level on record.

Crowe acknowledged that enabling more Americans to save for a downpayment, as this bill would encourage, is one of the potential answers to this growing problem.

 

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