I think the last 10 years skewed the data. Homeownership was good, until affordability products were created and blew up a bubble in housing prices beyond what people could afford. I think if we were to get rid of these programs or products and let prices drop back to down. Plus, if we based our financing on 30-year or 15-year loans with the proper income verification, I think homeownership would have more advantages again. Finally, I think homeownerhip is a consumption item, not really an investment item. A 20 unit apartment building is an investment item.
Data cited by the Philadelphia Fed study's authors, Li and Yang, show that home equity as a share of a household's net worth has declined during the recent economic downturn, as it did from the mid-1980s to the late '90s.
That is because the ratio of mortgage amount to home value has risen since the mid-1980s. In addition, there has been an increase in cash-out refinancing, resulting in many homeowners' taking out more money than they actually owed on their houses.
Even the argument that "housing is a relatively safe asset that pays off in the long run" has its problems, Li and Yang's report says, because of the volatility of local markets.
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