Housing and Strong Families

Is there any link between housing markets and strong families? Is there a link between our nation’s current poor housing market and family breakdown? Does a strong housing market indicate stable families, or vice versa? What are the links between housing choices and family strength?

A recently released survey by the Consumer Federation of America revealed that Americans continue to harbor misconceptions about economics, wealth building, and credit scores. In fact, the survey revealed that collective knowledge fell in these areas over the last two years. For example, it ought to be well known that the most important factor in an individual’s credit score is paying bills on time. The second most important fact to know is that maxing out your credit cards is bad. And yet, survey after survey on marital breakdown shows that money problems and poor financial management are key indicators of divorce. More and more states are considering legislative proposals to dissolve the so-called “mini-marriages” which involve no real property distribution, and are generally negative financial situations due to high credit card debt.

A basic principle of family economics is that home ownership builds wealth. In fact, 70% of Americans pay less income taxes annually because they own their homes. In addition to tax savings is the added possibility of equity appreciation and wealth building. More than 50% of the total net wealth of the typical American family comes from the equity build up from home ownership. A recent Federal Reserve consumer financial survey shows that median net wealth of a homeowner is $171,700, while the wealth of a typical renter household is only $4,800. Typically, home values rise at the general rate of inflation plus one to two percentage points – built in insurance for your family’s finances. And because home appreciation is base on total property value rather than cash investment, it is not unusual to find that a home owner’s cash investment rate of return from appreciation is 100% to 200%. Clearly, home ownership is sound family policy, and the longer you live in your home the more likely you are to reap its benefits over the long term. Yet most marriages end in divorce between years 2-10, thwarting the best possibilities for growth of marital wealth.

Divorce always forces a sale or at least a split of the marital home. Compound that with a negative family financial picture, and you have a small market downturn. Combine that picture with nearly half of the marriages in America ending in divorce, and you can easily forecast a major ill housing market. It is a fact that home ownership stabilizes neighborhoods and cities, and creates stronger families. There is obviously a clear link between housing markets and strong families. A poor housing market could be cured by encouraging marital longevity and family strength. Strong families will yield a strong housing market. The link between housing and family strength is purely economic policy that encourages family stability.