Tuesday, March 20, 2007

Home Ownership Might Still Be Good For America

Greg and Tyler have both mentioned the result by Andrew Oswald that high levels of home ownership are associated with high levels of inflation.

Now, as you all may know, the mortgage interest deduction is a perennial whipping boy for economists. Liberal economists see it as a tax give away to upper middle class owners who are more likely to itemize. Conservative economists view it as turning potential investors away from the stock market towards the less productive real estate market.

While I am sensitive to both those arguments the question remains - is more home ownership in and of itself a good thing or a bad thing for America as a whole. At first blush Oswald's results seem to suggest that it is a bad thing.

I am, however, not so sure. Home ownership exposes families to more systemic risk. That is, if the your local economy turns bad not only are you out of a job but you are stuck in a home which is decreasing in value.

On the other hand it shields people from idiosyncratic risk. That is, suppose that your town is doing well but your business just happens to do poorly this year. Well, at least you still have the house. Even if you have to tap it for equity or sell and scale down, you still get to keep whatever premium your neighborhood commands.

My thought is that the second result might be more important than the first. People are attached to their communities and buying a home helps the hedge against the risk that their personal fortunes will not match those of their neighbors. It allows them to keep their kids in the same schools even if those schools are in greater and greater demand.

All together I think home ownership decreases the risk level homeowners face and perhaps that's precisely why they face higher unemployment. They are more willing and more able to hold out for a better position. If that's the case the home ownership may be good for America after all.

13 comments:

Anonymous said...

Local real-estate risk is idiosyncratic risk. The relevant alternative to home-ownership is investing in a well-diversified market fund, which does expose people to systemic risk, but is more efficient than idiosyncratic investment such as local housing values.

Karl Smith said...

Local real-estate risk is idiosyncratic risk.

Relative to the economy as a whole but not to your community.

Portfolio theory usually refers to systemic and idiosyncratic risk relative to the stock market as whole.

The relevant reference group here, however, is your community.

Anonymous said...

the super mind evolution system -
traffic travis -
truth about abs -
turbulencetraining -
turbulence training -
twitter affiliate cash -
twitter decoded -
video piggy -
video web wizard -
vincedelmontefitness -
vince del monte fitness -
warp speed fat loss -
wedding speech 4u -
windo fix -
your bill killer -
you will get paid -
zygor guides -
20 day persuasion -
advanced pc tweaker -
adware bot -
affiliate naire -
apple patch diet -
article submitter -
art of approaching -
burnthefat -
burn the fat -
carb rotation diet -
cold sore freedom in 3 days -
conversationalhypnosis -
conversational hypnosis -
copy that game -
cure for bruxism -
cure hemorrhoids -
cyber link pro -

Anonymous said...

dl guard -
driver checker -
driver robot -
drop shipping wholesalers -
earth4energy -
earth 4 energy -
easy backup wizard -
easy click mate -
easy photo biz -
eatstopeat -
eat stop eat -
epinoisis -
error fix -
error killer -
error smart -
evidence nuker -
fap turbo -
fatburningfurnace -
fat burning furnace -
fatloss4idiots -
fat loss 4 idiots -
final uninstaller -
fitnessmodelprogram -
fitness model program -
fit yummy yummy -
flattenyourabs -
flatten your abs -
flat to fab -
governmentregistry -
government registry -
heartburn no more -
hippo jaw -
homemadeenergy -
home made energy -

Anonymous said...

honest riches -
hot video squeeze templates -
instant website creation -
jump manual -
keyword research pro -
linden method -
malware removal bot -
maternityacupressure -
maternity acupressure -
meet your sweet -
micro niche finder -
musclegainingsecrets -
muscle gaining secrets -
muscle gain truth -
my traffic strategy -
nasty dirty money -
negative calorie diet -
no adware -
pc optimizer pro -
perfect uninstaller -
pergola plans -
pick the gender of your bady -
plr ebook club -
pregnancy without pounds -
profit lance -
publicrecordspro -
public records pro -
questions for couples -
quit smoking today -
ready made review sites -
reg genie -
registry easy -
registry easy download -
registry winner -

Anonymous said...

registry winner download -
retrievea lover -
reverse mobile -
richard mackenzie direct -
rocket italian -
rocket spanish -
roulette sniper -
rss ground -
secret affiliate weapon -
secrets book -
spam bully -
spyware cease -
spyware nuker -
spyware remover -
spy zooka -
starting a day care center -
tattoo fever -
team idemise -
the bad breath report -
the cb code -
thedietsolutionprogram -
the diet solution program -
the rich jerk -
the super mind evolution system -
turbulencetraining -
turbulence training -
vincedelmontefitness -
vince del monte fitness -
warp speed fat loss -
wedding speech 4u -
windo fix -
wrap candy -
zygor guides -
7day ebook -

Anonymous said...

360 fix kit -
advanced pc tweaker -
adware bot -
affiliate naire -
art of approaching -
beating adwords -
believe and manifest -
blogging in action -
body building revealed -
burthefat -
burn the fat -
carb rotation diet -
cheat your way thin -
cold sore freedom in 3 days -
conversationalhypnosis -
conversational hypnosis -
convert 2 ev -
cure for bruxism -
cure hemorrhoids -
digi cam cash -
digital media solution -
dl guard -
driver checker -
earth4energy -
earth 4 energy -
easy backup wizard -
easy member pro -
easy tv soft -
eatstopeat -
eat stop eat -
error fix -
error killer -
evidence nuker -
fap turbo -

Anonymous said...

fatburningfurnace -
fat burning furnace -
fatloss4idiots -
fat loss 4 idiots -
final uninstaller -
fitnessmodelprogram -
fitness model program -
flatten your abs -
gamers testing ground -
gov auction -
governmentregistry -
government registry -
gov records -
herbal hair solution -
homebre ware -
home job group -
homemadeenergy -
home made energy -
inteli gator -
joanas world -
joyful tomato -
kidney stone remedy -
learn digital photography now -
learn elements now -
linden method -
lose man boobs -
malware removal bot -
maternityacupressure -
maternity acupressure -
meet your sweet -
muscle gaining secrets -
muscle gain truth -
niche adsense themes -
ninety day powerseller -

Anonymous said...

fatburningfurnace -
fat burning furnace -
fatloss4idiots -
fat loss 4 idiots -
final uninstaller -
fitnessmodelprogram -
fitness model program -
flatten your abs -
gamers testing ground -
gov auction -
governmentregistry -
government registry -
gov records -
herbal hair solution -
homebre ware -
home job group -
homemadeenergy -
home made energy -
inteli gator -
joanas world -
joyful tomato -
kidney stone remedy -
learn digital photography now -
learn elements now -
linden method -
lose man boobs -
malware removal bot -
maternityacupressure -
maternity acupressure -
meet your sweet -
muscle gaining secrets -
muscle gain truth -
niche adsense themes -
ninety day powerseller -

Anonymous said...

pc optimizer pro -
pregnancy miracle -
pregnancy without pounds -
privacy control -
publicrecordspro -
public records pro -
quit smoking today -
reg genie -
registry easy -
registry genius -
registry smart -
registry winner -
registry winner download -
retrievea lover -
reverse mobile -
richard mackenzie direct -
rocket italian -
save my marriage today -
secrets book -
seo elite -
spyware cease -
spyware remover -
spy zooka -
stock assault -
talking to toddlers -
the action machine -
thebadbreathreport -
the bad breath report -
thedietsolutionprogram -
the diet solution program -
the rich jerk -
tonsil stones remedies -
top secret fat loss secret -
turbo cash generator -

Anonymous said...

turbulence training -
twitter online system -
uncle sams money -
underground hypnosis -
vincedelmontefitness -
vince del monte fitness -
warp speed fat loss -
water 4 gas -
wedding speech 4u -
wp goldmine -
wrap candy -
xsite pro -
zygor guides -
37 days to clean credit -
advanced defrag -
adware alert -
adware bot -
affiliate prophet -
affiliate video brander -
anti spyware -
art of approaching -
atomic blogging -
auction classified cash -
automated cash formula -
bbq book -
bloggers pay check -
blogging in action -
body building revealed -
burnthefat -
burn the fat -
carb rotation diet -
cheat your way thin -
chopper tattoo -
cleanup the profits -

Anonymous said...

cold sore freedom in 3 days -
commission blueprint -
conversationalhypnosis -
conversational hypnosis -
cure for bruxism -
declutter fast -
driver checker -
earth4energy -
earth 4 energy -
easy member pro -
easy tv soft -
eatstopeat -
eat stop eat -
fap turbo -
fatburningfurnace -
fat burning furnace -
fatloss4idiots -
final sync -
final uninstaller -
fitness model program -
fit yummy yummy -
flatten your abs -
forex ambush -
governmentregistry -
government registry -
healthy urban kitchen -
homebrew installer -
homemadeenergy -
home made energy -
instant article wizard -
jamo rama -
joyful tomato -
lose man boobs -
lower body make over -

Anonymous said...

maternityacupressure -
maternity acupressure -
maverick money makers -
meet your sweet -
muscle gaining secrets -
muscle gain truth -
natural cancer treatments -
niche review templates -
nyhms warcraft guides -
pappa pc -
pc booster -
pc optimizer pro -
pc secret formula -
pda flix -
privacy control -
publicrecordspro -
public records pro -
push button ecover -
reg defense -
reg genie -
registry easy -
registry genius -
registry smart -
registry winner -
registry winner download -
reverse mobile -
richard mackenzie direct -
rocket japanese -
rotator cuff training -
save my marriage today -
secrets book -
silent sales machine -
silver lotto -
spyware cease -