Should Homeownership Still Be The American Dream?

This was initially a guest post I wrote for Sam at Financial Samurai. Let me know what you think.

There have been numerous studies performed over the years which clearly outline the social benefits of homeownership. In the mid-2000’s it was nearly impossible to argue against the advantages of owning a home. Research showed that homeownership led to increased education for children, lower teen-age pregnancy rates and a higher lifetime annual income for children – and these are just the advantages to family life. This doesn’t even account for the advantages versus the alternative (renting).

The government has seen this research and done their best to encourage new homebuyers to enter the marketplace. Are the statistics they are looking at still accurate? Should homeownership still be the American dream?

If you aren’t disciplined enough to save up 20% of a home’s purchase price, you shouldn’t be buying. Forever soaring home prices used to reward these risk-takers with an inflated net worth and a false sense of wealth; but having 0% equity in anything can hardly be classified as “ownership.”

What if I can come up with data that discourages people from purchasing a home? My goal is not to turn off everybody (my back-hair accomplishes this) but rather turn off those that aren’t ready.

The Discouraging Data

While I may not be very inclined when it comes to Microsoft Excel; my girlfriend can be referred to as The Sultan of Spreadsheets. Her job is to extract the data; my job is to manipulate it.

Together we looked at the following information.


Homeownership by State

(2010 rates – Source: infoplease)

The Happiest States

(2010 – The Gallup-Healthways Well-Being Index Survey included questions about job satisfaction, healthy behaviors, physical health, emotional health, and other aspects of everyday life)

Average Salary by State

(2010 Bureau of Labor Statistics)

Average Credit Score by State

(2011 Credit Karma)

The Hypothesis

The states with the highest percentage of homeownership should have the best credit, the highest salaries, and should be the happiest states.

Results & Notes 1

  • West Virginia is the least happy state.
  • West Virginia has the highest percentage of homeownership.
  • West Virginia has the 3rd lowest income.

Results & Notes 2

  • Hawaii is the happiest state.
  • Hawaii has the 2nd lowest percentage of homeownership.
  • Hawaii has the 3rd best credit score average.

Results & Notes 3

  • Mississippi is the 3rd least happy state.
  • Mississippi has the 3rd highest percentage of homeownership.
  • Mississippi has the worst credit score average.
  • Mississippi has the lowest income.
  • Mississippi has the highest poverty rate.

Conclusion 1

My hypothesis (and what the government expects) was found to be inaccurate. It was actually the exact opposite. The state with the highest homeownership (WV) turned out to be the least happy state. The unhappiness could be because of the people purchasing the homes. The average salary of West Virginians in 2010 was $35,370. I tried to find a correlation between the low income and the high percentage of homeownership, but there is none. The average West Virginia home value (according to Zillow) is $92,900.

Even if they financed the entire amount (including taxes, insurance, and PMI) – the monthly payment is an affordable $595. If budget were a problem, they would be higher on the poverty list, not the unhappy list.

Conclusion 2

Hawaii is considered to be the happiest state. They also have the 2nd lowest percentage of homeowners. You could say that this is a bad example because Hawaii is just different. The language, the lifestyle, the remoteness…Each of these attributes allow Hawaii to be a dream in itself. Who needs a home when you can sleep on the beach and not be bothered?

While it’s true that the island is different, the lack of homeownership cannot go unnoticed. I say this because Hawaii has the 3rd highest credit score average. It’s not like they are ignoring modern civilization and using seashells as a viable form of payment. They are swiping (and smiling), but not buying.

Conclusion 3

Mississippi proves my point. What happens when people who shouldn’t buy houses, buy houses? Sh*t hits the fan. Any underwriter (or human) can look at the above statistics and conclude that Mississippians should not be purchasing homes. Having the lowest income available and the worst credit score average hardly gives you the criteria to have the 3rd highest percentage of homeowners. It’s no wonder they have the highest poverty rate!

My only concern is that Mississippi is only the 3rd least happy state – that reeks of too much optimism.

Written by A Blinkin

A Blinkin

Hunter, aka A. Blinkin, is the blogger behind Funancials. His experience in banking, lending, payments and investments has earned him the title of “Personal Finance Guru.” In addition to helping people with their finances, Hunter enjoys crunchy tacos, spending time with his wife and puppy, and writing in third person.

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  1. Maria@moneyprinciple says

    I like the article on the basis that it makes me think not that it is right. I always feel dodgy about correlations presented as causality. In other words, it is perfectly possible that the happiness of people in Hawaii has nothing to do with home ownership.

  2. says

    I have never thought about the correlation between happiness and homeownership. I can’t believe how contested this topic has become (from a financial standpoint). I have mentioned to some friends that we were considering being renters for life, and following this statement, we received such harsh words and foreboding predictions from them.

    I don’t know if I would feel “happier” owning a house, but I think a lot of people have huge sentimental value tied up within this type of ownership. So much so, that they can’t imagine anyone else not having the same priorities.

  3. Anonymous says

    “If you aren’t disciplined enough to save up 20% of a home’s purchase price, you shouldn’t be buying.”

    Damn.. I’m in the pool of people who got in with only 5% down.

    The reason why government wants home ownership is because homeowners vote. Vote keep them in office and being in office keeps them paid.

    I think the American dream should be to own your home.. emphasis on own :-)

  4. ghendric says

    Buying a home shouldn’t mean you have to enslaved to the debt of the home. A mortgage is probably one of the biggest scams ever perpetrated on anyone in the history of the world. Somehow we’ve been convinced that paying for our home three times over is a good thing because its an investment. What a lie! The recent housing bubble burst is proof enough that it isn’t true. Nowhere in there is it taken into account that you have to maintain the home constantly and to do that takes money. Sometimes lots of money. Buying a home should be like buying anything else on a loan. It shouldn’t cost you a full lifetime of money to buy a house…

  5. Flavio says

    Late to comment I know, anyway I hope this might give the autor of the blog some backup, I am Costarican, in my 30s, live together with my SO, both work in IT, I am making in this country..yes..30 000 a year, that is pretty much a doctor or a good lawyer salary, I am lucky I know. Ok, first; I am also considering be a renter for life, first because my country is way too expensive for living, second because a decent house is now around 200 -300 thousand, that is in a word: slavery…our friends are now engaging to mortgages, with big cars also, loans, leasing etc, you name, I dare you to see it yourself how a little US we are, we are now much closer to capitalism than any other system. A monthly payment for one of these houes in gated communities is around 1500-1600 bucks a month.

  6. Flavio says

    Anyway there are many reasons why I would bother in buying a house, overpriced, unstable market, insane payment fees, you gotta cancel 20 % cash in advance, the area or the work is not worth the effort.


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