One of the greatest aspirations of most people chasing the “American Dream,” is to own a home. It’s a lovely idea, to be sure, but it’s not as simple as one might think. In fact, there is a lot to suggest that true home ownership is practically a myth.
Equity determines ownership
Measuring how much people “own” has to do with equity. A person who has full equity in a home or car completely owns that house or vehicle. However, until full equity has been reached, people only co-own homes, vehicles or anything else bought on credit with whatever entity they secured the financing from. The average American moves about nine times after age 19, according to the U.S. Census. If the average person can expect to live to 75, that leaves about 56 years of life after age 19. That means the average person changes residence about once every six years or so. One in six people move every year, according to the Census. Given that the average mortgage is a 30-year mortgage, six years is just not enough time to establish much equity. In reality, until a person establishes at least 51 percent equity, that “homeowner” is a minority shareholder.
Foreclosures and repossessions threaten the notion
Should anything go wrong, such as foreclosure or a repossession, the person who holds the deed does not own the home. The lender does. In fact, according to CNN, there were about 102,000 homes in September and almost 93,250 in October that people believed they owned, but found out otherwise. Granted, there has been a slowdown in foreclosure filings and repossessions and auctions, but that is more due to a federal freeze than anything else.
In reality, the typical American will never actually own his or her home, at least not outright. It can be done, of course, but it is difficult. If the home’s value ends up being higher upon sale than when bought, a small profit may be realized, but once agent fees and closing costs are taken into account, it really isn’t much.