What Is the Link Between Homeownership and the American Dream?
In many ways, the American Dream is a concept of optimism. It implies equal opportunity and that any individual can aspire to financial stability and even superior wealth—regardless of their background—through hard work, entrepreneurial ventures, or other means. A large component of financial stability and the American Dream is owning your own home. The Great Recession and the ensuing housing collapse in 2008 cast doubt on the so-called "American Dream." The economic crisis precipitated by the 2020 lockdowns and job losses didn't help.
The American Dream is now considered out of reach for many groups in American society. This article focuses on how 2008 started to dismantle it.
- The American Dream is a concept whereby any individual can achieve superior financial status regardless of their background.
- Homeownership plays an integral role in the American Dream.
- The collapse of the housing market during the Great Recession displaced close to 10 million Americans and ruined the American Dream for many.
- The growing wealth gap in the United States exacerbated by the 2020 economic crisis has placed the American Dream out of reach for a large part of American society.
Understanding the American Dream and Homeownership
Homeownership plays an integral role in the American Dream. The years 2003 to 2006 were a period of easy credit in the housing market when subprime lending was rife. Subprime lending gave access to mortgages to people who should not have qualified for a loan and were unable to shoulder the debt.
After recovering from the dotcom bubble, investor optimism was high, and homeownership was on the rise. Despite rising interest rates, homeowners had the backstop of capital gains. If they could not make mortgage payments, they could sell their house for a profit. For most, it was too good to be true.
The collapse of the housing market during the Great Recession displaced close to 10 million Americans as rising unemployment led to mass foreclosures. In 2008 alone, 3.1 million Americans filed for foreclosure, which at the time was one in every 54 homes, according to CNN Money. The demise not only ruined the American Dream but increased skepticism among the younger generation that had yet to enter the housing market.
As the housing market stabilized and prices began to climb, skepticism remained. By the second quarter of 2016, the All-Transactions House Price Index had surpassed the pre-crisis high. However, homeownership in the United States continued to fall. A combination of growing inequality and the lingering mistrust in the financial system kept many on the sidelines. By 2016, homeownership in the United States had dipped below 63%—a 50 year low.
Is the American Dream Over?
Anecdotally, the American Dream pertains to homeownership among the working class of America. Proof that regardless of your income, your upbringing, or where you live, you can own your own home. However, even with the 2008 housing collapse a thing of the past and the U.S. economy back to full employment, the American Dream no longer exists. There is a wider wealth gap in the United States, working-class families are not buying homes, and they are swamped with debt. Then, in 2020, the economy was devastated by economic crisis and lockdowns.
The effect of the Great Recession and subsequent events was that the so-called American Dream is no longer attainable for many, and optimism has been largely replaced by skepticism.