Is Home Ownership Essential to the American Dream?

[donheff]

Imoldernu, your post showed how a guy lost all of his money to nursing expenses after selling his house. He was only able to keep the $35k in his trailer. If he had kept his old house would the entire $280K have been exempt from Medicaid's asset evaluation? Is there a limit to house value exempted? E.g., could someone with a $1M house deplete other assets so his spouse could get Medicaid for nursing expenses and then sell the house to improve his lifestyle after she dies?

 

[brewer12345]

My former wife and I felt that we needed house and yard to raise kids, but I see lots of families growing in the townhouses to one side of me, and in the apartments down the street. Parents are likely very close to their work, and some of the women seem to be home all day so there must be some cash freed up this way. I thought when the kids got a little older they would likely leave, but I have not noticed that yet.

Ha

Search me. I suspect that the expense of your local market might have something to do with the persistence of families in townhomes/apartments. Or possibly something to do with the school district.

Despite the hassle factor involved in owning a house, I am fine with it. I have a mental bug about home as castle and having control over my small domain. Probably not hugely rational, but like I said, its a lifestyle choice.

 

[imoldernu]

Imoldernu, your post showed how a guy lost all of his money to nursing expenses after selling his house. He was only able to keep the $35k in his trailer. If he had kept his old house would the entire $280K have been exempt from Medicaid's asset evaluation? Is there a limit to house value exempted? E.g., could someone with a $1M house deplete other assets so his spouse could get Medicaid for nursing expenses and then sell the house to improve his lifestyle after she dies?

Varies by state, but the 5 year lookback is national, I think.
The non nursing home spouse must continue to live in the house. I'm personally aware of a case in Rhode Island, where the non nursing home spouse wanted to pay for the cost as a moral responsibility, until the children went to a geriatric lawyer who persuaded them to allow the state to pay. The interesting part was the age factor. The surviving spouse had thought the house value to be about $150K, but as oceanfront property, it later sold for $850K, which value eventually went to the heirs. I do believe that there are some limits, but those may be rather high...

The five year lookback is the key. Any disposal of assets during that period would preclude saving the house value. Likewise, any increase in value of the residence within the 5 year period would be excluded... such as buying a more expensive house, or going from a rental to home ownership.

In our case, we went from a mobile home to a home with a many multiple value, for exactly that reason. We bought in 2004, and were quite relieved in 2009, which passed the 5 year lookback. (When we bought, the lookback was only three years, so the extra two years were chancy.

Our two tier retirement approach includes the value of the house as a reserve for a the surviving spouse. If all other assets are depleted, the sale of the house (plus Social Security) should be enough to pay for continuing care for 10 to 15 years.

State elderlaw websites should detail the specifics, such as cash savings limits or automobile prices which would obviously vary.

Here's one of dozens of sites that discuss the lookback. Best to find one for the state involved.
http://insurance.lawyers.com/medica...er-Assets-for-Medicaid-Look-Back-Periods.html

 

[Birdie Num Nums]

What's the American Dream this thread suggests? "Owning" a home rather than renting is the Dream? Why is that specific to our good ol USA? Don't Canadians also want to own vs. rent? Or Brits?

I have always rented. I am convinced my rental circumstances/costs over the past 30 years contributed heavily to my ability to ER a few years ago at age 55. We all can discuss and debate this and that detailed cost of owning/renting a place to live, but I am today extremely satisfied with where I still live today, and what it has cost me to live here these past 30 years, vs. buying a home/or investing the difference. And I don't have to figure out $bookwork or worry about HOA neighbor troubles.

 

[haha]

What's the American Dream this thread suggests?

The "American Dream" of homeownership is an invention of realtors and mortgage brokers and S&Ls, and all the many people who make money of the compulsion to own a home. Actually, to me is seems that immigrants are perhaps even more into home ownership. For many people, especially non corporate types who own donut shops or restaurants or nail salons or whatever, and who are not going to get moved, it seems to work out pretty well.

Ha

 

[imoldernu]

There hasn't been too much info on Single Family home ownership changes in recent times. This article indicates an increase in rentals and a decrease in ownership over the period 2007-2012. May be a clue to the future of REIT's...
Calculated Risk: Lawler: How Much Has the Single Family Housing Market Shifted to Rentals (in numbers)?

Understanding the shift, may be an indicator for the future of home values, but the article exposes a number of variables that go beyond the supply/demand factor.

 

[Jay_Gatsby]

I'd venture to say "no," home ownership is not essential to the American Dream. Rather, LBYM and saving your money are essential to allow for freedom of choice (when, where and whether to w*rk).

 

[obgyn65]

I would say no also : http://en.wikipedia.org/wiki/American_dream

I'd venture to say "no," home ownership is not essential to the American Dream. Rather, LBYM and saving your money are essential to allow for freedom of choice (when, where and whether to w*rk).

 

[Birdie Num Nums]

The "American Dream" of homeownership is an invention of realtors and mortgage brokers and S&Ls, and all the many people who make money of the compulsion to own a home. Actually, to me is seems that immigrants are perhaps even more into home ownership. For many people, especially non corporate types who own donut shops or restaurants or nail salons or whatever, and who are not going to get moved, it seems to work out pretty well.

Ha

This myth of the "American Dream" thru home-ownership--"an invention" of those who financially benefit by it, as you say--reminds me of what I consider another myth created by those who financially benefit most: the diamond engagement ring.

Didn't folks in the good ol' days just buy gold wedding rings? That was it. My grandparents, now deceased since the early 1990s, had only gold wedding rings. (I still have my grandpa's gold wedding ring.)

There was never an engagement ring (let alone a now-suggested "promise ring") up until the mid-20th Century, as far as I know, was there? When did the diamond engagement ring come to be? (I once heard it was circa 1941, suggested by the highly-monopolized diamond industry.) And why should the diamond engagement ring cost at least two months salary of the man? Who came up with that?

But tell that to the girl you'd like to marry--that an expensive diamond engagement ring is mostly a money-making gimmick by the diamond-industry monopoly--and that a simple golden ring should suffice to express your love and commitment of forever.

 

[meierlde]

I suspect that a good bit of the homeownership idea is a modern version of Thomas Jefferson's preference for the yeoman farmer over the city worker. Given that farm life is no longer practical, owning a home gives one a piece of ground all be it generally smaller than a farm.
Of course until recently there was one profession that never owned a house until they retired the protestant clergy, since a parsonage was part of the comp for their job. When they retired then they had to look at buying a house.

 

[FIREd]

I don't think that the dream of home ownership is particularly American. For me, the American dream has to do with the freedom and opportunities granted to those living in America to achieve prosperity through hard work and ingenuity.

 

[haha]

This myth of the "American Dream" thru home-ownership--"an invention" of those who financially benefit by it, as you say--reminds me of what I consider another myth created by those who financially benefit most: the diamond engagement ring.

Didn't folks in the good ol' days just buy gold wedding rings? That was it. My grandparents, now deceased since the early 1990s, had only gold wedding rings. (I still have my grandpa's gold wedding ring.)

There was never an engagement ring (let alone a now-suggested "promise ring") up until the mid-20th Century, as far as I know, was there? When did the diamond engagement ring come to be? (I once heard it was circa 1941, suggested by the highly-monopolized diamond industry.) And why should the diamond engagement ring cost at least two months salary of the man? Who came up with that?

But tell that to the girl you'd like to marry--that an expensive diamond engagement ring is mostly a money-making gimmick by the diamond-industry monopoly--and that a simple golden ring should suffice to express your love and commitment of forever.

I agree with your analysis, but I am not sure of the history. My great-grandmother married in 1880, and got a diamond ring. I know because I had it reset and I wear it now, on my pinky.

Ha

 

[Birdie Num Nums]

I don't think that the dream of home ownership is particularly American. For me, the American dream has to do with the freedom and opportunities granted to those living in America to achieve prosperity through hard work and ingenuity.

I agree. The American Dream is the opportunity of people to live their lives to their fullest potential. Be able to reach whatever goal they wish, based upon each decision they make every day--despite their circumstances of birth. Guaranteed by the highest law of the land: Our Precious Constitution.

 

[harley]

My former wife and I felt that we needed house and yard to raise kids, but I see lots of families growing in the townhouses to one side of me, and in the apartments down the street. No yards don't seem to be a problem, there are parks all over easily walked to, and fewer families today will let their young kids play out in the yard alone anyway, due to crime concerns. Parents are likely very close to their work, and some of the women seem to be home all day so there must be some cash freed up this way. I thought when the kids got a little older they would likely leave, but I have not noticed that yet.

Ha

Different generations. There's no need to have a yard anymore since if you let your kids go out into it to play some neighbor will call CPS and they'll take the kids away from you.

In my particular case, renting is never cheaper than owning. When you've got 4 dogs either no one will rent to you or the additional fees and deposits will eat you alive. And I don't blame them. I wouldn't rent to me either.

 

[marko]

I would just say that I suspect all else being equal, they would rather have an employee who is more desperate to get (and keep) the job. You can more easily make them work longer hours, slash their pay and benefits, make them accept lousy working conditions -- and their "BS bucket" is a lot larger.

At my first job (1972) the exact opposite was almost a requirement. This was a fairly large engineering/consulting firm that paid very well but if you had an 'independent income' you were favored somewhat. The thinking was if you were well connected and help bring in contracts(?)

It was more a matter of being 'in the club' and hiring 'the right kind of people' than anything else.
After one guy left, they found two years of uncashed paychecks in his draw...everyone thought that was so cool and then they started doing it.

This company was very big on high-end business travel (they were one airlines single biggest customer) and I think a lot of folks were in it for the free trips to exotic places.

 

[samclem]

There was never an engagement ring (let alone a now-suggested "promise ring") up until the mid-20th Century, as far as I know, was there?

Traditionally, it's probably appropriate to think of the engagement ring for the bride-to-be as an escrow. Probably a bit out of date with the modern hook-up culture.

From Wikipedia, which matches what I've heard elsewhere:

One reason for the increased popularity of expensive engagement rings is its relationship to human sexuality and the woman's marriage prospects.[10] Until the Great Depression, a man who broke off a marriage engagement could be sued for breach of promise. Monetary damages included actual expenses incurred in preparing for the wedding, plus damages for emotional distress and loss of other marriage prospects. Damages were greatly increased if the woman had engaged in sexual intercourse with her fiancé.[10] Beginning in 1935, these laws were repealed or limited. However, the social and financial cost of a broken engagement was no less: marriage was the only financially sound option for most women, and if she was no longer a virgin, her prospects for a suitable future marriage were greatly decreased. The diamond engagement ring thus became a source of financial security for the woman.[10]

Based on the interests of all parties involved, it made a lot of sense.

 

[GatherYeAcorns]

I rented half my adult life. I wish I could have used the rent money to pay off 20 years of my current 30 year mortgage. Those apartments were crappy as hell here in the Bay Area.

 

[kcowan]

I owned from 68 to 95 and have been renting since. I enjoy the flexibility that I get from renting. Plus I am totally debt-free.

(I think owning as a part of the American Dream has been dealt a death blow that will take about another ten years to recover from. This will accompany a fundamental distrust of banks. I suspect the McMansions have been permanently disabled.)

 

[HFWR]

Given that careers of 30 years seem mostly a thing of the past, perhaps renting will be even more prevalent in the future. Thus, flexibility may be a key part of the new "American Dream"...

 

[Mulligan]

Given that careers of 30 years seem mostly a thing of the past, perhaps renting will be even more prevalent in the future. Thus, flexibility may be a key part of the new "American Dream"...

I wouldn't dispute your thought. I am about neutral on the subject, but I do believe that owning my home will payoff in the long run. However, the one thing I would NOT do is what a friend of mine recently did a few months ago. He purchased a home with very little money down. Total monthly payment is $1100 a month. However $200 a month of it is PMI. That is more than the principal paydown. Plus he said he would have to get 20% down AND refinance again to get rid of it. Thus incurring more costs and fees and possibly at a higher interest rate since he got in at under 4%. I don't see how he can come ahead on this transaction.

 

[timo2]

(..... I suspect the McMansions have been permanently disabled.)

This thought of excess McMansions sitting around brings to my mind my first experience as a child with shady property disposal practices. When I was in 8th grade in 1967, my oldest brother got married in Asbury Park, NJ. At the time, there were several burned out resort/beach hotels. The explanation from the locals was that local Mafia had torched them for the insurance money.

And during the recent downturn, nearby my neighborhood, we did have a rather large McMansion get torched by the somebody (neighborhood rumors are the owner/builder).

 

[imoldernu]

Is Home Ownership Essential to the American Dream?

Simplifying a previous post:
For a married couple, it depends on your financial situation.

If one partner has to go into a nursing home, payment will come from the couple's assets, until those assets are depleted to a certain level (depending on the state) perhaps $50,000. At that point Medicaid may pay for the care.

The exception to depleting the assets is that if the non-nursing home member is living in the "owned" house, he or she can maintain ownership. (as well as an automobile). When the nursing home patient dies, the remaining member will retain the house, and its' value.

I do not beleve that ongoing payments from SS, annuities or pensions are included in the asset depletion requirement.

It is important to understand the "lookback" law.
Some Q&A here: ElderLaw Answers
......................................................................................

In short, the value of the "owned" home would be preserved.

 

[NW-Bound]

"Is Home Ownership Essential to the American Dream?"

Sure, it's nice to have your own place. I may be old-fashioned, so I have always liked to be an owner.

Ah, but all posters here are thinking about stick homes. I myself have two, but as I have spent time reading RV'er blogs, I have realized that there are people who are happy with their home on wheels. It's not for me, but that works for some people, and may be more affordable to them, and can be comfortable too.

 

[Major Tom]

This thought of excess McMansions sitting around brings to my mind my first experience as a child with shady property disposal practices.

You were a child with shady property disposal practices? I was in my 30's before I developed any kind of real estate savvy

 

[gozer]

I really think market conditions in your area and timing can influence which is better for short periods of time. For long term, I personally fall into the own something (house, condo, etc) vs renting. I have reached FI, so I can't easily be pushed around the country by a job. And I have never lived in an area where the housing market was out of control. I'm in Ohio not California or any other expensive area of the country. But hey, Money Mag just rated my hood #7 in best places to live in the US.

When I bought my first house in 1988, the mortgage payment (p + i + escrow + pmi) was only about $130 higher than my rent + renters insurance. $650 vs $520. 2 years later I refinanced which dropped the PMI and lowered my interest. My payments dropped to about $500. In that same time my old town home had gone up to $590. Today those town homes are $1200 a month.

Of course with a house you have to cover maintenance. But I had a larger place with more privacy for a growing family, a larger yard for the munchkin to play in and a garage to keep the cars in better shape longer. Additionally some amount of that money paid on the house comes back when you sell it which further reduces the cost of the house. I sold that house after 7 years for $40,000 more than we owed, after paying the sales fees.

My total cost of ownership including maintenance was around $55,000 for the 7 years. Lots of DIY work was involved. So after deducting the $40,000 we walked away with, we have about $15,000 dollars spent for seven years of living expenses. Less than $200 per month to live there. If I had stayed at my town home and rent had never gone up, I would have spent 3X as much (~$44,000). It's cool having an accountant for a wife that tracks everything. She had to sell me on the idea of a house and took great pleasure in pointing how the decision ended up being better from a money standpoint.