American Dream Home: What's the Middle Class Without a House?

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MILWAUKEE, Wisc.—There was a feeling Tonya Adair had when she would return to her house after a day teaching math in a Milwaukee middle school. Her three kids would be upstairs, and she'd take a moment to herself. "I guess it was just a sense of being at ease with nobody watching, no landlord." Adair, 47, says now. "It's important to have something that's your own."

The way Adair talks about her house is a lot like the way her father, Pastor Bill Caldwell, 73, describes the first home he owned, the one where Adair, her three brothers and her sister grew up in Ruston, Louisiana.

"I built it from the ground up. I figured if other men could, so could I," said Caldwell, of the three-bedroom he constructed in 1965. It was on a piece of land he bought for $300 on credit while working as a custodian at a department store. "It meant something for a family to have something to call their own."

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The attachment to home ownership that Caldwell, now the pastor in a Monroe, Louisiana, instilled in five children, is deeply ingrained in the American psyche. But ownership has been through a bruising confrontation in recent years with an economic crisis that ran roughshod over American homeowners. Last year, Adair found herself behind on her mortgage, and was pressed to sell her Milwaukee house in a short sale. She now rents a Milwaukee condo. Then in Louisiana, Pastor Caldwell watched two of his sons, Adair's brothers, lose their homes to foreclosure.

"It was a lot for one family to lose," Pastor Caldwell says, "all three of them."

More than seven million home foreclosures and short sales have swept the country in the last eight years, according to RealtyTrac, the real-estate information website. The home losses struck a blow to the American middle class, whose wealth — assets and savings minus debt — has been built in significant part on a foundation of owning a home. According to recent research by a group of economists, the financial and housing crisis of the late 2000's accelerated the decline in economic stability among the bottom 90 percent of families, who by 2012 had an average of about $80,000 in wealth—the same as in 1986. Many of families were left with no reserves at all.

It's a crisis that's pressed Americans to grapple with whether owning a home fits anymore in the collective national story of the middle class. On a practical level, Americans have developed a suspicion of the value of owning a home. A 2014 MacArthur Foundation survey conducted by Hart Research Associates found that over half of respondents believe that purchasing a new home has become less appealing. Forty-three percent said owning a home is no longer a sound long-term investment.

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But even as Americans reckon with the financial impracticality of buying rather than renting, and with empirical evidence in recent years that there is no straight line between ownership and stability, the overwhelming majority of people say they want to own their own home.

Home ownership remains an aspiration, "the most tangible cornerstone that lies at the heart of the American Dream, at the heart of middle-class life," as President Barack Obama has described it in a 2013 speech in Phoenix.

A home is a foundation

For Adair, and her four brothers and sisters, the house their father built was a foundation, even in rocky economic times. When Pastor Caldwell injured his back working as a janitor at a department store, he began looking for other ways to support his family. His wife, Lena Caldwell, worked as a hospital housekeeper and at a laundromat, but it paid small wages, and he found jobs for him were scarce in the area. When he heard of a laundromat for sale 30 miles away in the town of Monroe, Caldwell sold the house, used the money to buy the business, and put a down payment on a new home.

"The house made all that possible," Caldwell says. He and Lena Caldwell both worked at the laundromat. And the business brought them enough income to provide their five children with what Adair described as a "basically middle-class life," until in the 1980's when Billy Caldwell became a full-time pastor.

In the decades that followed, Mr. Caldwell's children followed his example. Two of his sons, who worked in a Louisiana factory, put down payments on homes of their own. And when Adair married and had children, she and her family moved to Milwaukee where she took a job as a teacher and took out a mortgage on a modest three-bedroom house across the street from a playground on Milwaukee's north side.

"I thought about it as something that would be in the family and would be an investment for the family," Adair says. "That's how it was growing up — an investment."

But the events of the next decade turned her investment into a loss. When Adair and her husband divorced in 2003, she began to struggle to meet the monthly payments, especially in the summer when school was out. She refinanced the mortgage, which lightened her monthly burden, but two years later, she says the mortgage bills exploded to $1,400 each month. Adair had been sold a predatory refinancing loan; the kind that lenders pushed on many borrowers, especially blacks and Latinos, and later helped tank the economy.

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Last year, Adair, who by then had become the principal of a Milwaukee high school, narrowly avoided foreclosure through a short sale. Though she was earning a solid middle class income of about $100,000 a year, she was supporting herself through graduate school and one of her sons through college, plus paying a growing mortgage.

"It was just not possible anymore," she said.

Two of her brothers in Louisiana had similar stories. When the Louisiana company where they worked shut its doors, the brothers separately fell behind on their mortgage payments. Their houses soon slipped into foreclosure. In search of work, one moved to Texas. Both are now renters.

"I tried to help. We wanted to keep those houses in the family, but we just couldn't," Pastor Caldwell says.

Adair estimates that in her case, the short sale stripped her of $60,000 in equity, nearly all her wealth at the time. She's like many families in this regard: assets are overwhelmingly concentrated in home equity. This is especially true for African American families who on average hold less than a tenth of the assets and savings of white families and are more likely to have invested the savings they do have into their houses.

"I thought a lot about the home as something my kids could have later," Adair said, of her sons, a 26-year-old who works in Milwaukee, a 19-year-old in college and a 17-year-old who still lives at home and is finishing high school.

More than a place to live

To Adair, the short sale was about more than the lost wealth. Certainly, she is like most people in the United States who have begun to cast some doubt on the practicality of owning a home. "It was a lot better for me, getting away from the bank and the mortgage," she says.

Yet even though most believe owning makes less financial sense than it did a decade ago, seven in 10 renters who responded to the Hart Research Associates survey said they would like to own a home someday.

"There is a conflict between the aspiration and the perceived attainability of the aspiration," said Geoffrey Garin, president of Hart Research Associates.

Adair and her youngest son now live in a condo unit she rents from an acquaintance. And despite her financial struggles over the last several years, her attachment to the idea of one day owning a home again is steadfast. "For whatever reason, I feel like a second-class citizen because I don't own a home now," she says. She recalled a recent encounter with a new neighbor told her that the building had taken a turn for the worse since condo owners began renting their units. "People look at you different. When you think of the middle class family, home ownership is just part of it. Maybe it's a mindset, but not owning a home makes me think, well, where am I really?"

Anne Shlay, a sociology professor at Temple University who writes on cities and housing, says that in many respects, owning a home has taken on a moral quality that's separate from its economic rationale.

"As a country, we tend to think home ownership makes you a better person," she says. "We see renters as losers, as failed homeowners."

In Louisiana, Adair's father, Pastor Caldwell says he hopes that the economic troubles will pass. "When I built my home, ownership just made you feel like you were really getting somewhere, I guess. My children wanted that too."

And Adair's sons, for their part, have inherited their mother's and grandfather's belief in the importance of owning a home. "Even my youngest says that once he's out of college he wants to own a home," Adair says. "I think my sons valued always having a place to come back to that they can say is theirs."