July 31, 2002     Los Gatos, California Since 1881 Is the American Dream becoming a nightmare? By Jean Newton With the price of homes continuing to increase, the ability of many working families to enter the housing market is diminishing. According to the California Association of Realtors, the most recent Housing Affordability Index stood at 27 percent, down seven points from the same period one year ago. With the cost of a median price home in California jumping 25.5 percent compared to one year ago, it's not surprising that families are finding the lack of affordable homes on par with the problem of getting affordable health care. The discussion of health care and housing affordability has been a benchmark concern dominating public policy discussions over the past several years, according to a study released today by the Fannie Mae Foundation, one of the nation's leading foundations dedicated to affordable housing and homeownership opportunities. The study showed that roughly the same percentage of working Americans (41 percent) believe the lack of affordable homes is a very big or fairly big problem as compared to the lack of affordable health care (39 percent). Others believe it is a very big or fairly big problem compared to high unemployment (34 percent) or crime (20 percent). In addition, 46 percent of working families say there are few to no good options for families in similar financial situations looking for affordable places to live. "Our research indicates that Americans are looking for affordable homes in communities where they feel safe, have access to stable jobs, and can send their children to good schools," said Stacey Davis, CEO and president of the Fannie Mae Foundation. "For many working Americans, squeezed between incomes that aren't rising nearly as fast as housing costs, the result is that more and more worry about finding a home in a community where they are comfortable living." The study, conducted for the Foundation by the independent research firms of Peter D. Hart and Robert M. Teeter, found early signs of distress about finding affordable housing opportunities in today's market, particularly among working families who are the backbone of the American economy. (These are families, with children, that live in metropolitan areas, earning $54,000 in household income and have at least one parent with a full-time job or the equivalent.) Eight out of 10 (79 percent) working families believe the money required in today's market for a down payment and closing costs would be an obstacle to them owning a home. Of those families, 50 percent believe such expenses would be a major obstacle. In addition, almost two-thirds of working families—renters and homeowners alike—say it would be more difficult to obtain their current residence in today's market. Close to half of the working families (45 percent) surveyed thought that by this stage in their lives they would be living in a better place than they are. The research found that the lack of affordable homes is an even larger problem for those with children and for those who have moved in the last five years. Forty-four percent of those with children say that the lack of affordable homes is a very big or fairly big problem compared to only 35 percent of those with no children in the household. More than half of working families worry that their kids won't be able to own a home when they grow up. While 85 percent of those families who moved more than five years ago say that their home is very or fairly affordable for them, only 65 percent of those who moved within the last five years say that their home is as affordable. When looking for a place to live, 67 percent of Americans say a low crime rate is extremely important, 53 percent say stable jobs are extremely important, 52 percent say high-quality schools, 50 percent say low taxes and 45 percent say affordability. The study also revealed regional differences in Americans' concern about the lack of affordable homes. Half of Americans living in the West (55 percent living specifically on the Pacific Coast) and 40 percent of those living in the Northeast think the lack of affordable homes is a big problem, compared with 34 percent in the South and 28 percent in the Midwest. Meanwhile, 48 percent of Americans who say they reside in a large city believe it's a very big or fairly big problem, compared to only 37 percent of those who describe themselves as residing in a medium city and 30 percent of those in small towns or rural areas. "What's surprising about our results is that the lack of affordable homes is seen as a bigger problem than many of the top issues on the public agenda today, including employment," said Geoffrey Garin, president of Peter D. Hart Research Associates. "The only comparable issue in the minds of most working Americans is affordable health care, which has emerged as a major public policy matter over the past decade. This raises the potential that affordable housing will emerge as a dominant public policy issue in the years ahead, as the stories behind the numbers are told." The study showed a broad base of support for government leadership on the problem. Sixty-five percent of Americans agree that local government should provide leadership, while 59 percent say the federal government should take action. At least seven in 10 adults supported a variety of policy measures to address the lack of affordable homes with roles for the government, private and nonprofit sectors. Despite the growing problem, owning a home is still a very powerful part of the American Dream, and working families are hopeful that they will see the dream come true. The study found that nine in 10 working families (89 percent) who rent want to own a home, and eight in 10 (85 percent) expect someday to be homeowners. When asked which should be a higher priority, increasing the number of affordable apartments or the number affordable homes to buy, even renters say "affordable homes" by a two-to-one margin (61 percent to 29 percent). "While the majority of Americans are able to fulfill the American Dream by owning a quality home, this research indicates that for far too many working families that dream is an elusive one," said Davis. Information provided in this column is presented by the Realtor members of the Silicon Valley Association of Realtors at   www.silvar.org. Send questions on any topic to jnewton@jnpr.com.