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Can buying a house still help low-income people build wealth?

Home ownership in America has reached an all-time low. What does it mean for wealth creation?
Home ownership in America has reached an all-time low. What does it mean for wealth creation?
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Homeownership was once the cornerstone of the American dream. But the Great Recession, which claimed 4 million foreclosures and left the housing market crippled, has made buyers skittish.

Some people seeking to build their meager fortunes with home ownership saw those dreams dry up as housing prices plummeted. The Cabreras, a family of five, bought a starter home outside Los Angeles in 2005 for $490,000. By 2009, It was hopelessly underwater at $150,000. They explained to the Atlantic that they sold the home in a short sale and walked away with nothing — except for a ding to their credit.

Now many would-be buyers like the Cabreras are wary. But that has housing and policy experts concerned, because, they say, owning a home gives access to better neighborhoods and better schools, which help lead kids into college. And despite recent disasters, it's still a dependable savings account.

Recent data from a Pew Institute study shows that one of the key markers in the widening gap between white and black Americans is home ownership — and ownership has dropped more among black households since the recession. Credit for mortgages remains tight, especially for those like the Cabreras who don't have perfect scores, and the housing crisis has set off a trend for renting, bunking up with friends, or moving back in with mom and dad.

In 2013, home purchases fell for the ninth straight year, according to the Joint Center for Housing Studies at Harvard. The homeownership rate has dropped to 65 percent, the lowest since 1995.

Minorities and young people appear to be the groups that have put off homebuying for the time being, and it's unclear when, or if, they will come back.

Millennials are putting off home buying for a number of reasons, experts say, but one of the big ones is simple — they don't have a lot of money. Soaring student debt and sluggish job market have left millennials with a slower start than their parents.

Homeownership also took a plunge among minority households; the rate for white households fell 2 percent from 2010 to 2013, according to Pew research. The rate among minority households slipped 6.5 percent.

If settling into a mortgage has been an engine of building wealth, what can restore it?

Sarah Edelman, a housing expert for the Center for American Progress, told the Atlantic that policymakers should target ideas that help first-time homebuyers get into homes and that help renters save up.

"The majority of first-time homebuyers may not be able to come up with a 20 percent down payment," she said. "For the future health of the housing market, we must make sure families who can afford to buy a home do."

Creative approaches range from measuring creditworthiness in broader ways, and rent-to-own programs for renters. Some organizations are experimenting with programs to share the equity in a house or apartment to spread the risk for jittery would-be buyers who were burned by the recession.

The Federal Reserve conducted its own survey last year, and found that the average net worth of a homeowner ($194,000) is still 36 times greater than that of a renter ($5,400).

Other forms of savings — like stocks, bonds, and mutual fund investments — just aren't as reliable because consumers aren't compelled to contribute a chunk of the monthly budget the way that they are with a mortgage, experts say.

Email: laneanderson@deseretnews.com