@Randem

I remember cringing every time I heard President Bush utter that phrase — “the American dream of homeownership.” It always rubbed me the wrong way. (Sorry, Mr. Bush, The American Dream stands for something much bigger than owning a home.)

So how has that all worked out for us? An op-ed in the New York Times seems to think not:

Owning a home lies at the heart of the American dream.” So declared President Bush in 2002, introducing his “Homeownership Challenge” — a set of policy initiatives that were supposed to sharply increase homeownership, especially for minority groups.

Oops. While homeownership rose as the housing bubble inflated, temporarily giving Mr. Bush something to boast about, it plunged — especially for African-Americans — when the bubble popped. Today, the percentage of American families owning their own homes is no higher than it was six years ago, and it’s a good bet that by the time Mr. Bush leaves the White House homeownership will be lower than it was when he moved in.

Now, as the real-estate market still hasn’t found its bottom, and foreclosures keep coming in, homeownership will be the domain of investors, and I argue that greater percentage of American families will rent, rather than own, when compared to the numbers before Bush decided to take credit for housing.

I was just playing with this neat little data-mapping tool that displays housing costs and transportation costs mapped across regions. When looking at the Chicago area, I made a few interesting observations.

My first observation was, of course, the one they’re trying to get you to make: when you factor in transportation costs, living in the city is more affordable than living in the suburbs. I don’t doubt this to be the case, considering the astronomical cost of owning a vehicle, insuring the vehicle, and fueling the vehicle, in comparison to the very affordable cost of public transportation in a city like Chicago. Getting rid of my car has worked out to be one of my best financial decisions.

On a strictly monetary scale, living within the city of Chicago and using only public transportation appears to be the most affordable choice. It would be naive to accept that data alone, however, since other considerations will apply, for instance, if you have children. I’m sure we all have our theories about schools, parks, and crime in cities vs. suburbs, but all I’m going to say about that is that those data are quite absent from the mapping tool.

My next observation, however, was that the map colors didn’t invert as I expected them to when I switched to only mapping housing cost without transportation. In other words, based on their data, housing costs are higher in the suburbs regardless of transportation costs. (Granted, the data is mapped as a percentage of median income, rather than by dollar amount, but it seems that median income should be a reasonable number to use, since it factors out the extremely high and extremely low numbers on either side.)

I was rather surprised to see that. I’ve always been under the impression that the suburban home was less expensive than the urban home. That may still be true by the square foot of living space, but it’s not true on overall cost of ownership — with or without the cost of transportation.

And the final observation I made was that suburban life appears far less sustainable, financially speaking. The graph separates areas into two groups: those where housing costs 0-30% of median income, and those where housing costs more than 30% of income.

The rule of thumb, for what seems like forever, has been that your mortgage payment should cost no more than 25% of your income. Before the sub-prime mess started, that was the rule banks used to decide whether or not to approve a loan.

So even if we round that number off to 30%, we’re still looking at a scary proposition: most of those families in the suburbs are in over their heads just on housing cost. Then, if you factor in transportation costs (which the map allows for up to 48% combined) and the rising cost of gasoline, it’s hard to imagine how suburban families make ends meet each month.

Depending on how this whole sub-prime mess turns out, this could easily foretell the coming of lots of suburban slums, even while the inner city (long considered a euphemism for a slum) becomes the high-end place to live. What I’m really curious about now is what roles crime and education will play in all of this.