Image: New home for sale in Illinois.
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The allure of the American Dream — and the fresh memories of those double-digit gains during a once-in-a-lifetime boom — are apparently offsetting the stinging losses brought by the bust.
Image: John Schoen
By John W. Schoen Senior Producer
msnbc.com
updated 4/13/2011 1:11:24 PM ET 2011-04-13T17:11:24

Despite a bruising, five-year drop in U.S. home prices, eight in ten Americans still believe that home ownership is the best long-term investment they can make, according to a new survey.

Apparently, hope springs eternal.

After a dramatic run-up in U.S. home prices the 1990s and early '00s — fueled by easy lending standards and the encouragement of Wall Street — the market began its sickening plunge in July 2006. The average metropolitan home has lost roughly a third of its value since then, according to the latest reading from the S&P/Case-Shiller Home Price Index.

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Generous tax breaks for home buyers temporarily halted the slide last year. But with those incentives gone, home prices are headed lower again.

But the allure of the American Dream — and the fresh memories of those double-digit gains during a once-in-a-lifetime boom — are apparently offsetting the stinging losses brought by the bust, according to the survey by the Pew Research Center's Social and Demographic Trends project. The survey found that 81 percent of adults believe "buying a home is the best long-term investment a person can make."

The findings, released this week, are based on a telephone survey conducted among a nationally representative sample of 2,142 adults from March 15 to March 29.

The drop in home prices represents more than just a paper loss. Among homeowners who reported that their home is worth “a lot less” now than it was before the recession, roughly two-thirds said their finances are in worse shape than before the housing bubble burst.

Nearly half of all homeowners reported that their home is worth less now than before the recession began. Of those, the overwhelming majority say it will take at least three years for values to recoup their losses, while nearly half say it will take at least six years to recover.

Returns like that would give a gold bug second thoughts. But apparently few people have shaken the conventional wisdom, handed down for generations, that homeownership is a risk-free road to wealth. Some 37 percent of those surveyed "strongly" agreed that a home is the best long-term investment a person can make, while 44 percent "somewhat" agreed.

No word on how long they think it will take to again see multiple buyers showing up on the first day of a listing and waging cellphone bidding wars on the front lawn. Or condos flipped in six months for a 100 percent profit.

Story: Some real estate agents feeling spring chill
Major Market Indices

Some homeowners do have regrets about buying. Nearly a quarter said that if they had it to do all over again, they would not buy their current home. But most of those said they had buyer’s remorse because they don’t like the house itself or the location. Only a third said they regret buying their house because it was a bad investment.

On Tuesday, the CEO of one of the nation’s biggest mortgage lenders, Bank of America, sought to set homeowners straight on the wisdom of buying a house as an investment.

“It's sobering to think, but some people shouldn't be thinking of (their home) as an asset," Brian Moynihan told a gathering the National Association of Attorneys General, who are trying to work out a deal with bankers like Moynihan to help stem the tide of foreclosures. "They should be thinking of it as a great place to live."

Investment returns aside, pursuit of the American Dream — with homeownership as its core — still has a strong hold among 80 percent of Americans surveyed, along with “being able to live comfortably in retirement.” Some 73 percent include paying for their children’s college education on that list. And about half said the same about leaving an inheritance for their children.

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Vote: What is your view on home ownership?

Video: What’s out there? Homes under $350,000

  1. Closed captioning of: What’s out there? Homes under $350,000

    >> on the market for $350,000 or less. "today" real estate contributor barbara corcoran is here with the tour. you're looking spring-like today.

    >> i'm trying.

    >> let's go to some place you see the same color with the sun. albuquerque, new mexico. the house priced at $299,900. three bedrooms and two baths.

    >> this is a community with a big bonus of being next door to the rio grande bosk, miles of walking and riding trails. brick floors throughout the house . people think adobe houses will be darker on the inside. that looks like a beach house . they have brick floors, wood ceilings and lots of light. they have overheadlights, side lights. you can't be out of the sunshine inside these doors. the open dining room is steps from the kitchen . you see it in the background there with a big window. the kitchen has pale wood cabinets and red tile back splash. i'm having trouble talking today. there is a library with built-in book shelves and a windows office. the redwood decking on the back almost gives you a room in the back to enjoy. look at the views. it's 360 degrees of beautiful mountain ranges.

    >> i have never seen a contemporary adobe home today.

    >> most of them are very contemporary. they have taken the best of the old style and added the openness of the new style.

    >> cool. let's go to knoxville, tennessee to the classic brick house . five bedrooms at $319,000.

    >> knoxville is only 35 miles from the smoky mountains national park . it has a million and a half acres of parkland. this is a traditional brick house with a classic facade. there are wood floors throughout the house . beautifully furnished, overly furnished for selling but they have excellent taste and the house looks great. the dining room is odd. i feel like henry viii will be in the corner. macbeth should live in the house . i don't know what's going on there. it reads too dark but it's a nice room. there is an open kitchen with granite counter tops, pots hanging from the ceiling should be eliminated immediately.

    >> too much clutter?

    >> they bring the celling down almost 12 inches . not a good idea. there is a fenced backyard which we'll see in a minute. they need some cushions on the little chairs there, but you can see how spacious it is. the backyard is huge and the taxes are so low on this house .

    >> let's go to atlanta, georgia. this is a three bedroom priced at $325,000.

    >> what you have in atlanta is lots of medical doctors and ph.d.s on every single block. it's home to the centers for disease control . that employs a lot of medical staff. this house is neat as a pin on the outside. i think they must have manicured every inch of the house hours before this shot. inside it's just as neat. very large rooms, high ceilings throughout. in fact, most of the ceilings in each room are a mile high and it makes the rooms look larger. a great shot of the wood burning fireplace. dining room in the back, french doors to the right. it's a spacious house , meticulous which helps in the sale of the house . that's a white cabinet kitchen . the cabinets pop right out. the clutter should be taken from the top of the cabinets but you can see how huge the kitchen is, perfect for a family. out back there is a fenced backyard with a very small -- oh, i forgot that blue dining room .

    >> they like color on the wall.

    >> and you know that should be eliminated. it should be painted white. the backyard looks a little bit too plain and should be merchandised a bit and the patio cleaned up to make it look as good as the front of the house .

    >> in the pacific northwest , portland, oregon, modern townhouse with three bedrooms.

    >> when you see this townhouse it looks like a toy house , but remember in portland, prices are high, but values are great. this house is smack in the middle of an area with artists a huge gate community, a lot of totally creative community there. people are moving in by the dozens. you would swear you're in a big house . look at the windows, the cell cellin cellings. talk about making a lot of a little. it's only 1600 square feet but you wouldn't feel cramped here for a minute. another great shot of the living room . there is a kitchen somewhere in the house . doesn't look miniature. that's a huge kitchen .

    >> spacious.

    >> modern appliances, granite counters, top of the line in every way. the sweet spot of the home is the backyard -- oh, the bedroom. we never find a great bedroom to shoot. that looks like it's from " house beautiful ."

    >> there's the backyard on a rainy day .

    >> in a rainy part of the country.

    >> and lastly, san diego , california. two bedrooms at $34,900.

    >> this is an expensive community. this is what you get for $349,000. it's a spanish style home on a quiet house . 744 square feet big. we have houses in big cities because we want to show you how much bang you can get for your buck. there is a sweet dining room , miniature in size but nice. i like that pass-through window. there's the kitchen adjacent to it. if you just see one second more after we get out of the kitchen . i know there is a bedroom and a beautiful backyard that comes with the house . if you want to call it a backyard it's an alley way turned into a patio. how clever to put that little wood on top?

    >> you know it's helpful when you give our director direction.

    >> i'm sorry. i'm rushing.

    >> thank you so much. if you want to know more go to today.com. coming up

Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 5.09%
$30K home equity loan FICO 5.19%
$75K home equity loan FICO 4.67%
Credit card rates View more rates
Card type Today +/- Last Week
Low Interest Cards 13.34%
13.32%
Cash Back Cards 17.82%
17.81%
Rewards Cards 17.07%
17.06%
Source: Bankrate.com