"I helped them ... telling them that I thought this was a mistake," he says. He felt voicing his concern was enough. But they were attempting it during a very tough economic environment in Texas. After a while, they couldn't cover the mortgage and the housing prices plummeted. "And long story short, that larger house not only cost them their housing dreams, it cost them their marriage and it had a big impact on their children."

The lesson he took away: "Happiness is not defined in housing."

Yet the desire to be a homeowner, to be landed, is so ingrained in the American consciousness that someday they might unravel it in the genome. From birth, most of us are taught that the home we live in should be our main source of wealth, the fundamental vehicle we use to build equity and join the ownership society. It's our birthright-the way we shake off the distant memories of unjust past economic systems such as feudalism and tenant farming where our identity was tied to barons. To be an owner is to enjoy not only economic freedom but political freedom as well.

And yet these days, some are questioning whether that dream is still practical or necessary. We live in an increasingly mobile society where people rarely live in the same place for more than a few years-either because they are footloose by nature, or because permanent job situations are more difficult to come by. And given the high costs of moving, closing on a property and paying taxes on it, a short stay of five years or less in an expensive house could be devastating, especially if there is no security blanket. Even pundit Suze Orman sometimes asks viewers on Saturday nights if it might be wrong to dream of home ownership.

The 2007 housing crisis, of course, offered a grotesque passion play on the subject. According to the Zillow Home Value Index, the median home price in the United States was $147,800 at the end of November 2011, having fallen 4.6% from the year before and some 24% from the peak. That doesn't account for bloodbath cities like Orlando, Fla.; Riverside, Calif.; and Phoenix, whose home prices were cut by more than half. Meanwhile, some 28% of mortgage holders were underwater in negative equity for the third quarter of 2011. 

Home values had made a slight comeback with the home buyer tax credit introduced by the Obama administration, but once the credit expired, the hopeful surge in home prices evaporated in 2010, and prices plunged again, especially in places where the bubble had been the worst, like Florida, Arizona, Nevada and California. Gone were the dreams of the mid-2000s, when speculators and average people alike thought they could use overvalued houses as piggybanks to pay for cars and toys on credit or otherwise flip the homestead in a couple of years or see 20% gains every year. 

The question, both timeless and timely: Is home ownership right for everybody?

Alan Moore, an advisor with the Financial Service Group in Racine, Wis., says the argument that people should own homes under all conditions is just not true. Very often he tells retirees not to buy. "The timeless advice that everybody has been giving, the American dream that you buy a home, pay it off over time and after you retire you don't have to pay rent-well it's just not true," he says. "If you do own your own home you have maintenance issues, you have property taxes and depending on where you live, that alone will run up your bill to where you basically feel like you're paying rent."

A home also ties retirees down, Moore says, making it hard for them to travel. And for everybody, a home makes it impossible to react in emergencies, especially if you've tapped yourself out on debt (not knowing the difference between what you can borrow and what you can afford).

"Buying too much property can destroy a family's freedom and causes hardships by their unintended loss of economic freedom," Diesslin adds.

Besides that, many advisors say that calling homes an investment at all can be misleading. In fact, houses are illiquid, come with many hidden costs and offer no diversification. The money you might be saving on rent could go into a bucket of more variegated investments that are actually growing faster than a home's value (sometimes even when the savings imputed by not paying rent are factored in). Homeowners generally had 68% or so of their net worth tied up in their residence in 2007, according to the Federal Reserve, a fact brought home painfully when the housing bubble burst.

In a paper called Is Buying A Home Or Renting Right For You? professor Moshe Milevsky tackles the conventional wisdom and says many homeowners should have rented instead. "I think a large proportion of individuals within the population should not own a house," he says flatly, "or they should at least push off the purchase as long as possible and instead rent. Anyone that followed this advice in the United States over the last few years, possibly the last few decades, would be much better off today." 

With a demure apology for sounding preachy, he says housing isn't necessarily a bad investment. It's just that so much of the wealth of young people is tied up in human capital-in their skills and future earnings potential. This is already an illiquid, undiversified asset. "It therefore makes little sense to invest yet another substantial amount of total wealth in yet another illiquid and nondiversifiable item like a house."

Milevsky imagines paying 10% down on a $500,000 house. If you shift $50,000 from your assets to the house, you have $450,000 in assets on the left side of your balance sheet in assets and $450,000 on the right side in liability. "The equity on your personal balance sheet has not changed," he emphasizes. You might reduce that liability to $400,000 over five years and have $100,000 in equity. But if the house price has dropped 20%, you still have $400,000 on your asset side and liability side and you still have the same equity. Meanwhile, "the $50,000 you originally invested in the house is gone and all the payments you have made in the last five years could essentially be considered rent. You are no further ahead now, financially, than you were five years ago. All you did was consume housing."

"If you look at the period from the early '30s to the early '50s, you were better off renting by and large," says Diesslin. "It just was because we went through a deflationary cycle where real estate lost value for a long time and housing didn't really start to appreciate in truth until the '60s. And you have to remember there's a big tax aspect to that." If inflation were brought into the equation, he says, and the deduction was against a 70% tax bracket, it would have huge implications and suggest buying is better. But we're now currently in a deflationary cycle with a 35% tax bracket.

Real estate salespeople say that because interest rates are so low, now is the time to buy. However, an increase in rates later could inversely harm prices, which again makes equity disappear. Also, even though housing prices have slumped, so has household income, which means the ratio of income to housing costs is not necessarily getting better. 

"My opinion is that people should never stretch to buy a home," says Kathleen Campbell at Campbell Financial Partners in Fort Myers in Southwest Florida, one of the areas hardest hit by the downturn (and winning dubious distinction as one of the top cities for foreclosures). "I feel that the first responsibility as far as your finances go is to make sure that you have adequate savings and that includes both emergency savings and ongoing retirement savings. If you have little or more emergency savings and/or find yourself unable to contribute what I call a reasonable amount to some sort of retirement savings, whether that's a 401(k) or IRA or whatever, then you need to think hard about whether you're really going to be able to afford a home."

Campbell has lots of horror stories. She says she knows somebody who bought a home in her area for $700,000 at the top of the market with a $600,000 mortgage and recently had to short sell it for $325,000 with a mortgage balance of $550,000. Another client is a woman whose husband died in the middle of the housing crisis. Though they hadn't overextended themselves, she was stuck with a home she was underwater on when there was no survivor benefit on his pension and she couldn't afford to keep it. The bank had to foreclose. "Some life insurance would have been real helpful in that circumstance," Campbell says. "But it's an example of what can happen in the worst of circumstances when you own instead of rent. Rent is not all bad." 

She says people should look to buy the least expensive home that suits their needs. "How many foreclosures have occurred because someone making $50,000 per year bought a $300,000 home during the mortgage heyday, just because someone told them that's what they would qualify for?" 

Yale professor Robert Shiller, who helped create the S&P Case-Shiller Home Price Index, cobbled together a look at inflation-adjusted prices for homes since 1890 and says that real prices did not rise more than 1% per year between then and 2005. And Shiller has been quoted as saying prices these days could fall further with all the extra inventory overhang. 

And these facts don't take into account the fact that homeownership is fraught with so many hidden costs, such as homeowner's insurance, property taxes, closing costs and maintenance (tabs the landlord would otherwise be picking up for renters). 

"Our firm has done extensive research on the hidden costs of home ownership (new and older homes), which often tips the scale in favor of renting," says Dennis Stearns of Stearns Financial in Greensboro, N.C. "The hidden costs plus home selling costs definitely favor renting for those who will be in the home five years or less. For us, the question is whether buying at today's low interest rates is worth it even if the home our client buys drops another 5% to 10%."

Campbell says that even those people who pay $200,000 and see their home price rise to half a million need to look closer. "Add up the repairs, mortgage interest, maintenance, property taxes, insurance and the ultimate costs to sell, and you've likely spent more than you'll ever get when you sell." 

Furthermore, she says, the mortgage interest deduction-one of the big selling points for buying-is only worth its value over the standard deduction a buyer would get anyway, she says, and only reduces the taxes by a percentage. 

And again, economic freedom comes into play. Campbell says that in many cases the mortgage payment and rent payment will be similar, but the rent payment is easier to change if necessary. If somebody is committed to a $1,500-a-month rent payment, she says, "if you lose your job or all of a sudden your wife who is pregnant finds out you're going to have quadruplets not just one child, that $1,500 a month becomes something that's not doable for you anymore." You have almost complete latitude to make changes if you rent, she says-to move in with family, to move to a place with cheaper rent, to move to a bigger place or even to leave for another city with more job opportunities. "You're not stuck with a home that you have potentially no equity in, or worse negative equity," she says.

Just Post Bubble Griping?