Will we see the start of another housing collapse before the end of 2010? That is what a number of top economists are beginning to fear. The truth is that there are some very troubling signs in the housing numbers. The massive tax credit that the U.S. government was offering to home buyers helped prop up the housing market for quite a while, but now that the tax credit has expired, many real estate professionals are bracing for the worst. The reality is that foreclosures continue to set all-time records, the mortgage industry is a complete mess and another massive wave of adjustable rate mortgages is scheduled to reset in 2011 and 2012. As the U.S. economy continues to falter, and as the nation starts to deal with the economic fallout from the Gulf of Mexico oil spill, many are now wondering how in the world Americans are going to be able to afford to purchase millions of these homes which are still massively overpriced. The American Dream is still way too expensive for the vast majority of Americans. So are there signs that housing prices in the U.S. could be on the verge of another major decline?
The U.S. has long seen home ownership as an unquestioned virtue, dating to a 1918 government "Own Your Own Home" campaign. Herbert Hoover, Franklin Roosevelt, Bill Clinton and George W. Bush all talked as if owning a home was the only way to join the middle class. Not only did it promote social stability—recall Mr. Bush's "ownership society"—and build well-maintained neighborhoods, home ownership became a hedge against inflation and a way to save for retirement. Until it didn't.
Home ownership rose from around 40% of households in the 1940s to about 60% in the 1960s and then hovered around 65% until the 1990s, when a government-backed push to spread ownership, particularly among minorities, helped lift the rate, reaching a peak of 69.4% in mid-2004.
Some of those new homeowners, including those sold outrageously inappropriate subprime loans, should have remained renters. Many couldn't afford to maintain the houses they bought. Others were dependent on refinancing to keep their homes, an approach that worked only as house prices kept climbing. They didn't. At last tally, the U.S. home ownership rate was at 67.2% and sinking.
The rub: Many virtues of home ownership evaporate if the value of the house falls to the point where one owes more on it than it's worth.
If the post you are commenting on is more than 30 days old, your comment will have to await approval before being published. Rest assured, however, that as long as it is not spam, it will be published in due time.
No comments:
Post a Comment
If the post you are commenting on is more than 30 days old, your comment will have to await approval before being published. Rest assured, however, that as long as it is not spam, it will be published in due time.