The American Dream of Home Ownership Has Become a Nightmare

Culturally a decent house has been a symbol of middle-class family life. Practically, it has been a secure shelter for the children, along with access to a good free education. Financially it has been regarded as a safe store of value, a shield against the vagaries of the economy, and a long-term retirement asset.   Indeed, for decades, a house has been the largest asset on the balance sheet of the average American family. In recent years, it provided boatloads of money.  to homeowners through recourse to cash-out refinancing, in effect an equity withdrawal from their once rapidly appreciating home values.

These days the American dream of home ownership has turned into a nightmare for millions of families. They wake every day to the reality of a horrible decline in the value of the home that has meant so much to them. The pressure to meet mortgage payments on homes that have lost value has been especially shocking—and unjust—for the millions of unemployed through no fault of their own. For the baby boomer generation, a home is now seen not as the cornerstone of advancement but a ball and chain, restricting their ability and their mobility to move and seek out a job at another location. They just cannot afford to abandon the equity they have in their homes—and they can't sell in this miserable market.

American homeowners have experienced an unprecedented decline in their equity net of mortgage debt. The seemingly never-ending fall in prices has brought an average decline of at least 30 percent. Furthermore, the country is now going through an unprecedented nationwide slide in sales, despite the fact that long-term mortgage interest rates nationwide plummeted recently to a record low of 4.3 percent before rising slightly. The result is that home occupancy costs for home purchases are now down to roughly 15 percent of family income, dramatically lower than the conventional, affordable figure of 25 percent of family income devoted to home occupancy costs. Yet new home sales, pending home sales, and mortgage applications are down to a 13-year low.

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California Housing Prices on the Rebound

The national housing market is shrouded in uncertainty.  But in California, there are glimmers of stability.  Click here to read the full story at cnnmoney.com.

Inventory Up... not good...

Housing inventories rose in many U.S. cities for the eighth straight month in August in a sign of the continued headwinds facing a soft housing market.

Full Story: http://www.nytimes.com/2010/09/06/business/economy/06housing.html?_r=1&ref=realestate

"Let" the Market Fall?

The unexpectedly deep plunge in home sales this summer is likely to force the Obama administration to choose between future homeowners and current ones, a predicament officials had been eager to avoid.

full story: http://www.nytimes.com/2010/09/06/business/economy/06housing.html?_r=1&ref=realestate

Looking to Qualify for a Mortgage?

Lenders scrutinize all elements of a mortgage application, but one factor remains critical: The debt-to-income ratio, or the percentage of a borrower’s monthly gross income that goes toward housing expenses. If it surpasses 36 percent, lenders typically will reject the loan.