Your House: Just a Home
By M.P. McQueen
The Wall Street Journal
September 14, 2009
It's time to face facts, if you haven't already: sometimes your house is just a home.
For most of the last decade, Americans treated their homes as sources of ready cash and as brick-and-mortar retirement plans. Overleveraged at purchase with no down payment, no documentation and negative-amortization mortgages, homeowners also mined equity with home-equity loans and lines of credit.
At the end of the second quarter, about 23% of single-family homes with mortgages were "underwater," with owners owing more on their homes than they are worth, according to Zillow.com. And analysts for at least one major bank expect that share to rise as the housing market bottoms out in some areas.
Foreclosures and short sales, where homes are sold for less than the debt outstanding on them, comprised 31% of total sales in July, according to the National Association of Realtors, helping depress prices for all. Buyers and sellers are at loggerheads in many markets, as home sellers refuse to accept the reality of lower prices. Depressed values and tighter credit in turn have reduced everyone's ability to borrow against their houses for remodeling, refurbishing, college tuition or other purposes. The lockup has caused people to feel poorer, even if they're employed and don't need to move. This feeling has, in a reversal of the boom's wealth effect, curbed consumer spending.
To be sure, the bust is giving plenty of first-time buyers, including the police officers, nurses and teachers who were priced out of some metro areas their first chance in years to own a home, helped by an $8,000 tax credit -- provided they can obtain a loan.
But many other Americans have been forced to accept that they'll be living in their current place for a long while, even if they'd planned to flip or trade up. While sales of low-cost housing are picking up, for many, a house is back to what it traditionally was: a long-term financial commitment, a sturdy shelter and a place to hang your hat.
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