Housing Crisis Likely to Wipe Out Two Decades of Family-Earned Wealth 28 comments
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The collapse of the housing bubble is likely to eliminate most, if not all, of the gains that families had made in accumulating wealth over the last two decades, according to a new study from the Center for Economic Policy & Research in Washington, DC.
In the report, entitled The Impact of the Housing Crash on Family Wealth [pdf file], the authors project that the sharpest falloffs are projected to occur for the youngest families.
If housing prices fall another 10%, as they seem likely to do, the study estimates that families will have a net worth anywhere from 56% to 67% less than they had in 2004. That corresponds to an average decline of $41,000 in median wealth and show, according to the authors, that homeownership is not always an effective way to generate and accumulate wealth. Go figure.
However, a study conducted in early 2005 by none other than the National Association of Realtors showed that over two-thirds of all first time home buyers at the time had put down less than 10% to purchase their homes, and a whopping 42% of those first-time buyers had put down nothing at all. It's no wonder, since their own data show nobody could afford to buy a house in the first place:
(see NAR Optimists Drubbed By Their Own Dismal Data)
So is the bursting of the housing bubble really as damaging to family wealth as it seems? If the NAR is to be believed, none of this money was really wealth in the first place. Rather, it was just another result of a massive, nationwide borrowing binge. But now that the bill has come due (talk about a balloon payment!) who is going to pay it all back?
For a clue, look no further than Fannie Mae (FNM) and Freddie Mac (FRE), which found new owners on Tuesday (you and me). Now, through them, you and I are effectively acquiring 66,000 houses a day through foreclosure.
How about a cute little fixer upper?
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This article has 28 comments:
Face it, lose a job in a two income family, it is highly likely you will lose your home, since you likely bought it based on two incomes. Unemployment pays next to nothing. No income is "0" income. Can't amke huge unreasonable house payments on that amount. So, moral of the story, until the value of "0" increases, it is possible that some day you too could find yourself understanding the value of "0" first hand.
As financials worsen for local governments,they will attempt to hike taxes and fees on everything you have,including your dog!
Now I get to pay higher taxes to insure that the FM paper that my banker bought with my deposits, doesn't default.
If I had my way I'd hold the little rodents, that way overbought, in servitude until such time as they paid off their debt. No BK outs.
Then I would put a bullet in the appropriate bankers that knew damned good and well what was going on. Too strong?
Try me.
When they sznd the Tax Bill for this mess that so many made tonns of money on (lenders, banks, builders and the govt... through increassed taxes)... Now they are sending the bill back to us for the fancy times that they lived in for the past 7 years.
I think I'll leave the country for 15 years and have the tax bill marked " return to sender" ! Hey we did not make any money on this.... we did not engage in "risk".... why should folks that ventured nothing and as a result had nothing to gain have to loose?
The outsourcing of jobs and inflation running well over announced rates combined with a lack of investment in this country has produced a situation where costs of living are way in excess of the ability people have to pay their bills. Sub-prime borrowers were just the weakest link. Look at AMEX and other banks recent news on their prime borrowers increasing their defaults. When gas, heating oil and the cost of food soar to create another monthly mortgage amount something has to give.
Much of the divide between the "high saving types accusing the younger generation" and the "wasteful types in the young generation" is merely because the former rode the bubble up and cashed down.
My dad bought his first home for 20k, sold it for 60k, his second for 107k (a real stretch for him at the time) and sold it for $450k.
Many people like him only had money because they could tap the equity to send kids to school, trade down to cash out to retirement.
Some of this younger group gets out a college which costs 10x as much as when their parents went, into a housing market which was high and if everything else didnt go haywire they would be able to afford the mortgage as well.
Right now the lack of opportunity, outsourcing of not only manufacturing but service jobs as well, combined with a total lack of investment in the infrastructure and technologies of the future here at home has led to a longer term problem that wont be easily fixed..
MA in CT
Peace & prosperity is possible. mms
www.marketwatch.com/Ne...
Too many rats to escape at the same time without losing our tails! No longer a story of 3 blind mice.
Remember people. . .
they came for the jew but I was not jewish so I said nothing
they came for the gypsy but I was not a gypsy so I said nothing
they came for the poor but I was not poor so I said nothing
they came for the vile student loan defaulters but not me so I said nothing
they came for the house ditchers but not me so I said nothing
when they finally came for me. . .everyone else cheered.
okay I changed the end. . .what do you think this crisis looks like to those of us who can not have a house because we can't afford it. .
heaven
salvation
payback
as Nelson from the Simpsons would say "Ha ha!"
Why?
Say you are a home owner whos house has gone down from $700 to $350. (hypothetically speaking, not that it happens too often). Now the beautiful house you were eying the that beautiful neighborhood that was $300k away from your budget at $1M now is only $150k away from you and very reachable.
Now lets say its the other way around. You bought your house at $700 and now its worth $1.4M. Now the $1M beautiful house you were eying when you bought yours is now $2M which i $600k away. Now it is probably impossible for you to ever buy that house.
Rising house prices are only good for BANKS since they lend out more money and cash in more interest every month. And guess what? You dont pay? They sell your house and owe you NOTHING from your equity unless they sell it for more which is almost never the case. They will sell your $700k house for the $500 you owe in a heartbeat and you lose your $200k equity. They lose nothing.
And if you have mortgage insurance, they get their FULL equity back from the insurance YOU PAID for and again they lose ZERO while ruining your credit.
Housing bubble is TERRIBLE FOR HOME OWNERS!
National average according to RealtyTracInc. is about 8,200/day (Now what portion belongs to FNM and FRE they do not one 100% of all mortgages)
nows the time to salvage some of that exaggerated value,
then buy an unimproved property stick a prefab on it,
use remaining cash to deversify into stocks>financials&g...
(if your time horizon allows that model)
if your upsidedown on home, rent out rooms to the already foreclosed souls
What happened when they came for the pedophiles and the child molesters?
that was so funny and insightful. . .really