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Homes: American dream becomes American nightmare

By
February 3, 2010

Home ownersship on the brinkNot that long ago, owning a home topped the list for the American Dream.

Now home ownership is the American Nightmare as more and more find they owe far more than their home is worth and the only way to recapture that dream is to walk away.

Some 4.9 million homeowners now live in homes with values below 75 percent of their mortgage value and that fiture is expected to rise to 5.1 million by June of this year.

The best solution? Give it back to the bank and take a hike.

That’s the advice of people who claim to know about such things. 

Reports The New York Times:

The number of Americans who owed more than their homes were worth was virtually nil when the real estate collapse began in mid-2006, but by the third quarter of 2009, an estimated 4.5 million homeowners had reached the critical threshold, with their home’s value dropping below 75 percent of the mortgage balance.

They are stretched, aggrieved and restless. With figures released last week showing that the real estate market was stalling again, their numbers are now projected to climb to a peak of 5.1 million by June — about 10 percent of all Americans with mortgages.

“We’re now at the point of maximum vulnerability,” said Sam Khater, a senior economist with First American CoreLogic, the firm that conducted the recent research. “People’s emotional attachment to their property is melting into the air.”

Suggestions that people would be wise to renege on their home loans are at least a couple of years old, but they are turning into a full-throated barrage. Bloggers were quick to note recently that landlords of an 11,000-unit residential complex in Manhattan showed no hesitation, or shame, in walking away from their deeply underwater investment.

“Since the beginning of December, I’ve advised 60 people to walk away,” said Steve Walsh, a mortgage broker in Scottsdale, Ariz. “Everyone has lost hope. They don’t qualify for modifications, and being on the hamster wheel of paying for a property that is not worth it gets so old.”

Mr. Walsh is taking his own advice, recently defaulting on a rental property he owns. “The sun will come up tomorrow,” he said.

15 Responses to Homes: American dream becomes American nightmare

  1. griff

    February 3, 2010 at 11:32 am

    As George Carlin once said of the American Dream, “You gotta be asleep to believe it.”

    Wake up.

  2. doggie daddy

    February 3, 2010 at 7:01 am

    After record setting increases in property taxes here in Illinois and the Reagan wannabe presidents failure to pass any comprehensive reform or change in (and his TARP/Helping Homes crap doesn’t count) home ownership leaves something to be desired.

    Well those in denial can at lest blame it on ‘W’ again, it’s easier than doing something about it.

    HOPE indeed.

    And they can’t figure out why voters are already feed up with them.

  3. MightyMo

    February 3, 2010 at 12:03 pm

    Republicans have loved to use the theory and logic of “Trickle Down” economics for years. However, they refuse to believe that it hasn’t worked, but with the housing mess, they now have proof.
    This is a bush created problem through and through. It was his desire in June 01 to implement through HUD a program that made housing available to more Americans with the firm belief that more homes sold equaled a stronger economy. This was orchestrated by selling homes using what would normally be considered bad lending practices, but the “bad” side was expected to be counter-balanced by the “good” results of millions of people spending money.
    It worked directly as designed, except that Trickle Down economics only works while it is being artificially supported. Once the artificial money started to dry up and people actually became responsible for their actions then the plan fell apart.
    To blame this mess on anyone else is pure ignorance. Any attempt to now blame this on Obama (although I don’t agree with his plan to spend our way out of this) is ignorance at the highest level.
    Once again, the American public are responsible. We allowed bush to dangle a golden carrot in front of our faces, and being the greatest nation on earth for financial ignorance, we grabbed it and ran.
    While I was financially secure throughout, I sat down one day with a lender who was determined to sell me the benefits of an interest only loan. It was the most ridiculous and financially dangerous thing I ever heard of and immediately turned it down. But how many Americans took the hook simply because it offered a few extra dollars a month in their pockets?

  4. giving-up-in-nc

    February 3, 2010 at 12:10 pm

    Woo Hoo! With all those huge bankster bonuses being paid out get ready for some serious trickle down economics! I got a bucket out in front of the house ready to catch some of it, but so far it’s just full of a lot of B.S.

  5. Warren

    February 3, 2010 at 2:40 pm

    It’s now a vicious circle. Here in the ‘New West’ we’ve experienced this perhaps more than other areas of the country. My house is now worth about 1/2 of what it was four years ago.

    The cycle goes like this: Some homeowner walks away from his home and his mortgage. That leaves yet another empty house on the market. That further depresses local home prices. Which puts more homeowners deeper under water. That in turn causes more of them to walk away from their homes and mortgages. On-and-on.

    If anything the problem here is escalating. My house dropped another $20G in value last month alone. There are whole tracts of empty unsold homes, some new homes that have never been occupied. Some with the whole tract closed down and barricaded with chain link fence. I was in Las Vegas a couple months ago visiting friends that live there. We drove through miles of abandoned housing.

    I don’t see this problem turning around anytime soon.

    —W—

  6. griff

    February 3, 2010 at 6:34 pm

    Mighty Mo:

    Look up National Homeownership Strategy implemented under Bill Clinton in 1994.

    An excerpt:

    “The ideal of homeownership is so integral a part of the American Dream that its value for individuals, for families, for communities, and for society is scarcely questioned. This paper provides a brief survey of research into the nature and significance of homeownership’s presumed benefits, particularly for lower income households and other underserved populations.”

    President Bill Clinton has linked increasing homeowner-ship to the challenge of expanding opportunity for work-ing families. Speaking to the National Association of Realtors in November 1994, he expressed a national consensus that “more Americans should own their own homes, for reasons that are economic and tangible, and reasons that are emotional and intangible, but go to the heart of what it means to harbor, to nourish, to expand the American Dream.”

    Deja vu?

    Once again the “it’s all Bush’s fault” partisan blame game falls flat.

    As is always the case, both parties share some of the blame for the mess we’re in, but don’t let that ruin your Bush-bashing good time.

  7. DejaVuAllOver

    February 3, 2010 at 9:42 pm

    Both parties are run by the same mob of neocons, banksters and people with an agenda for themselves. And not just Hillary, either. Just like the Supreme Court recently proved that Big Government and Big Business are essentially the same. Iraq, Afghanistan or whatever ME country the zionistas have as their next victim, neither party will do a damn thing to stop them and it’s probably too late, anyway. Ya’ know how the mob will get soldiers to fight their filthy wars? By trashing the economy so we’ll have to fight in order to eat. The bankster scandals, the housing market (perhaps intentionally created) crash, the bailouts for the mobsters and the Fed’s warp-five money printing policies are all part of the Master plan, devised by and for our Masters.

  8. Zengine

    February 3, 2010 at 9:55 pm

    Agree.

    I’m striving to be a novelist, and one of the issues I have to consider is whether to go for traditional publishing or to market the work as e-media.

    I’m leaning toward traditional publishing. My reasoning is that it’s hard to read an e-book whilst homeless.

  9. Zengine

    February 3, 2010 at 9:46 pm

    Not at all surprised that ‘walk away’ is the predominant advice. Can’t have a bust without the uberclass having a go at the corpses.

    Could be that another bubble will grow, or even a rebound before stabilization. Maybe it will even happen before the real crash hits. Either way, eventually, those values will rise again.

  10. bryan mcclellan

    February 3, 2010 at 10:20 pm

    I always scoot over another for fledgling novelist on my ledge.
    Welcome,
    don’t surrender your elevator pass!

  11. Carl Nemo

    February 3, 2010 at 10:40 pm

    Hi Zengine,

    It’s best to go the e-book route as a novice writer. E-books are where the action is nowadays with all the e-book readers coming on line.

    Also you should buy a copy of Adobe Acrobat 8.0 which is the standard model for web publishing, imbedding links, photo’s, animations etc. Most folk are familiar with only the Adobe Reader side which provides uniform documents to readers worldwide through the ubiquitous .pdf format.

    There’s also web companies that will help you launch your e-books etc. As far as homeless people reading e-books, it seems almost exclusive to me in that they have alot more to worry about than reading an e-book. There’s no shortage of hard/soft bound publications and they can also keep warm in the public library…no?

    Anyway here’s some links too that possibly will inspire you to start your writing. Even if you don’t publish anything of your own, just learning how to use Adobe Acrobat effectively is a valuable skill for small companies etc. that need tech manuals, product instructions etc. created to support their operation. Good Luck on your endeavor… : )

    http://www.ereader.com/refid=45583?cid=eReaderPro300

    http://www.amazon.com/s/?ie=UTF8&keywords=electronic+books+reader&tag=yahhyd-20&index=aps&hvadid=47938409011&ref=pd_sl_92to2t24r_b

    Many writers try to find cheaper alternatives to purchasing Adobe Acrobat, but I don’t recommend simply depending on programs that will convert a .txt, .rtf, word or whatever with a conversion program to .pdf. You’ll have far more latitude by owning Adobe’s product along with other programs that are integrated to work seamlessly with Acrobat. Also document protection is of paramount importance when supplying material via the web. So copy protection with overall encryption to even open the document is important to prevent “sharing”.

    Carl Nemo **==

  12. Zengine

    February 3, 2010 at 10:50 pm

    Thanks much, mate.

  13. bryan mcclellan

    February 3, 2010 at 11:09 pm

    Sorry if it’s not that crowded, Har..

  14. Zengine

    February 4, 2010 at 12:14 am

    Worthy of serious research and consideration. I’ll certainly look harder at it, thanks.

    I did write a novel over a decade ago, marketed it to no avail. Looking at it now I understand why it didn’t fly. The rewrite I started last year is at 50k words, but that will have to be hacked and slashed so viciously that I threw it on the back burner.

    Thwarted yet again, I read a 3′ stack of books on the craft and started a new project. First draft is at 47k words (80k projected) and looking much, much better than my previous work.

    Truth is, I actually have to see my first born on paper. Have to hold it, feel the cover, flip the pages and smell the ink. That appeals to me.

    In taking the time to write down what I think about it, I’m seeing that my earlier dreams about the endeavor have colored my expectations. A physical book is a solid part of my goal, I suppose. Money is a tertiary consideration, really. It’s there, but not primary. More like fused to the arse of my secondary consideration.

    Now, I will put down my tequila. I will back away slowly.

  15. bogofree

    February 4, 2010 at 2:16 pm

    Let’s open up the housing market to anyone with a pulse. Forget having any of those requirements that worked so well in the past. Hey, you got a whole group you have pandered to for votes. And don’t forget the banks getting the chance to trade paper with each other. Who cares about credit checks! Who cares about balloon payments! Forget about the fact your payment is 80% of income as I can just tweak this application a bit and you’ll be all set!

    But it takes some real dummies not to realize the potential shortfalls and I’m certainly not going to give a free pass to those whose common sense on financial matters is buying scratch tickets.

    The end result is once again most of us end up bailing out the irresponsible legislators, home buyers and banks.