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Robert Reich: No Longer Home Sweet Home - The Ongoing Housing Crisis and the End of an Era
http://robertreich.org/post/18439504925No Longer Home Sweet Home: The Ongoing Housing Crisis and the End of an Era
TUESDAY, FEBRUARY 28, 2012
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Houses are the major assets of the American middle class. Most Americans are therefore far poorer than they were six years ago. Almost one out of three homeowners with a mortgage is now underwater, owing more to the banks than their homes are worth on the market.
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What were witnessing is a fundamental change in the consciousness of Americans about their homes. Starting at the end of the second world war, houses were seen as good and safe investments because home values continuously rose. In the late 1960s and 1970s, early baby boomers got the largest mortgages they could afford, and watched their nest eggs grow into ostrich eggs.
Trading up became the norm. Homes morphed into automatic teller machines, as baby boomers used them as collateral for additional loans. By the rip-roaring 2000s, it was not unusual for the middle class to buy second and third homes on speculation. Most assumed their homes would become their retirement savings. When the time came, theyd trade them in for a smaller unit, and live off the capital gains.
The plunge in home values has changed all this. Young couples are no longer buying homes; theyre renting because theyre not confident they can get or hold jobs that will reliably allow them to pay a mortgage. Middle-aged couples are underwater or unable to sell their homes at prices that allow them to recover their initial investments. They cant relocate to find employment. They cant retire.
The negative wealth effect of home values, combined with declining wages, makes it highly unlikely the US will enjoy a robust recovery any time soon.
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Robert Reich: No Longer Home Sweet Home - The Ongoing Housing Crisis and the End of an Era (Original Post)
Hissyspit
Feb 2012
OP
raccoon
(31,110 posts)1. K&R. nt
shcrane71
(1,721 posts)2. How can the US have any sort of economic recovery without strengthening the housing market?
Buffet just said that the number of households being formed have reached equity with the number of housing units now available. So, shouldn't bank ease their lending practices to allow consumers to get into homes?
There is no other way to build economic security for the majority of Americans, living paycheck to paycheck, other than getting into a mortgage.