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Tue Feb 28, 2012, 07:16 PM

Robert Reich: No Longer Home Sweet Home - The Ongoing Housing Crisis and the End of an Era [View all]

http://robertreich.org/post/18439504925

No 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 we’re 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, they’d 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; they’re renting because they’re 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 can’t relocate to find employment. They can’t 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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Reply Robert Reich: No Longer Home Sweet Home - The Ongoing Housing Crisis and the End of an Era [View all]
Hissyspit Feb 2012 OP
raccoon Mar 2012 #1
shcrane71 Mar 2012 #2