Banks Now Own The American Dream
By: Gerri L. Elder
For the first time in about 63 years the banks own more of the American dream than American citizens. The Federal Reserve has released a grim report stating that Americans currently have less than 50% equity in their homes and that things have not looked this bad since they began collecting data back in 1945.
With an economy that many believe is in or headed for a recession, the collapse of the housing market, rising costs of fuel and groceries and mass layoffs happening across the country every week, more Americans are teetering on the edge of bankruptcy and losing their homes to foreclosure than ever before. People who used to be able to get home equity loans to tide them over during hard times are now unable to do so. Lenders now have tighter standards, but that's only part of the problem. Homeowners no longer have equity in their homes to borrow against.
The price of homes continues to spiral and has already put many people upside down in their mortgages - owing more than their property is now worth.
According to USA Today, the Federal Reserve's flow of funds report indicates that in the second quarter of 2007 home equity had fallen to 49.6 percent. By the fourth quarter of 2007, the figure had slipped to 47.9 percent. The total value of home equity has also declined. The Fed began tracking this data in 1945.
During the housing market boom, housing prices rose unrealistically. At that time mortgage loans were so easy to get, many people did not even stop to realize that they were playing with real money when they bought expensive homes, refinanced to cash out the equity in their homes and took out lines of credit against their home equity. It seemed that no one expected the inevitable, which is today's reality.
If home prices continue to fall, as economists expect they will, homeowners are in for more bad news. Moody's Economy.com has estimated that 10.3 percent of homes will have zero equity by the end of the month. Even worse, if home prices fall 30 percent from their peak, 15.9 percent of homeowners will be upside down in their mortgage loans.
There is certainly very little good news to be found in the housing market right now. While some areas report that people are shopping for homes, that doesn't mean that others are not being forced out of theirs due to bank foreclosures.
The foreclosure crisis is still in full swing, which is flooding the market with vacant homes. Since mortgage loans are no longer handed out like candy, many people who would like to own homes are still unable to buy them, even at the reduced prices.
There's no quick fix for the economy and foreclosure crisis.
Each time we, as Americans, think that we've bottomed out and things have gotten as bad as they possibly can, another report proves us wrong.
Surely the housing market can't have much further to fall - or can it? Only time will tell.