House Poor Growing

By Mike Colipitts

Fewer people are going to the movies. Fewer yet are buying goods in stores. Major grocery chains home mortgageare seeing a rise in what were second rate brand food products selling at a discount. The savings rate has risen and may hit a new high. America is on a budget squeeze, and a growing number of homeowners are suffering from being house poor.

Hundreds of thousands of older people who had already retired are being forced to take on jobs again in restaurants and at Wal-Mart, suffering major losses in the stock market and in real estate.

Home equity for the majority of homeowners has been zapped by declining home values, an excess of inventory and the foreclosure epidemic, and many are wondering when we’ll get out of this financial mess.

Lost home equity doesn’t just represent decreasing wealth. It has an over riding effect on consumer confidence. Home owners, who are house poor can’t borrow against equity, take out new lines of credit, refinance, pay for college and even sometimes pay for a new washer or dryer.

No wonder why the rut is a dilemma for a society that has weighed so heavily on credit, and now the credit card companies are slashing all sorts of limits over all income levels. Millions of homeowners are house poor and many are deciding to stop paying their mortgages.

For decades Americans believed that buying a home was an avenue to wealth and savings, but not anymore. According to a survey conducted for the National Foundation of Credit Counseling, nearly half of all those surveyed no longer believe that the American dream of homeownership is a realistic way of building wealth.

Considering the massive downturn in the economy from the financial crisis rooted in the housing market, the survey is hardly a surprise to anybody. But the Harris poll also shows a bevy of other disturbing insights.

Given their current circumstances, roughly a third polled; representing 72-million people do not think they’ll ever be able to buy a home. Another 42% of those who have owned a home but no longer own one feel they’ll never be able to buy another home. Of those who do own a home now, 31% say they don’t think they’ll ever be able to buy another home, move-up to a larger one or buy a vacation property or investment real estate.

The housing bubble that produced so much wealth seems to be providing an extremely depressing view of the future. “The lack of confidence in consumers’ ability to buy a home, improve their current housing situation or trust homeownership to provide a significant portion of their wealth sends a strong message about the impact of the housing crisis,” said Gail Cunningham of the National Foundation of Credit Counseling.

“It appears that whether a person was directly affected or not Americans attitudes towards homeownership have shifted.”

But is the shift for real or long lasting? Could it be fall-out from the national economic downturn and fears of the economy worsening? Economists don’t know and can only study and speculate about the situation, and like the rest of us wait to see what happens next.

The housing crash is making at least some headway to improving as bargain hunters buy up foreclosures.