The White Picket Fence Has Become a Little Grey!

For many Americans, the dream of owning a home or a business is the definition of the American dream.  Add to this, the 2.3 kids, the well paid job or successful business and the stylish car to drive to work every day and you had the true picture of success.  An individual's home, that was the symbol of stability and security, has become the primary center of stress for many home owners.  It is no longer a dream for many but a nightmare instead.

The United States Census Bureau in 2007 reported an increasing number of homeowners are spending a growing amount of their incomes on housing. People in 49 out of 50 states reported an increase. The only state that didn't, Alaska, spent the same amount. The report showed that people are spending around 21 percent on their housing needs, up from 19 percent in 1999.  In many areas, and for many Americans, it has reached a much higher number.

 At this rate, first-time buyers are being priced out of housing markets all across the country. Economists point to rises in home prices in the last 7 years, as well as higher interest rates, coupled with stagnant wages and lost jobs over the same period. Household incomes, on the other hand, haven't done a very good job of keeping up. The same Census report showed that income has actually dropped, not risen, over the past 7 years, down 2.8 percent.

 The report goes on to share the percent of people who allot more than 30% of their income for housing. The numbers are up almost 8%. National guidelines suggest that more than 30% of household income for housing is excessive and not financially healthy. Add to this that many companies take advantage of those desperate to own with shady lending practices and impossible interest rates.   If this census was in 2007, one can only guess how much worse the numbers will be in the 2010 census.

 Buying and owning a home has dropped to its lowest level in nearly nine years in the first three months of the year at the same time, housing vacancies reached an all-time high, according to figures released early this year by the Commerce Department.   In addition, many distressed sellers are facing declining home values, their rates on adjustable mortgages have gone up, divorce prompted by stress around finances and even loss of health to stress related illnesses.  This only adds to the amount of foreclosures and housing vacancies.

What does this mean in the long run?

The real estate market will remain lifeless until income can catch up to housing. And since real estate is one of the biggest drivers to the overall economy, a weak real estate market means a weak economy.  The downward spiral is easy to follow.  If no one is buying homes, then the number of new homes being built then decline.  This means that all those individuals that earn their income in the building industry now are losing jobs or have lowered income due to fewer contracts.  Continue down, these individuals are not spending money they would normally have and down it spirals impacting out.  A giant ripple effect that is long reaching!

 Until  income can begin to grow as quickly as the real estate market, this trend shows no signs of slowing down. This could mean that the upcoming real estate slump could last much longer than anyone predicted.  The true impact and prediction will be measured with the 2010 Census.  The only consumers that will benefit from this current trend are those with the financial position to buy up property that has dropped in value and can afford to hold on to it for a long term investment.