June 2, 2011:
Housing prices now stand at 2002 levels, meaning nearly a decade’s worth of appreciation has been wiped out. If you bought anytime in the last 10 years, chances are your house is worth less than you paid. You’re trapped in a loss.
“More and more divorced couples are forced to remain in their homes while their houses are for sale, which creates extreme stress on the couple and their children,” says Margo Meeker, a clinical psychologist. “Having to live under one roof post-divorce and then having to stage and show the house while the family is going through such a major transition and loss creates even more anguish in an already stressful situation.”
A recent survey by the National Foundation for Credit Counseling concluded that financial distress was having an impact on our marriages, our roles as parents, our jobs, health and even sleeping patterns.
Just 6% of respondents said financial distress wasn’t a factor in their daily lives.
Good luck finding them.
Falling housing prices aren’t just rattling families. Psychologist Elizabeth Lombardo told me last year that bankers who deal with customers have stress, too. There’s anxiety about whether the economy will really recover. That adversely affects job performance, health and sleep. And there’s the loss of money: their own and that of their clients.
Bankers also take the stress of their job home. As Ms. Lombardo put it, “a grumpy Wall Streeter who comes home can wreak havoc on the entire family without even meaning to.”
The ripple effect has become larger partly because so many Americans have tied up their wealth in housing. In 1985, 12% of personal disposable income came from savings, while just 1% came from home-equity lines, according to the Federal Reserve and Congressional Budget Office.
By 2007, 10% of personal disposable income came from housing credit: second mortgages, home-equity lines and so on. Less than 1% came from savings.
Today, Americans are saving more and spending less. Their homes are no longer piggybanks or sources of free money. That’s a good thing, but we spend less when we’re saving. Falling home prices have failed to translate into demand. People who want to buy homes still can’t afford them.
In another National Foundation for Credit Counseling survey, nearly half of respondents said they could never come up with a down payment for a new home. Another 17% said they would have to borrow from family or friends. And 21% said they would need to get a low down payment if they used their own funds.
The confluence of sellers unable to sell and buyers unable to buy has created what Ms. Meeker calls a “housing trap.” People who anticipated home prices rising-or at least staying level-can’t afford the economic hit even if they choose to move to a place that is less expensive.
“There is definitely an increased sense of feeling trapped, and panicked with no great option,” Ms. Meeker says. “Most folks are holding tight and praying that things will turn around eventually, but no one knows how long that may be, creating a silent sense of quiet despair but having to put on a very brave face out in the real world.”
It’s a real world where signs abound that the economy is slowly improving. Unemployment has eased slightly, the stock market has rallied, industrial output is edging higher. Yet many of us just don’t feel wealthier. Our homes are losing value.
Mr. Wainwright hit another chord just right. “Bought myself a house over in the valley, thought I had a money makin’ machine, can’t sell the place now I’m in a dark alley,” he sings in “Fear Itself.” “Livin’ the American dream.”