American dream, downsized: Homeownership not a given - News & Observer

Government retirees with $100K pensions | Does IRS owe you cash. Realtors Now, with the economy in another tailspin, they're on the fence. The couple can walk to restaurants and movies from their building in southwest Charlotte. They have a gym and a pool, and they don't have to mow the lawn or repair the roof. Mostly, they don't have to worry - like so many of their friends - that the housing market's slide isn't over. But around the country, particularly in places hit hardest by the Real Estate bust, that's changing. Legions of homeowners remain underwater on their mortgages or unable to move because they can't sell their house. Plenty who want homes can't buy them because credit remains tight. Recent data show new homes are smaller - and sport fewer pricey extras, such as fireplaces and patios - than in years past. Just 11 percent of sellers surveyed by the National Association of Realtors last year had owned their home for three years or less, down from 30 percent in 2006. Increasingly, consumers seem to be viewing their houses simply as places to live, instead of lucrative investments. It remains to be seen whether the shift is permanent. Memories of past recessions can fade quickly, economists say, and government policies encouraging home buying aren't likely to disappear, because the housing market remains a critical part of the U. What's more, many say the reasons to buy, from the appeal of a long-term investment to the simple desire to own property, might outweigh even consumers' worst fears. For now, though, some experts say the American dream has taken a back seat to economic realities. Often, the only way to buy was to pay cash or take out a pricey loan with a large down payment. From the beginning of the federal income tax, people have been allowed to deduct their mortgage interest. Bill helped veterans secure low-down-payment loans with low interest rates. Meanwhile, the government continued to encourage home buying through tax breaks and programs that push homeownership for low-income earners. Credit was cheap and easy to obtain, risky products such as adjustable-rate mortgages crowded the market, and by the mid-2000s, homeownership rates had spiked to nearly 70 percent. Investors bought and sold homes quickly, reaping huge profits. We know what happened next: The financial world nearly collapsed. The nation plunged into its worst recession in decades. Even homeowners who weren't underwater began to question their investments. Today the nation's homeownership rate has dropped back below 66 percent. And the housing market is still struggling, despite record-low interest rates and attractive prices. Prices have fallen more than they did during the Great Depression, research firm Capital Economics reported recently. Part of the reason the market remains weak is that some people who want to buy can't get loans. The National Association of Realtors, for one, is calling on banks to bring back "common-sense standards" in lending, loosening what the association considers to be too-strict requirements, spokesman Water Molony said. He said a homeownership rate of around two-thirds of U. But Molony said there's a pent-up demand among other potential buyers that could help bolster the anemic economic recovery. But she said the market there has had to pay the price for other areas caught up in the housing bubble, which has made lending tighter and required homebuyers to come up with more money to buy. Since then, managing rental properties for homeowners who can't sell has become one of the biggest parts of his job. It's unclear whether the trend of putting off homeownership is permanent. Two-thirds of millennials, who are 18 to 30, believe they will be homeowners within the next five years. Jon Wilkinson, 25, planned to buy a home this spring, after his wife, Linda, finishes school at the University of North Carolina-Charlotte. Given the low interest rates and prices, though - their mortgage wouldn't be much more than their current monthly rent - they decided to buy earlier. The survey found that typical sellers had been in their home eight years, up from seven years in 2009 - and that first-time buyers plan to stay in their new house for 10 years. Repeat buyers, meanwhile, plan to hold their property 15 years. Personal-finance guru Suze Orman endorses the strategy in her new book, "The Money Class," reminding readers that a home is not a stock - and that buying with the intent to flip for a profit or to fund other goals through home-equity loans was never wise. Most economists and industry experts expect the market to rebound, though they acknowledge recovery could be a long road. Some say that once credit standards loosen and the economy improves, consumers will turn more readily to homeownership - and that eventually, young adults who chose to rent for convenience and security will want to buy a house and settle down. Experts suspect the government will always encourage ownership through the mortgage interest deduction, too. People say, 'Are you going to vote against home ownership. The Gibsons still think they'll probably buy a home someday. They got married last year and hope to start a family in the next few years, and they've already been pre-approved for a home loan. Still, they worry: One friend, unable to sell her townhome when she had to move, was forced to let it fall into foreclosure. The couple are looking at homes, but they wonder if many are still priced too high. In the meantime, Lina Gibson and her husband, who works for Carolinas HealthCare System, are contributing more to their retirement accounts and padding their savings. They clip coupons and shop at consignment stores, a dramatic shift from a few years ago. They don't have any debt and they like the freedom that brings. New-home sales hit 870,000 in July 2007, before the recession began. In July, new-home sales fell to an annual rate of 298,000, the lowest level in five months, according to the latest data from the Census Bureau. The median sales price, $222,000, was also down from the previous month, though it climbed from the year before. In addition, a study last year by the National Association of Home Builders found the median size of new single-family homes is declining. Today's downsizing trend is likely to last, association economists said, fueled by factors such as tight credit, less interest in buying homes as an investment and the desire to keep energy costs down. The group's research found a steady decline in the number of homes started since 2005 with three-car garages, fireplaces and patios. And the share of for-sale homes priced above $300,000 was less than 25 percent in 2009, down from 35 percent in 2006 and 2007, the association found. Relationships today have taken a whole new twist that many may not realize could also twist personal finances. Lack of equity can derail attempt to refinance mortgage With mortgage interest rates hovering around 50-year lows, refinancing is an appealing prospect for many homeowners. I think this is especially true considering the stock market's August gyrations. Taking nervous energy and using it to focus on sure-thing money moves such as lowering payments or paying debt faster makes sense. Parents can give kids a leg up on credit history Teens and young adults trying to build an all-important credit history might do well to piggyback. They look like credit or gift cards, can be reloaded with money and don't require the holder to keep a bank account. 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