Real Estate Price Plunge Turns American Homeownership Into Perilous Path [View All]

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Real Estate Price Plunge Makes U.S. Homeownership Perilous Path
By Kathleen M. Howley


Nov. 3 (Bloomberg) -- Kajal and Vishal Dharod paid $559,000 in 2006 for a new four-bedroom house built in Rancho Cucamonga, California. Today, it’s worth about $360,000.

“We don’t know how we can come back from a loss like that,” said Kajal Dharod, 29, a first-time homeowner with a $4,200-a-month mortgage. “Buying the house was a mistake.”

American homeownership, once considered a path to wealth, is now leading to disillusionment. Home prices in the last four years have been the most volatile on record, swinging from a gain of 12 percent in 2005 to an estimated 13 percent loss this year, according to the National Association of Realtors. Those gyrations have embittered many property owners and potential buyers, said Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies in Cambridge, Massachusetts.

“We always talk about homeownership as being the American dream, but during the last decade people forgot it’s shelter and started thinking of it as a fast way to make or lose money,” said Retsinas. “The quicker we move back to seeing real estate as a place to live, a place to put down roots, the quicker the housing recovery will strengthen.”

Home-price growth in the next decade probably will average about 3.5 percent a year, based on Retsinas’s estimate of increases of about 1.5 percent above inflation and the Federal Reserve’s long-term inflation forecast of about 1.7 percent to 2 percent. On that basis, it could take a decade or more for the Dharods to recover from the 36 percent loss on their home. ..........(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20603037&sid=a5Mu8v6dknLo