The American Dream has become the American Nightmare
As real estate prices continued to climb higher over the last ten years, artificially low interest rates and very easy lending standards were not the only factors contributing to the so-called housing boom. Just as important were the expectations the future prices would continue to rise and that the rental market was all but dead. With all of these factors reversed, the housing market has plunged and is getting much, much worse.
Many people expected to be able to pull money from future appreciation, which could help pay mortgages, taxes, maintenance, and insurance, houses actually seemed cheaper to buy, despite the super inflated prices. Now on the other side of the coin, not offering any free cash, the rental market suffered for years.
Now that house prices have reversed, buying a house is the worst thing someone could do. As the horrible housing market continues and the cost to buy a house is now in the stratosphere, renting becomes a far more compelling option. However, due to all the recent condo-conversions, the supply of rental housing is somewhat constrained.
But, with the reasons we talked about above, a falling housing market eliminates the financial advantages of buying and increases demand for rental properties.
So as you see the American Dream of Homeownership, the so-called cornerstone of wealth, has become the American Nightmare. To many families are suffering from the Illusion of wealth of the last few years. In fact when this is all said and done the wealth that so many people worked so hard for will be gone.
The American people will begin to wonder who or what is responsible for the disappearance of their wealth. Even though people should take responsibility for how they borrowed to finance a higher standard of living, the reality that the information that has been given to the American people for years has not been completely honest will come to the forefront.
My guess is that people will begin to question the Government, the Federal Reserve and the validity of the Dollar.
