The decline in housing values and home equity affects people differently than other investments. The average person who invests in stock or bonds and other securities look at those things from a different vantage than an investment in a home. Most people feel their biggest investment is their home and housing values, not stocks or bonds, help define a person’s sense of financial stability as well as their perception of wealth, soical status, etc. The right to pull equity out of the home changed the life styles of many. The average person could now live on a much higher economic level than they experienced before. Whether it was right or wrong or fiscally irresponsible for homeowners to pull so much equity in such a short period of time is certainly arguable, but at this point the argument becomes merely academic. It happened, and now so many are underwater – economically speaking.
The sudden rise in housing values made lots of Americans feel rich. Suddenly the have nots had something. People went out spent and invested that money. A lot of the investments went into more properties. The whole idea was to ride the wave of the boom and cash out on the crest – problem was most people never saw the crest and when the wave collapsed it was too late. Prices fell along with people’s psychological sense of wealth and financial well being.
People who once had equity are now left with debts and deficits. It may take years for many to recover not only financially but psychologically. Scores of depressed housing prices can create scores of depressed people. Many folks cashed their retirement funds to chase the craze. How long are they going to have to work before they can retire? I guess for many it’s a question of how long are you going to live.
