State of the nation's homeowners

When will house prices go up again?

That's the question, worded in various ways, that I'm frequently asked by my neighbors, who happen to know that I write about real estate for a living.

My answer, always the same, is: I have no idea, and neither does anyone else.

There are plenty of forecasts of what may happen to house prices. Up. Down. Flat. U-shaped. V-shaped. L-shaped. Even W-shaped. But personally, I don't think any of the forecasts are all that reliable. After all, hardly anyone predicted the housing boom or the collapse with any reliable degree of specificity about the exact nature or timing of events.

And if anyone could really truly predict the future, well, a lot of things in our world probably would be quite different than they are. Sure, one or more of today's forecasts may prove to be on the money, but which one?

That's not to say forecasts aren't useful, especially if they offer insights into the state of housing and homeowners. One such recent report, "The State of the Nation's Housing 2009," by the Joint Center for Housing Studies at Harvard University, is well worth reading in full for that purpose.

Here's a summary of what I gleaned from this report about U.S. homeowners:

We're less wealthy than we thought we were. Home equity, on a quarterly basis and adjusted for inflation, declined a whopping 41 percent from the peak of the housing boom to the last quarter of last year. Approximately $6 trillion of equity disappeared from 2001 to 2007, $2.5 trillion of it in the most recent of those years and another $2.5 trillion last year.

More money was lost in stocks and mutual funds, but because homeownership is broader-based than Wall Street investment is, more of us lost out in the home equity crash than had bad luck in the stock market.

We're tapped out. While much of that equity evaporated as home values declined, a large chunk was extracted from our homes when we refinanced and took out cash. In fact, homeowners who had conventional prime loans took out $1.8 trillion of equity from 2001 to 2007. But now that's over: 14 million of us now owe more than our homes are worth, according to one estimate cited in the Harvard report. ...CONTINUED

All rights reserved. This article may not be used or reproduced in any manner whatsoever, in part or in whole, without written permission of Inman News. Use of this article without permission is a violation of federal copyright law.