June 12th, 2014

For Most Americans, the Housing Crisis Isn’t Over

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The Housing Crisis Isn't Over

In the eyes of many economists, the housing and mortgage crisis of the late 2000s is in our national past. According to a recent survey by the John D. and Catherine T. MacArthur Foundation, however, a large majority of Americans don’t feel the same.

The recently released study found that 51 percent of Americans believe that the housing crisis is ongoing and an additional 19 percent are of the opinion that the crisis will get worse before it gets better. This divergence in opinion between experts and average Americans points to very real financial pains that many Americans are still experiencing when it comes to housing. These hardships include 52 percent reporting that they’ve made at least one sacrifice in the past three years in order to afford their rent or mortgage payments. According to the Macarthur Foundation, these sacrifices include neglecting to save for retirement, piling up credit card debt, passing up needed healthcare, moving to a worse neighborhood or even sacrificing healthy meals.

No Difference Between Buyers and Renters

An interesting side-development of the American housing crisis has been the increasing amount of lost faith in homeownership. Traditionally a core facet of the so-called “American Dream,” the MacArthur Foundation found that respondents were less likely to think of home ownership as a good investment than in the past. Findings along these lines state that 64 percent of respondents believe building wealth through homeownership is less likely now than 20 or 30 years ago, and 51 percent believe renting has become more appealing.

In light of the more negative perception of home ownership, it’s not surprising then that well over half of those surveyed wanted to see the government invest in both owning and renting equally. 58 percent believed that renting, like owning, could help Americans achieve the American Dream, certainly a marked turnaround from earlier understandings of the concept.

Credit Consequences

As we’ve touched on recently, falling behind on your mortgage payments can be a dangerous, slippery slope. Getting backed into a corner with an unaffordable mortgage or rental agreement can lead not only to foreclosure or eviction, but also to accounts in collection and other derogatory marks on your credit report, including negative marks from other credit lines that you’ve neglected in favor of your housing.

The MacArthur Foundation made a specific point in their survey of focusing on those who have been deemed “financially distressed,” defined as renters or owners who pay more than 30 percent of their household income on housing. For those in such a situation, their mortgage is not only in danger of going unpaid, but their large housing payments are sucking funds from other needs. In this scenario, credit health is both more at risk and more important than ever. While it’s tempting to allow credit card payments to take a backseat to pressing housing-related concerns, an available line of credit with an affordable interest rate and minimal to zero fees can be crucial to getting a hard-pressed family over the hump of difficult times. Those who are financially distressed need the benefits of healthy credit more than anyone, but their credit is also more vulnerable as they precariously balance a hefty mortgage against other expenses and risk late payments on either or both.

It’s a harsh irony that your credit health may become most important when it’s most at danger. A small bright side of the findings, though, is that they point to resiliency. Americans now know that realizing the American Dream doesn’t depend on drowning in an oversized mortgage, and most have certainly proven that they have the will, and (if they’re lucky) the resources, to financially manage through more difficult times. Hopefully, as the housing market continues to improve, the average American won’t have to balance housing expenses against other fiscal priorities quite as often as they do now.

Mike

is a Content Writer at Credit Karma. Since joining the team in June 2013, he’s been delivering the financial know-how on the daily. When away from work, you can find Mike watching hockey, Twittering for hours and frequenting trivia nights.

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8 Comments

  1. Being financially overextended is indeed a reality for many Americans. The federal government has programs such as HARP available which are designed to help homeowners obtain financing a a rate that is more manageable.

    Loan Depot at 4:24 am on June 25, 2014

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