I'll admit it: When home prices were soaring in my neighborhood, it made me feel really smart.
Like so many millions of other homeowners, we concluded that we chose the right house in the right neighborhood at the right time. And as the years went by, and all of us on the block could count our home appreciation month by month, all this paper equity made us feel financially secure as in, "Now we know how we're going to pay our college tuition bills down the road."
But as they say, easy come, easy go. Home prices in our neck of the woods have been falling just as they've been falling around the country.
The Case-Shiller Home Price Index released last week showed home prices in the top 10 metropolitan areas declined more than 13 percent since last year. Home prices declined in the top 20 markets, but if you were a single-family homeowner living in Las Vegas, Phoenix or Miami, you really got swatted: Single- family home prices in those cities declined by 20 percent.
Worse, many economists don't believe we've seen a bottom on housing prices. Some estimate home prices could drop 25 percent from their recent highs.
We've lived in our house for nearly 15 years, so if the price comes down even 20 to 25 percent, there's still an excellent chunk of appreciation to fund the college dreams of our pre-teens. And, we've been working hard to pay down our mortgage balance, adding to our equity.
But if you bought your home in the past two to three years, all of your financial hopes and dreams, not to mention a good dose of self-esteem, may have evaporated overnight. And if you bought your house hoping to make a fast $50,000, you may find now that your home is worth $50,000 to $100,000 less than you paid for it. It may even be worth less than your mortgage balance.
If the news isn't bad enough, I've been hearing from readers around the country who are in shock that their home equity lines of credit have been shut off.
This is what a stuck housing market looks like. Nobody feels that smart anymore. The question is what's going to help?
At its most recent Federal Open Market Committee meeting, the Federal Reserve lowered its benchmark short-term interest rate another 25 basis points, to 2 percent.
The collective groan you heard was from those living on a fixed income, who know that the paltry sum they're earning on their savings accounts and certificates of deposit isn't enough to keep up with inflation, let alone the fast-rising cost of basic necessities.
But longer-term mortgage interest rates haven't quite fallen along with CD rates. And while you can get a 30-year loan for around 6 percent if you have excellent credit, it isn't low enough to compensate for the other mitigating factors.
The huge drop in home equity has spooked home sellers. Foreclosure rates have skyrocketed, hitting new records. Banks are still taking weeks and weeks and weeks to parse offers from prospective buyers. Buyers are getting fed up and are moving on to make other low-ball offers.
Fighting through all this to get a deal done is like wading through Jell-O. Just ask any real estate agent who hasn't torn his or her hair out yet.
The good news is that eventually we'll move through the recession. We'll get through the presidential election (traditionally a drag on any real estate market), and people will start buying homes again.
Starting up a real estate market is a lot harder than getting the stock market rolling. But once it gets rolling, everyone is going to feel a whole lot better.
Contact Ilyce Glink at www.thinkglink.com, or by mail at Real Estate Matters Syndicate, P.O. Box 366, Glencoe, Ill. 60022, or by calling her radio show at 800-972-8255 from 11 a.m. to noon Sundays.