The depressing housing depression
ORLANDO, Fla. — Ernest Markey lost his stone-cutting business in 2009. He then sold his home for half a million dollars less than its value at the peak of the housing bubble and moved with his wife, Marie, to a smaller home in a less affluent suburb. They gave up two new cars and bought one. Used.
The Markeys have since patched together a semblance of their old life, opening a new stone-cutting shop. But they do not expect that they will ever recover financially from the loss of equity in their old home.
“For two years I kept thinking that things would get better,” Mr. Markey, 51, said as he stood in his empty store on a recent weekday. “Now I think the future doesn’t look so good.”
The United States has a confidence problem: a nation long defined by irrational exuberance has turned gloomy about tomorrow. Consumers are holding back, businesses are suffering and the economy is barely growing.
There are good reasons for gloom — incomes have declined, many people cannot find jobs, few trust the government to make things better — but as Federal Reserve chairman, Ben S. Bernanke, noted earlier this year, those problems are not sufficient to explain the depth of the funk.
That has led a growing number of economists to argue that the collapse of housing prices, a defining feature of this downturn, is also a critical and underappreciated impediment to recovery. Americans have lost a vast amount of wealth, and they have lost faith in housing as an investment. They lack money, and they lack the confidence that they will have more money tomorrow.
Many say they believe that the bust has permanently changed their financial trajectory.
That’s true for me, though my losses were only about one-tenth of what the Markeys endured. We sold our Dallas house in 2010, after we moved to Philadelphia. It was not an expensive house at all when we bought it. We put $40,000-plus over the five years we had it, improving it. We ended up selling it for the exact price we paid, after it was on the market for six months, during which time we watched our savings drain out as we paid rent in Philly and the mortgage in Dallas. We had exactly one offer on the house, too, and we were grateful to get it, because we were sweating bullets, paying that Dallas mortgage. People kept telling us we made out well being able to offload the house after only six months. I keep trying to be grateful for that. Still, the emotional experience of hemorrhaging money while the house was on the market made a deep impression on us, plus the fact that we lost everything we put into the house to improve it. Again, our loss was pretty minor compared to what most people in our position are going through, but it was enough to permanently change us. I can only imagine what it’s like for the others.
How did it change us? Basically, it’s going to be a long, long time before we can even think about buying or building a house. The risk seems almost unendurable in this economy. There’s no telling if I’ll have to move again for work. Who has job security anymore? We’re moving back to my hometown because I’m fortunate enough to have a job that allows me to work via wi-fi from there. But what if that doesn’t last? What if we have to move again? I can’t stand to think about it, but I have to think about it so I don’t get myself and my family into a situation in which we’re trapped, and at risk of bankruptcy. In that sense, I have very little confidence in the future. Multiply that by millions of people, and you see why the country is mired in a slough of economic despond.