It’s tough to say for sure, but it’s unfortunately looking more and more like home prices will continue their free fall in 2012. This is a really hard pill to swallow for Americans, including myself and my husband, who have seen the price of our home do nothing but fall for the past four years since we bought it in 2007 at the very top of the housing market (lucky us).

It adds to the pervasive fear that seems to be dominating the US that our money is really losing value and even our long term assets, like our homes are falling in value and there is really absolutely nothing we can do about it.  Walking away from a mortgage only hurts you in the end, so I’d appeal to your sense of long term accomplishment and common sense to not even think about it.

The feeling of loss and helplessness is definitely not helped by this continuous free fall in home prices. It’s no wonder people are panicking and defaulting on their homes on purpose becaues they feel they are already under water on the home price.

Sorry to say that 2012 doesn’t look too good for home prices, and this “recovery” they keep talking about seems to be nothing more than a pipe dream fed to the Americans to keep us all from an uprising. The housing recovery is also a pipe dream, as there are still too many homes on the market that are abandoned or not selling to make it a real recovery at this point.

There are a lot of existing homes that have been on the market since the whole crisis started, which really adds to the falling prices as well. The inventory far exceeds the demand, and when that happens it forces prices even lower on not just houses, but basically anything for sale – Economics 101.

December showed that almost a third of the homes that were sold were considered “distressed” meaning they were short sales or foreclosures. Scary stuff. Some of this is even due to the whole “flipping” craze that got a lot of prospective home buyers in trouble when they bought homes expecting to flip them and make a huge profit and really did nothing more than get themselves into hock over their heads.

At least this whole situation has gotten the dangerous flipping craze under control, if we can find a silver lining anywhere. Here’s one comforting thing I always think of. You’re in your house, you have a roof over your head, and you probably don’t plan on selling any time soon. So just enjoy your home. Sooner or later this whole crisis will be over and you will once again resume your happy house dwelling, knowing your home is a solid investment.  So ignore those Zillow updates for now that tell you your home went down in value yet again and know that these times will pass.

I’m sitting here, reading about the latest move from the Obama administration in an effort to ease some fo the pain felt by home owners. When I read that this plan might help people with their housing problem, I thought maybe it meant helping families to avoid foreclosure.

That made the most sense in my mind. Help those that have lose a job or had money issues due to the economy stay in their homes instead of getting evicted and adding yet more foreclosed inventory to the already crowded and flailing housing market. Right?

Well no. Their big plan is to help current home owners that own a home that is worth less than the mortgage amount left, to refinance those homes. Right now, under current banking restrictions, most banks will not refinance a home if it has dropped in value significantly from the first time the home owner purchased it.

It makes sense from a business standpoint for the banks, but generally really sucks for home owners who tend to get antsy when they see on paper that their home value is much less than the worth of the outstanding mortgage is.

I’ll admit, when we were in this boat, it didn’t feel too good. HOWEVER, I knew that we were going to stay in this home, which we both love, for a long time. And the amount on paper didn’t bug me as much because I knew we were in this investment for the long haul.

Home owners in this situation have to realize that home values fluctuate, and that they will not always see a larger number on paper than what their mortgage is worth. I realize there are extreme situations which are exceptions, but that is generally the rule, and in a down market, you’re going to have more of this – plain and simple.

I’m not sure how much good this new plan is going to do, other than maybe keeping some skittish homeowners in their home instead of intentionally defaulting on it so they could get out of the mortgage agreement and go rent somewhere. Other than that, where is the real benefit for the economy?

And where, more importantly, is the benefit for the thousands of people kicked out of their homes, and more to come since the banks are starting up the foreclosure process again? I think the money used for this “stimulus” could have been used elsewhere, much more wisely. That’s my opinion.

In a move that has many homeowners hanging on by a thread worried, banks are now finally getting through their months or sometimes years of backlogs, and are beginning the dreaded foreclosure process again. This means that people will be thrown out of their homes who previously had a stay of eviction due to backlogging in the process.

This is not a good thing. Not only does it mean that people and families will have nowhere to stay besides a motel or rental, but it also is a signal that the housing market is going to be again flush with repossessed homes on the market for sale or auction.

Because of severe backlogging in the banking industry, and a huge inventory of homes that had to go on the repo block, banks were really behind in actually repossessing the homes in which occupants had fallen months behind on their payments.

You may have even heard of some of your friends or family who are behind on their payments and somehow have still managed to stay in their homes. This means that those people may be soon looking for a place to stay. This is just a sad state of affairs we are in today that Americans are experiencing so much financial flux.

Some data suggests that the increase in actual foreclosure proceedings may in actuality be better for the housing market. I don’t know how that can be, but I’ll leave that up to the financial gurus who come up with these theories in the first place!

Do you know anyone who has been impacted by the housing market slump? Statistically you probably do. I know that we have a few acquaintances that have been impacted by it.

It’s sad to see that people who have worked so hard to get their home are now forced to give it up likely due to losing a job or getting their hours cut, or one of the spouse losing their job and the couple not being able to afford the home on a single income.

Very shameful. I hop that we do experience a real recovery soon…..for the sake of families that are affected by things like this.

The whole debate over whether paying off your mortgage early or not has been debated exhaustively. I honestly think that the answer depends on too many variables to be able to give everyone the same blanket statement of yes or no on whether they should try to do this.

For one thing, it depends on how large your mortgage is and how much you pay in interest. If you are someone that has a very high interest mortgage, and it far outweighs any percentage you’d be making by investing that same money in the markets, then you definitely may be a candidate for paying off your mortgage early.

The timing also may have a lot to do with the answer to the question. Right now, people are not making much money at all in their retirement and savings accounts and other instruments. They may see paying off their mortgage earlier as more of a benefit than investing that same money.

I’ve actually toyed with this idea, because we decided to put a lot of our retirement accounts in cash. We thought why risk the value of our portfolios completely crashing in the ensuing chaos that may happen in the next couple years.

So now, since we have this money basically sitting idle, earning very little money, why not pay off the mortgage earlier? However, you also have to think about what tax breaks you are getting every year by paying mortgage interest.

That’s a caveat not to be taken lightly by some people in certain tax brackets that really get a nice tax break by having a mortgage and paying that interest every year. They may miss that tax break when taxes come around again if they have the mortgage paid off early.

However, the difference may not be huge for others. They may like the freedom of knowing they have paid in full for their property and home. They may actually enjoy that much more than getting the tax break every year.

By the way, you still would get the tax break for property taxes – those never go away since you will always pay property taxes. Now, if the government suddenly decides that they don’t want to give you tax deductions for mortgage interest, that makes the answer to the paying off the mortgage early question a little more clear cut for lots of people.

My husband and I, for example, would likely begin to accelerate our mortgage if this ever happened. This would take away a lot of the incentive we have for not paying it off early.

I really hate unected bills. Especially those that exceed $500, as the lovely escrow shortage notice we just got in the mail for our taxes and insurance bill for our mortgage. I would really love if, just for one friggin year, our mortgage company would figure our estimates out correctly.

Or, even better, if they figured them too high and we actually had a credit. That would actually be good news. But no, I keep getting notices every year that the figures are off, and that lo and behold, we owe more money.

This came as a real surprise to us, because we just got a letter from our county stating that the value of our home has dropped and that therefore, so have the property taxes, so it seemed really counterintuitive that the rate went up.

I need to call the mortgage company about this and figure out if it was either the taxes or the insurance that went up, as it was surely one of those since that is all our escrow account is set up to pay. Of course, they are busy today so it took forever to get through and I gave up.

Usually, when you get these escrow shortage notices, you are given the option to either pay it in one lump sum or allow the payments to disperse evenly over the next twelve months. Because ours is over $700, I am choosing to let it disperse over twelve months as that is much more within our budget than paying the $750 in one lump sum at this time.

I hate to say it, especially since my husband and I bought a 3,000 square foot home five years ago, moving up from a tiny apartment, but I think part of America’s economic problem now is the thought that bigger is better when it comes to just about everything.

This especially goes for American homes according to a recent survey. Even since the eighties, our homes have grown in size exponentially. The idea that we all need little mansions is really starting to become a problem.

Sure, the green movement is resulting in some slightly smaller homes being built now, but in general, the trend toward larger homes is still going strong. Some people are rebelling against is and buying smaller due to the financial crisis, but a lot of people are still buying and building “McMansions”.

The problem that started the whole economic fiasco was based in housing. People were getting loans on homes they really could not afford. It was all a house of cards, built on illusion, and banks were profiting big time, while the economy was booming because jobs were still steady.

When the house of cards and the illusion began to fade, that’s when we hit the hard patch that we’re currently still going through. Then, those that bought the huge homes they could not afford began to default on their mortgages, leaving empty real estate and bad loans.

These loans were also repackaged and sold as investments, and the fact that those also went bust just added another layer of complexity to the whole house of cards falling. Now, we are left with tons of unused inventory in the housing market, and people are still building homes that are too large.

This results in more energy consumption, higher payments and higher costs across that board. Now, what I will say in defense of my husband and I upgrading dramatically is that we were totally financially prepared, and had a legitimate business reason to get a large house.

We both have side businesses in addition to our 9-5 jobs, and we have inventory that we need to store, we also both needed our own separate office spaces, so the square footage has come in great handy for us in our respective businesses.

A lot of people got loans for homes that they could not afford in the end, and that, coupled with unscrupulous lending practices by the banks, really ultimately lead to the collapse of the economy and the housing market that we are still feeling the pain of today.

I have been thinking about what my husband and I are going to do in the near future when we have our secondary mortgage paid off. We got a secondary mortgage on our home when we bought it five years ago so that we would not have to make a down payment on the house.

If we tried to do that today, we wouldn’t own this home, since most secondary mortgages are not offered any more. They want the money down, so they can ensure you have equity in the home first before they take the risk on you.

It’s smart on the bank’s part, but it’s definitely going to lower the pool of people able to buy a home in the future. Now when you buy a home, you really HAVE to have that money down, which is not necessarily a bad thing, since you do get that instant equity.

It came to my attention that every time we go into our bank, which we use for everything from our mortgage loan and credit cards, to checking and savings accounts, they offer to refinance our home. is it good or bad to do this?

They always look at the computer screen and go “oh, I see that you are eligible for a refinance”. Every time. This is clearly something banks are chomping at the bit to do for you. Have you ever paused to wonder why, when they are putting money in your pocket by doing this?

Well the answer is simple. They are getting a lot more interest out of you if they can keep on extending the life of your loan. Of course a bank is going to want to get you into a new 30 year loan term when you’re only five years in to your loan.

They get 30 MORE years of interest from you. And there is little doubt that they incentivize their mortgage brokers to sign the deals as much as they can. The problem is, refinancing really is not ideal for everyone.

You should really consider how long you see yourself living in this home before you do it. What if you move in two years, then you end up owing the bank more than you would have if you wouldn’t have refinanced?

To me, the peace of mind of knowing that I have paid down the principle balance on my home is worth more than any amount of money they can put back in my pocket. And I’ve resolved to never refinance again.

There are too many fees they charge for refinancing, and then you are locked into another 30 year loan, right back where you started. When we put a deck on our house, we will likely save up half, and get a line of credit based off of the equity in our home instead of refinancing.

There is an ongoing fear that we are nearing a housing market double dip, although the odds of a double dip recession have been going down further and further as time goes on. Not that it’s all great news for the economy front, since the housing market has almost no good news at all, but at least the overall recession is not going to double dip according to most economists.

Just watching my house value numbers on the website Zillow, who I’ve signed up to receive updates from on my home’s value, I can see that home prices are still on the down trend. I may not like everything Zillow has to say, but at least it keeps me somewhat abreast of what is happening to the home values in my immediate surrounding neighborhood.

My home’s price is actually near a bottom according to Zillow. It’s actually LOWER than it was when the housing market first bit the dust back in 2008, if you can believe that. My mortgage has become an even bigger burden under the weight of this knowledge, but no matter, I know it will lift.

Right now, home prices are actually still on the down trend. They were at a stand still, but now they are on the decline again. More and more former home owners and potential home owners are deciding that owning a home is not right for them.

More and more people are just deciding to rent, and they are deciding to do it on a fairly long term basis. The last crisis really scared a lot of people away from home buying. That’s a sad fact, especially when these people could have gotten killer deals on something that would be worth a lot more ten and twenty years down the road as long as they stuck by it.

I still believe that home ownership has many benefits. But I also believe that home ownership is not for everyone. If you cannot have an emergency fund set up for those unexpected expenses, or you live very stringently from paycheck to paycheck, then the unexpected parts of home ownership may take you out of that pool of candidates that it makes sense for.

What do I love about owning a home? I love that I can decorate it any way I want without worrying how hard it’s going to be to clean it back up to get the security deposit back. I love not worrying about talking too loud or having the music or TV up too loud. I love the fact that I actually am working toward owning something.

To me, a home is a house, not an apartment. And I’ve lived in enough apartments to tell you that none of them ever felt quite like home. I never wanted to really decorate them well or have nice furniture because I knew it wasn’t “permanent”.

For me, having a home gives me a sense of security and permanence. Now, I will feel much better when we get our secondary mortgage paid off!

A lot of people have been saying, with the downfall of the housing market (temporary, not permanent, mind you), that owning a home has become more of a liability than an asset. What they don’t consider is that it is still an investment. The definition of an investment is something that you buy, and over time that asset aquires value beyond what you initially invested in it.

A home is not something you should buy and expect to get a return on your money in even a few years. With home shows showing how people make thousands of dollars, and the flipping pheonomenon catching fire, it seems like a lot of people have lost the perspective you need to have on home ownership.

Home ownership is a deeply personal decision. While it is true that home ownership is often a lot more expensive than renting, because you are responsible if anything breaks or needs maintenance, you still are paying on something that you OWN.

You are not making some landlord rich. Your landlord knows that real estate can make you rich, he’s no dummy, and he’s making money off of you every month. However, this is not to say that home ownership is for everybody.

It totally depends on your personal situation. Are you in a position where you can have a few thousand dollars saved at any given time so that you may fix things when they go wrong, or have the extra cushion when money is a little tight to make the mortgage payment.

Home ownership definitely requires a little discipline, and if you are accustomed to spending money on things, then it may not be the right choice for you. Comments like the one that the Bank of America CEO made recently about how owning a home does not mean you own an asset just make me mad.

It’s downright misleading. But it’s also downright misleading to make people think that home ownership is something everyone should do. It is not something that is the right financial choice for everyone, as evidenced by our massive overstock in home inventory right now and that huge rate of default.

When taken out of context, the Bofa CEO’s comments may have seemed pointed, but what he was really saying is that you shouldn’t always think of a home as an investment, but rather as a great place to live. The problem now is that everyone expects it to be an instant asset, and it often is more of a liability until you get some of the principle paid down and begin to build equity.

I’m a really big fan of HGTV, as I believe I’ve mentioned before. I watch it a lot, and I record a lot of their shows to watch while I’m eating lunch on the weekends. My husband and I both really enjoy watching a couple of their shows, including “My House is Worth What” and “House Hunters”.

A lot of their shows, which I also occasionally take in, have to do with flipping homes, improving homes for sale, and fixing up homes that you already live in with equity from appraisals (My House is Worth What often showcases homes that the owners want to know the value because they want to improve it more with their equity credit).

While I really love these shows and actually find them addictive, I think that often times they showcase the reasons behind the recession and how so many Americans found themselves in hot water.

Americans have fallen into the trap of “over improving” their homes, and of purchasing homes in the first place that they really had no business buying considering their income and their other expenses.

However, just a few short years ago, buying homes was made extremely easy by lax lending and by offers of zero downpayment.

Mortgage lenders were hungry for profits, and worse – they were offering their mortgage brokers and sales people huge bonuses and incentives to offer mortgages to people who they really knew probably could not afford the homes they were putting them in.

It seems that we have gotten into this culture of bigger is better. With all of the mini mansions going up, and people thinking they needed so many square feet for families that would have been fine in smaller homes, it was easy to get awe struck and buy something that you didn’t realize you couldn’t afford.

Many people realized it, but they realized it when it was too late. Watching these home shows, I have to wonder, yeah, your home may have the equity in it, but why not just pay the mortgage down instead of keeping it extended over and over? Why not just save up the money?

After all, when you borrow against your mortgage, you are really borrowing against yourself. What if your home loses it’s value and you end up “upside down”?

There are so many things to consider in your mortgage and your desires for improving your home. The key is not to over improve if you are thinking of getting an investment out of it. You should probably go into home improvement with the expectation that it is going to satisfy your needs and make your life easier, instead of haivng it be a major investment for the future.