It’s still too early to tell for certain, but America’s housing boom may be showing signs of slowing down significantly. One indication is that U.S. consumers have been acquiring less debt in recent years and seem to be more nervous about acquiring more debt in the near future, judging by the results of a recent Experian-Gallup Poll.

That debt doesn’t include first mortgage debt, which is unavoidable and has continued to increase significantly over the last few years due to rising prices. Some of those price rises have been dramatic, and even startling, such as a doubling of the median price of homes in Los Angeles County in the four-year period between 2002 and 2006. For the first time in history, the median price in LA County rose above the half million dollar mark, hitting $506,000. Although the rises in most areas of the United States have been far less spectacular, the fact remains that most home buyers are paying significantly more for their mortgages than they would have just a few years ago.

The poll, called Experian-Gallup Personal Credit Index survey, indicated that more than 70% of American consumers surveyed thought the country’s housing bubble is due to burst within the next year. In an interesting twist, however, more than two-thirds of those same consumers (68%) didn’t think the bubble would burst in their own area during that time. Those conflicting survey results are an indication that most Americans are also conflicted about what the future may hold for the country’s economy over the next twelve months.

Another sign that American consumers are nervous about an impending housing price collapse could be found in the fact that only 2% of respondents told the Experian-Gallup poll that they planned to tap into the increased value of their homes through home equity loans or lines of credit during the next six months. Another very small percentage (only 2%) said they were planning to refinance their homes during that same time period.

Those figures would seem to indicate that a large number of American homeowners don’t believe that now is the time to take on any more debt. But does that mean the overall economy is slowing down and that the home price boom are over? Not necessarily, but it would seem to indicate that American consumer confidence has waned significantly. Either way, it’s a safe bet that economists will be keeping a close eye on the market for trends.

Copyright © 2006 Jeanette J. Fisher

Jeanette Fisher teaches beginning real estate investors how to find, finance, fix, and sell houses for top dollar. Find out how to make more money using interior design AND marketing psychology strategies. Free ebook, The Truth about Making Money Flipping Houses. http://www.doghousetodollhousefordollars.com

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Home Equity
When you have a mortgage on your home but the value of the property exceeds the amount owed, the difference between the outstanding debt and the property’s value is referred as Home Equity. This remaining property value can be used to guarantee another loan: A Home Equity Loan or Line of Credit.

Home Equity Loans are secured loans with a fixed or variable interest rate, a fixed loan amount and a fixed, though negotiable, repayment program. A home equity loan is just like any other loan, only it is secured with the equity you’ve built on your home and thus carries fewer interests.

A Home Equity Line of Credit on the other hand, comes only with a variable interest rate, there is no fixed loan amount, though there is a credit maximum and the repayment is extremely flexible. The home equity line of credit is also secured on the home equity.

Interest Rate
Since both are secured, the interest rate charged is considerably low. Only home equity loans with a fixed rate can have a slightly higher interest. Home equity loans with a variable rate usually carry a somewhat lower interest rate. Home equity lines of credit, on the other hand, carry only a variable interest rate that is usually similar to the home equity loan fixed interest rate.

Loan amount
Home equity loans come with a fixed loan amount that can equal or be a bit higher than the home equity value. Home equity lines of credit are somewhat different: There is no loan amount, a credit maximum amount is set and you can borrow as much money as you need up to that amount. For example: If a $50.000 limit is set you could borrow $10.000 and a month later borrow $20.000 more. And so on till you reach the credit maximum.

Repayment
Home equity loans come with a fixed repayment schedule which has to be followed strictly with some exceptions. Though, there are in some cases grace periods and waivers you could apply for, if you request a home equity loan you will probably have rigid installments or at least a fixed amount plus a variable amount depending on interest rate variations.

Home Equity Lines of Credit let you repay the amount you owe they way you want to do it. You have an open line of credit where you can borrow and repay as much as you want as long as you don’t exceed the credit limit. Moreover, as opposed to home equity loans, lines of credit do not require to be renewed as you can always borrow more as long as there is credit left. If your home equity grows either by an increase on your property’s value or because of a reduction on your mortgage debt, you can ask for your credit maximum to be recalculated.

Mary Wise, a professional consultant with twenty years in the financial field, helps people in the process of securing personal loans, mortgage, refinance or consolidation loans and preventing consumers from falling into the hands of fraudulent lenders.
You can visit her site and get aid for Home Equity regardless of your credit. If the link doesn’t work, just copy badcreditloanservices.com and paste it in your browser’s address bar.

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Is your family’s financial well-being and net worth relying too much on the value of your house? Are you feeling wealthier because the value of your home has increased significantly in the last few years or decade? Have you taken out a home equity loan recently? If your home’s value declined by 20% or 30%, would it wipe out your equity and have you scrambling to find enough just to keep your home?

Consider the following scenario. If your house is valued at $300,000.00, and you currently have about $50,000 equity, and if the value dropped by 17%, it would entirely wipe out your equity. If, over the course of a year or two, the value dropped by 30 or 40%, (placing the value between $210,000 and $180,000) you could expect some visits from the loan company requiring you to infuse your loan account with money because the value of the house no longer covers the amount of your loan!

How much debt do you have? At the end of the first quarter of 2005, the total interest-bearing debts in the U.S. had piled up to $37.3 TRILLION! Real estate is now the largest single debt category at $10.7 trillion.

If you have been using your home’s equity to support your family’s well-being, you are not alone. Million’s of Americans are in the same situations, pushing the entire housing market onto a dangerous cliff that could crumble the entire economy. Millions have used their home equity line of credit to buy RV’s, boats, furniture, or just everyday things, either because they lost some income, needed to keep up with the Joneses or just thought they deserved it because of their new found wealth. Others are using extra money to buy a second home, or a vacation home or moving into a house twice the size and value they (or the bank) would normally consider. Plus, U.S. households have the biggest household budget deficit in history at $531 billion. We are spending $531 billion more then we earn each year!

Things to do now:

Consider how much your family values your house as a home. If your house is a lot more than an investment, don’t sell, but you consider paying off more of your loan to create more equity value in your home.

Sell your vacation property, second homes, and investment property. Especially if the property is loaded with debt. You don’t want the bank seizing your lake home, and then aggressively pursuing you because there was no value left in the lake home to cover the $100,000 still owed.

Conduct a family meeting to consider if you are living above your means. And consider the size and amount of amenities of your house as a factor of living within your means. It often times becomes difficult to cut back, because we want our neighbors, friends and family to believe we are financially well, and if get rid of the new vehicles, the satellite TV, the flat screen television, the kids’ cell phones, and all our other money devouring gadgets, our appearance may shrink in other people’s views. But if you are spending less, accumulating savings, and are growing your home’s equity and your family’s net worth, you are increasing your financial well-being and not just the appearance of being well-off.

Cut back on your expenses and start accumulating a savings account. Pay a little bit extra on every house payment. Set up an emergency fund. Start saving more and spending less! Start living within your means, accumulate savings, and protect your family from the real estate price bust that is going to occur. Don’t be fooled. Be ready.

If you need help learning how to save more and spend less, and how you can begin saving your way to success, please visit http://www.savingyourwaytosuccess.com.

Justin P. Ertelt is the author of Saving Your Way to Success, and owner of http://www.savingyourwaytosuccess.com, helping others achieve financial success. Justin can be reached at justin@savingyourwaytosuccess.com. To learn more visit http://www.savingyourwaytosuccess.com.

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