Stocks fell after the release of a Standard & Poor's report on Tuesday showing the worst decline in prices for single family homes in the US in more than 13 years. The drop in housing values worries investors who fear falling prices could seep into the broader US economy and crimp consumer spending. VOA's Mil Arcega reports.
U.S. stock markets tumbled Tuesday over worries that the drop in housing prices could hurt consumer confidence. Consumer spending accounts for two-thirds of all U.S. economic activity, and with house prices showing the worst depreciation in 13 years, many homeowners are feeling insecure about the future.
One couple Chris and Amy Wood says it hasn’t gone well. "We call it the American nightmare, that's what we call it."
Instead of earning equity on their investment, Chris and Amy Wood say they now owe more than their home is worth. "My negative equity is between $15,000 - $20,000. Negative, not positive. I can't do anything with this house unless I can spend between 15 and 20 grand, cash, to sell it."
Mark and Lisa Tingley are in similar straits. They purchased their dream home six years ago but rising interest rates have raised their monthly payments by more than 20 percent. "We've lived off of peanut butter and jelly just to try and make the mortgage payment. Luckily we have managed to hang on as a lot of our neighbors have not been able to do that."
Of the 406 families who live in this North Carolina community, 77 have already lost their homes. Reporter Binya Applebaum with the Charlotte Observer says many homeowners were talked into taking out subprime loans, offered by some lenders to people with poor credit or very little cash. "These were homes you could buy for one dollar down. You could take a dollar bill out of your pocket and become a home owner."
The Conference Board, which rates the consumer confidence index, says the recent turmoil in financial markets, coupled with higher gasoline prices may be contributing to consumer's heightened sense of uncertainty. The one bright note is the job market, which has grown steadily despite slower growth in February.