JWM, you realize you represent the exception and not the rule, correct?
Most Americans are in “dis-saving” mode (to use the old Econ101 phrase). The majority most likely to feel the impact are those homeowners who not only purchased an over-valued home, but then proceeded to pile debt on top of that, in the form of 2nd/3rd mortgages, home equity lines and credit cards. It is not even a matter of being in over one’s head, people have added so much debt (and at increasingly egregious rates), it exceeds any rational ability to pay it off.
I used a hypothetical example of a Temecula homeowner previously, but actually do know several people in that neck of the woods who fall into this category.
In one case, the family purchased a $635k house (they make a combined $92k in salary), and then added two more HELOCs totaling $194k. The HELOCs were for home upgrades (pool, landscaping, new kitchen and bath), as well as “toys” (new GMC Denali for the wife and a boat). Their 1st was a 2/28 with a teaser rate (1.5% for the first two years) and then prime + following. It resets this month, and they are already stretched due to debt service costs, gas (they both commute to SD each day) and necessities. The house is on the market for $725k (down from $760k), with no offers to date. Ugly? You bet.
But my sense is that in communities like Temecula, Murrieta, Corona, Moreno Valley, etc, this is the norm and not the exception. And the vast majority of families out there are closer to the US median per capita rate ($43k per household earner) than the six figures + per year needed to just service this kind of debt.
