What - A Home is not an ATM?

Now you tell me.

``People were using their home equity as really an ATM machine,'' [Eli] Broad said, [co- founder of KB Home] referring to an automated teller machine. ``They were spending more money than they were earning by taking equity out of their home. That couldn't go on indefinitely. We're now paying a price for that.''

Some of the prices to be paid are lowered house values, increased foreclosures, reduced savings, increased debt, and now reduced economic activity.

In the article where the above quote is from, Bloomberg news says KB Homes expects another 20% housing price decline. That's correct - he expects another 20% decline. That means many more homes underwater. Here is an older chart from Calculated Risk showing the potential homes underwater -


That would indicate the number of homeowners (really homedebtors) will likely be between 13 to 20 million. These numbers are from January - they could easily be revised upward. Now lets take a look at the article -

Eli Broad ... said he expects home prices to drop another 20 percent.

``I don't think we're anywhere near a bottom in housing,'' Broad told Bloomberg TV at the Milken Institute Conference in Beverly Hills, California. ``We're going to have a big inventory of unsold, unoccupied homes that's going to take three or four years to clear out.''

... The number of mortgage borrowers behind on their monthly payments rose to a 22-year high in December, according to the Washington-based Mortgage Bankers Association. The trade group estimated that 16 percent fewer mortgages will be issued this year compared with 2007.

This also illustrates that there is alot for financial pain to come. Another 20% of declines puts alot of people underwater. That would put approximately 1 out of every 6 homes in the U.S. underwater. A very dire forecast.