The Ever More Graspable, and Risky, American Dream

The New York Times > Business: "'We will not be going to any movies or eating out at restaurants,' said Mr. Daneshi, a self-employed wedding photographer who came here from Iran in 1988. 'But in two years, the house will be worth a lot more and we will have something to show for it.'

But now, with the Federal Reserve expected to embark on a series of interest rate increases starting with its meeting on June 30, some experts worry that recent first-time buyers could find easy home ownership a lot harder on their wallets, possibly causing housing prices to wobble in some high-price markets. Most analysts agree that there is no nationwide housing bubble because housing prices have climbed only slowly in the Midwest and the South, even as they have soared on the East and West Coasts. Still, if rising interest rates cause housing prices to drop, even slightly, industry officials warn that some new buyers will have no equity in their homes and could choose to walk away from their loans if they run into trouble with payments.

The volume of subprime mortgages, primarily for people with poor credit ratings, has risen sharply, as indicated by securities backed by the mortgages. Such securities soared to a total of $195 billion in 2003 from $17 billion in 1995, according to Inside Mortgage Finance, an industry research firm in Bethesda, Md. Securities backed by unconventional mortgages, like no-money-down loans, climbed to nearly $80 billion from less than $1 billion. Experts say these novel techniques have democratized the access to credit and home ownership. The overall rate of ownership climbed to nearly 69 percent in 2003 from 64 percent in 1994. Home ownership among blacks rose to 48 percent from 42.2 percent. Among Hispanics, it was up to 46.4 percent from 41.1 percent.

In the New York area, the median home price - half were less expensive, half more expensive - rose 88 percent from 1998 to 2003, to $353,000 from $188,100; in Miami, prices jumped to $226,800 from $121,500. The median home price for the Washington area increased to $286,200 from $172,100. In San Bernardino County, where some commute as long as two hours a day to jobs in Los Angeles and elsewhere, a five-bedroom tract house that sold for $378,000 a year ago is on the market again for $609,000."