The House That Debt Built

Many people view their houses as money, either in terms of the value when it's sold or the foundation for a home equity loan. That's not good right now.

Sales of existing single-family homes fell for the sixth straight month in September, down 1.9 percent.

Other housing statistics are just as bleak. The current sales rate is the slowest since January 2004. The median sale price took its largest drop in nearly four decades. And many don't have much to sell. Americans own less of their homes than ever before.

Americans have been using their homes as an ATM, cashing out more than $500 billion in home equity from 2001 to 2005 to cover expenses like health costs, student debt, repairs and credit cards. That's left many middle class homeowners house poor.

In 1973, the average homeowner's equity was 68 percent. That's dropped to 55 percent today. One reason is the explosion of so-called exotic loans that require little or no money down.

Interest rates have climbed and middle class families with first and second mortgages with adjustable rates are finding that those loans are taking a bigger piece of their paycheck.

Ann Estes, of Clearpoint Financial says, "We're seeing more clients every day, that very sadly, they've gotten into such a debt hole that it is very difficult to dig out of."

Those adjustable rate mortgages are now coming due.

Bruce Gottschall, with Housing Services of Chicago says, "We anticipate there's going to be more and more people. The adjusting ARMs are getting greater and greater. We've heard over the next 18 months or so up to a trillion dollars of ARMs will be resetting."

New census bureau figures show that homeowners across the country are spending about half of their salaries on home expenses.

There's a reason we're hearing so much about these exotic loans, like interest-only. In 2000 they made up only two percent of all loans. In 2006, they made up about a third of homeowner loans.

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