In its "Where America Stands" series, CBS News is looking at a broad spectrum of issues facing this country in the new decade.
CBS News correspondent Ben Tracy report the American Dream is now a nightmare for many of the 75 million Americans who own a home.
The housing report card is ugly. In the past two years, the housing market has lost an estimated $4.9 trillion dollars, as 59 million homes have declined in value.
Nearly 1 in 4 homeowners -- 10.7 million households nationwide -- are underwater on their mortgages. They owe more than their home is now worth.
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The housing market is so bad in California, that a bank demolished 16 nearly completed homes - because it was cheaper to knock them down, than to finish them.
Home building across the country is almost non-existent. In 2005, 2 million housing units were built in this country. Last year, that number dropped to nearly a quarter of that.
That's left former boom towns like Las Vegas with a lot of roads to nowhere, as builders ran out of money and buyers for the homes they once planned to build here.
Then, there's foreclosure. Nationwide, nearly 6 million households have been taken back by the bank in just the past three years - pushing down home values, and leaving some neighborhoods looking like warzones.
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People are still losing their homes, preventing a housing market recovery.
"Disaster is not too strong a word and crisis is not too strong a word," said Michelle Johnson of Consumer Credit Counseling Services.
All of those risky loans that banks gave to homeowners are still wreaking havoc.
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Jessica and Aaron Jenkins got in way over their heads when they bought their 5-bedroom dream home in Corona, California for over $700,000. They paid $2,800 dollars a month on their interest-only loan -- never touching the principal.
"It's cheaper than a 30-year fixed," Aaron said. "We can afford it so that's why we did it."
But this year, their loan would reset, adding $1,100 dollars to their monthly payment. In the next two years, nearly 361,000 loans will reset nationwide - increasing mortgage payments by an average of $1,000 per month.
That's why a record 3 million more foreclosures are expected in 2010.
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"Today, the number one cause of foreclosure is unemployment," said Pete Flint of Trulia.com.
Fifteen million Americans are now out of work.
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Twenty-seven-year old C.J. Mueller bought a house in Phoenix for $210,000. But then he lost his job. He tried to get his bank to modify his loan. Instead, he just got his foreclosure notice.
"It came to a point where I didn't really care," he said.
President Obama's mortgage modification program is supposed to permanently modify 3-4 million loans by 2012. So far, they've fixed 66,000. They want banks to speed up the process.
"Unfortunately it's been lip service and little action," Flint said. "Until the administration gets tough on lenders, we're still going to see huge amounts of foreclosures."
Banks say they are simply overwhelmed and some people are beyond help.
"I gave up. I don't care anymore," Mueller said. "Take the house."
The solution for many is to just walk away. Some experts say it may be better to cut your losses and ruin your credit in the short term, than to pour more money back into a bad investment.
"I paid $210,000 for the house. The house is worth $90,000," Mueller said. "Would you keep the house?"
To keep homeowners from walking away, credit counselor Michelle Johnson said banks should permanently convert all those risky loans into 30-year fixed mortgages for anyone who can afford the payments. "It needs to be a long-term fix. It can't be a band aid which is what many of these modification programs seem to be."
Some mortgage firms and a few banks are going further -- actually reducing the principle on loans.
"To date, it's allowed us to save about 15 percent more homes than if we had not used it," said William Erbey, CEO of Ocwen Financial Corporation.
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However, the housing market also needs buyers to start moving in. Jontue and Diana Junior just bought a 4-bedroom home in Las Vegas - thanks to the $8,000 federal tax credit for first time homebuyers.
"We knew that once we got into the house -- with $8,000 -- if we managed our money right, we shouldn't lose the house," Jontue said.
That incentive has juiced the housing market. Home sales are up nearly five percent in the past year. The tax credit expires in April, and experts say shell shocked banks need to start lending again so the market has more buyers.
"Until we have that, we really can't have a full fledged housing market recovery," said Rich Sharga, VP of RealtyTrac.
Yet homebuyers are much more focused on cost -- heeding the warning to never spend more than 31 percent of pre-tax pay on housing. For a family making $75,000 a year, than means not spending more than $1,900 per month.
Builders are responding with smaller and more affordable homes. Pulte homes scrapped their 3-story, 3,300-square-foot home. Now, they sell a 2-story, 2,000-square-foot home - chopping the price in half from $400,000 to $200,000.
"The larger homes and the price points and the square footages we were selling at just weren't selling like they used to," said Scott Wright of Pulte Homes.
In Phoenix, Philip Beere is buying up foreclosed homes, and giving them a major facelift and energy savings upgrade to make them more affordable. In one home, he lowered the annual utility bill from $2,000 to just $400.
As for the Jenkins family, they'll keep their home thanks to a loan modification, but their investment will likely never may off.
"What I've learned from this is that you don't need it," Jessica Jenkins said. "It wasn't worth it."
That's a feeling shared by millions of Americans now living with regret.
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