Homeowners: American Dream or Nightmare?

image5240895x.jpg
Scott Shumaker and his fianc
CBS

Scott Shumaker and his fiancée are right at home in the kitchen - even if it's one they're renting.

The couple ignored their parents' advice and have been renting a luxury condo in Los Angeles for more than $3,000 per month, reports CBS News correspondent Ben Tracy.

"They urged me the last couple of years, 'buy a house, buy a house, you're wasting your money, it will be such a good investment.' I'm so glad I didn't listen to them," Scott Shumaker said.

That's because more than one in four homeowners is now underwater - owing more than their house is worth. As home values continue to drop and adjustable rate mortgages reset, an astonishing half of all homeowners in this country are predicted to be underwater by 2011.

"In the past, renters were considered somehow too immoral, too incompetent, and too poor to own," said Nic Retsinas of the Harvard Joint Center for Housing Studies. "It's as if they were demonized. But now as it turns out, they weren't so stupid after all."

Yet ever since World War II owning a home has been the American dream, encouraged by federal tax deductions.

By 2005, 70 percent of Americans owned their own homes, a record high. But thanks to foreclosures and tighter lending practices, that's already dropped to 67 percent and expected to fall to 63.5 percent by 2020 - the lowest level since 1985.

And for those still looking to buy, don't expect a big return on your investment. In fact, historically home appreciation is just 1 percent above inflation - further evidence that our homes are no longer ATMs but rather places to live and raise a family.

"I think we need to get away from the idea that owning a home anywhere will generate profits for us down the road," said Arthur Nelson of the University of Utah Metropolitan Research Center.

Scott Shumaker decided to take the money he would have spent on a down payment and use it to jumpstart his new Internet business. For him, rent is not a four letter word.

"I have a lifestyle and a place to live that I really enjoy," he said. "It's hard to put a price on that."

The American dream - redefined.