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Asset #2: Residential Real Estate

The second asset that keeps Americans mired in poverty is residential real estate, specifically homeownership in neighborhoods whose property values decline faster than the homeowner's ability to pay expenses. Home ownership has long been advertised as the ultimate safe asset. "Your home is your wealth," realtors say. "Buy early and watch it appreciate." But property appreciation is not automatic - it is contingent on local economic conditions, demographic trends, and future employment prospects.

Even those families with stable jobs saw housing bubbles pop, property values erode, and mortgage payments become unmanageable. In Detroit and Cleveland, neighborhoods that once housed middle-class families now host boarded-up houses that sell for a few thousand dollars, or in some cases even less than a thousand. Many homeowners owe more on their mortgage than the house is worth - what economists call negative equity or being underwater.

If you have $200,000 in debt on a property now worth $120,000, you are effectively poorer than when you bought it. Worse yet, foreclosure on an underwater mortgage not only wipes out any hope of recouping equity, it also devastates personal credit for years. Low-income families who believed home ownership was the guarantee of stability found instead that in downturns they could neither afford rising property taxes nor keep their homes.

The widely cited subprime crisis of 2007 to 2008 was just the most spectacular example in recent memory. Those homes, assets only on paper, become liabilities - unpaid taxes, deteriorating structures, and stains on credit reports. Worse still, homeowners who stay in declining neighborhoods end up paying for the upkeep through higher insurance premiums and rising utility costs, often without any realistic expectation of a future payoff.