There's never been a better time to buy a home in America. However, since the economy is tanked, there is rampant unemployment, lenders (now bailed out with your tax dollars) are not likely to take a risk on you, the consumer. Think about it, would you risk lending money to someone who just handed their's over to some sleazy, and predatory and unregulated banker? This was one cause of the Occupy Wallstreet movement, which lost steam even as Wallstreet, thanks to the boost, surged ahead of most everyone else.
Lenders know that lower income people are the ones most likely to lose jobs, be a paycheck away from disaster, do not have much accumulated savings. For those that do, they need it to survive the hard and uncertain times. Middle income people, now defined as those earning less than $250,000 per year, are somewhat more likely to qualify for housing loans, but not if they already own homes that are financially "under water."
The term has less to do with rising seas, Hurricane Sandy, and more frequent floods, (which is a whole other related to hard times issue). Under water refers to those mortgages that millions of people have because they purchased homes that were built or purchased during the housing bubble. The bubble was a gravity defying upward trend in all housing prices. As the bubble rose, lenders became less risk averse and traded, swapped, and re-labeled loans granting credit to many who could ill afford the inevitable drop in real estate prices. Mortgages that are under water, are those wherein a home owner has a loan much higher in cost that is owed, than he or she could sell the hard asset property for in the present, crashed market.
What goes up, must come down. This is something that tennis ball chomping labradors have no trouble comprehending, but it is much harder for human beings, especially those influenced by a rising market. Emotion takes over and people very seldom can admit to the reality that rising prices should not increase forevermore. In fact, lenders and brokers, historically have used the sales pitch that "real estate" only increases in price, so home ownership is always a good investment, except when it's not.
Stratification in the market does have some silver lining, however. For first time buyers, who are not already committed to an overpriced mortgage, they can find excellent deals. Also, those rich enough to have the flexibility to exchange up, sell one and buy another in this buyer's market, can prosper. That is, they have to sell low, but if they buy a better house also priced low, they win increased equity. These deals are complex, however, and extra costs for accountants and tax breaks are prohibitive to less affluent buyers.
The extreme ends of low and high income can find some rare advantages, and as usual, the middle class, who pays for funding the under-paid, and the over paid, supplements both ends. Can the middle class then ever get a break? Not at this rate, or with this system. However, if the Obama administration is able to convince tax payers to a return to the tax code during the Clinton administration, the rich (earning $250,000 or more per year) will have to pay almost as much of a percentage of their income as wage earners do.