Thursday, December 31, 2009

A Higher Bubble

clipped from

Nor have families been able to keep borrowing against the value of their homes, which seemed for years to appreciate with no end in sight. Second mortgages have been shrinking along with real estate values. Money made available by banks to homeowners through home-equity lines of credit has fallen by 25 percent, to $538 billion, since the end of 2007, according to federal data.

About a decade ago, financial planners began to tout the benefits of 529 plans, which invest families’ savings in the stock and bond markets with the aim of keeping pace with the growth in college expenses. Even before the crisis, these plans couldn’t keep up. Then, in 2008, the average 529 plan lost 20 percent of its value.

So you’ve got an industry with skyrocketing prices, fueled by easy credit taken out by those who didn’t fully realize how much it was costing them. Now the credit’s harder to get, and people are much more aware of the downside of debt anyway. What’s next?