Gimme Shelter

Almost from the day they were married eleven years ago, Chuck Dribin and his wife Alice Eysenbach began salting away savings toward a home in suburban Chicago. "But something always seemed to happen," recalls Dribin, 38, a high school speech teacher. "Every time we saved $5,000, interest rates jumped and we needed $10,000." Even with a solidly middle-class income (now $40,000 between them), Dribin and Eysenbach, 39, a part-time teacher and actor, wondered whether they would ever be able to unlock the door to home ownership.

They finally managed to do so by lowering their expectations, accepting family help and taking out a riskier form of mortgage. With a $15,000 contribution from their parents, the couple scraped together about $25,000 for the down payment on a $117,500 three-bedroom home that they bought last September in Skokie. "The house has no garage and no driveway," says Dribin. "The bathroom's miniature, and the whole place is smaller than our apartment." To finance the deal, the family took out a 7.75% adjustable-rate mortgage that can jump as much as 2 percentage points a year if interest rates move up rapidly. "It's a little chancy," Eysenbach concedes, "but as the kids get older, I'll be able to work and earn more. As it is, this was the only way we could hope to buy a house."

The Illinois couple is among the legion of determined Americans who are struggling against all odds to buy their first home. But now, as the spring house-hunting season approaches, some help may be on the way. Everyone from builders to bankers to President Bush, who has called the home-buying crunch "among the most important and challenging issues in America today," seems eager to help first-timers catch up with the runaway cost of housing. When Jack Kemp was sworn in this month as Secretary of Housing and Urban Development, the former Congressman promised grandly, if vaguely, to "help recapture the American dream for first-time home buyers."

That dream has been steadily receding for many Americans, primarily young people. Since 1979, periods of high interest rates and fast-rising prices in many parts of the U.S. have caused the rate of home ownership in the 25-29 age group to drop from 44% to 36%. For those in their 30s, the rate fell from 61% to 53%. The increase in home prices has far outpaced the ability of young people to save the necessary down payment. A prime reason is the price of rents, which have risen even faster than home prices in many cities. Now interest rates are rising as a barrier once again. The average 30-year mortgage rate climbed to 10.56% last week, vs. 9.84% a year ago, as the Federal Reserve tightened up credit in response to renewed signs of inflation.

While longtime homeowners are sitting on an ever growing nest egg, which they can tap for their next house or other purchases, first-time buyers have few assets and too little salary to catch up. In a particularly gloomy report, the National Association of Realtors found last fall that the average potential first-time buyer had only 77% of the income needed to qualify for the mortgage on a starter home. Current homeowners, by contrast, had 112% of the income required for a mortgage on a median-priced home. Said Ira Gribin, president of the Realtors association: "The first-time home buyer is virtually priced out of the market in many parts of the U.S."