It’s official: Average U.S. home prices have now “achieved” quite a milestone. They’re right back down to where they were in 2003.

In other words, eight years and a ton of turbulence later, we’re back where we started on home prices. Talk about a nothing-doing return on investment!

But for many homebuyers it’s far worse than an investment with zero return … what’s happened is hardly the same thing as keeping money in a savings account in the bank at a puny 0.5% annual interest. Because as we all know, over this period home prices peaked, then plummeted.

Unfortunately, those who chose to jump in during the midst of the homebuying frenzy find themselves underwater in a big way with those mortgages.

This negative equity phenomenon is a huge issue, according to industry experts. In fact, business intelligence and analytics company CoreLogic is reporting that nearly one in four mortgages is now in a negative equity situation.

Mark Fleming, CoreLogic’s chief economist, goes even further. “It’s not just negative equity that we … focus on, but it’s also insufficient equity. All the people who have those primary loans that are somewhere between 80% and 100% LTV [loan-to-value] also basically don’t have access to the credit markets.”

The vast majority of homeowners who are underwater with their mortgages are continuing to pay on them. So far, so good. But the problem is that most of these owners are really underwater – to the tune of 30% or more based on the latest home value appraisals.

Here’s the stark truth: These owners will be stuck with their homes for years and years … and unable to sell them unless they’re willing to take a big loss. Given the precarious state of family finances in many households, that’s an unrealistic option at best.

It’s also a recipe for housing industry stagnation as far as the eye can see.

What’s the end-game in all of this? Most likely, negative equity is going to get worse before it gets better, as home prices will continue to stagnate – or even fall further in value in some markets.

An interesting parallel to this is the effect the residential real estate doldrums have on consumer psychographics. As people hear never-ending negative news stories and continue to view real estate as a problematic investment, these impressions are only magnified.

At some point, we get to a place where it will take years for those consumer attitudes to change. 2011’s third quarter average home prices reportedly dropped ~4% compared to the same period in 2010, thus continuing the ugly cycle of consumer retrenchment and lower home values. So much for the “hyped and hoped-for” housing recovery.

And what about consumers who may be thinking about becoming homeowners for the first time? Clearly, they’re not fools. Most will wait until the market has truly bottomed out before they jump in.

… Which leads us to this revelation: Not only are housing prices right back where they were in 2003, home ownership rates in the United States are now down to their lowest percentage level since before the U.S. Census Bureau began tracking this statistic back in 1963.

That is correct. After having reached a high of ~70% of the adult U.S. population in 2005, industry watchers like John Burns Real Estate Consulting are predicting that home ownership rates will fall to ~62% by 2015.

So much for attaining the “ownership society” preached by politicians throughout the 1990s and 2000s. But hey, at least a lot of people got a bunch of fee-based income from all the flurry of the real estate transactions …

Yep. “Paper entrepreneurship” at its finest. Too bad it’s all so ephemeral.