[An earlier version of this piece appeared in Forbes.com.] Falling house prices tend to be bad for incumbent politicians during reelections. Take, for example, George H. W. Bush. Vice President George H. W. Bush was elected president in a landslide in 1988. The U.S. housing market had been booming for years before that election. The Northeast
John, you state "Home equity fell much more for homeowners with mortgages, of course, because the amount you owe on your mortgage doesn't fall when your house value falls. A small percentage fall in house prices can cause a huge percentage fall in your home equity and family wealth. Recent home buyers with small down payments can quickly go “underwater” and owe more on their houses than their houses are worth."
Makes sense. So would you also say that if interest rates stay at or above the levels they are at now, and a market recovery seems distant, paying cash (as opposed to a mortgage) is better path for more people if they can afford it?
Would you say that if interest rates stay at or above the levels they are at now, and a market recovery seems distant, paying cash (as opposed to a mortgage) is better path for more people if they can afford it? As a way to avoid the potential issues you outline above (i.e., owing more than home is worth on the loan?
If that money was earning a lot less than the mortgage rate, then that buyer would probably be better off selling the investments and using the money to pay cash for the house.
John, you state "Home equity fell much more for homeowners with mortgages, of course, because the amount you owe on your mortgage doesn't fall when your house value falls. A small percentage fall in house prices can cause a huge percentage fall in your home equity and family wealth. Recent home buyers with small down payments can quickly go “underwater” and owe more on their houses than their houses are worth."
Makes sense. So would you also say that if interest rates stay at or above the levels they are at now, and a market recovery seems distant, paying cash (as opposed to a mortgage) is better path for more people if they can afford it?
Maybe John will weigh in on my question....
Keep talking. I don't understand exactly the question. Ask the question a different way.
Would you say that if interest rates stay at or above the levels they are at now, and a market recovery seems distant, paying cash (as opposed to a mortgage) is better path for more people if they can afford it? As a way to avoid the potential issues you outline above (i.e., owing more than home is worth on the loan?
If that money was earning a lot less than the mortgage rate, then that buyer would probably be better off selling the investments and using the money to pay cash for the house.
As a way to avoid the potential issues you outline above (i.e., owing more than home is worth on the loan?
Thank you - very insightful