Yet another stupid debtor and retirement account raider!

[ladelfina]

Sure, you did. But because of the timing, not because of the borrowing per se.
That San Jose house might be headed back down to $239k for all we know.

If you look at financing a home from the investment perspective of allowing you to leverage and make a big gain, how is it different from buying stocks on margin? Is that a great idea that everyone should also implement?

I don't think I ever said no one should ever, ever have a mortgage. I don't consider a mortgage entirely "consumer" borrowing (but it is when you are borrowing 120% of the sales price). Even if you look at debt as a kind of medicine that sometimes you need to assume because of some specific ailment: that doesn't mean you should be gobbling down hundreds of aspirin a day. A $4k car loan is not likely to be toxic; a $40k car loan may well be.

 

[ziggy29]

If you look at financing a home from the investment perspective of allowing you to leverage and make a big gain, how is it different from buying stocks on margin? Is that a great idea that everyone should also implement?

Plenty different. You can't live in your stocks. And if you don't take out a loan and pay mortgage interest, your alternative is paying rent. (This isn't an invitation to start the old rent/buy debate, just stating that if you did not take out a mortgage, you'd have much of that cash flow dedicated to rent. Pay the bank or pay the landlord for a place to live.

Houses also don't go bankrupt due to mismanagement, insider nefariousness or product obsolescence.

I don't personally think people should borrow more than they need to on a mortgage, but even though it may be the same *principle* as buying stocks on margin, in reality -- for practical purposes -- they have very little in common in terms of risk management.

 

[Milton]

This is not just a series of independent personal decisions made in a vacuum. It is a systemic sickness.. an epidemic.

The gov. is not just setting a bad example.. it is complicit in debt expansion. Debt expansion is not the result of bad planning.. it IS the plan.

Impossible to disagree, as long as the powerful borrowing incentive of mortgage interest deductibility survives.

 

[ladypatriot]

Like most other people on this forum, I think access to credit is necessary for a functioning market. But some people make really poor decisions in accessing credit. Unfortunately, those really poor decisions by those "some" may end up affecting a wider population. I don't blame the lenders, although I suspect that many mortgage agents engaged in less-than-honest practices. Profit is what drives the markets, and it is naive to think otherwise. Competition between financial institutions give consumers choices on credit products, whether mortgages, credit cards, car loans, student loans.

I can't understand how increasing regulations on credit lending will change what I see as a marketing problem. I'm talking about 5th Avenue marketing...advertising. Has anyone ever seen the film "In Debt We Trust"? It's worth seeing; it will either confirm what you've already known or it will be a real eye-opener.

People buy stuff. They have always bought stuff, and they always will buy stuff. Advertising/marketing companies exist to make people want to buy more stuff. Advertising/marketing companies have psychologists that study how to make people want to buy more stuff. These companies work diligently to target and influence consumers to buy bigger, more expensive stuff.

Why not increase regulations on advertising and marketing? I'm not being sarcastic. If you need to increase regulation on credit lending, why not increase regulation on what drives the consumers' need to buy more than they need and more expensive stuff than they need, whether it's a house or a handbag?

 

[cute fuzzy bunny]

It seems that the "savings" number is a function of guessed at earnings by individuals minus guessed at expenses.

So a thousand bucks a head might just be some bad guessing.

Further, the bulk of the debt is mortgage, and that built up equity is considered an expense as a mortgage payment, not as an asset. Its increased drastically as a number because inflation and cost of housing has gone up so much in the last 27 years.

$120k wont ever be paid off? Whole lot of people with 2-4x that in a mortgage that they probably will pay off in 20-30 years.

Lastly, if any decent house in a good neighborhood in the SF south bay area sells for $239k, I'll be buying it and as many of its friends as are available.

 

[NW-Bound]

Well, I am sure that we have all noticed that this thread is the most popular, i.e. with the most replies, and highest readership. I wonder what has made it so. Is it because of the plight of our debtor woman being so interesting? Or is it because of the articulate and thoughtful discussions? Well, except for some short (emphasis on short) outbursts of heated argument. Or is it because of the hilarious diversions?

I went back and read through this thread. I could not help burst out laughing when I got to the place where our ladelfina valiantly and singlehandedly kept the discussion on the topic, while the others seemingly conspired to sabotage the thread. Did you guys PM each other to do this? If so, I was certainly not in on this, being a newbie.

I think this thread deserves a special nomination in this forum. I am not creative enough to think of an apt descriptive adjective.

 

[cute fuzzy bunny]

Did you guys PM each other to do this?

Nah. We're well trained and we all know our roles.

I am not creative enough to think of an apt descriptive adjective.

hmmm...cluster...uh oh, I guess thats a naughty word...

 

[Frugality_of_Apathy]

hmmm...cluster...uh oh, I guess thats a naughty word...

What's wrong with a little clusterfun?

 

[cute fuzzy bunny]

Thats easy for you to say...the words "beaver cheese" werent automatically translated to YOUR username the last few years... :

 

[Milton]

Why not increase regulations on advertising and marketing? I'm not being sarcastic. If you need to increase regulation on credit lending, why not increase regulation on what drives the consumers' need to buy more than they need and more expensive stuff than they need, whether it's a house or a handbag?

Yes, we could more tightly regulate advertising, but it would make little real difference. The basic problem is the stupidity / greed of the average 'consumer' (what an ugly word!), and that's a more difficult matter.

Conspicuous consumption has a much longer history than that of the advertising industry.

 

[brewer12345]

Why not increase regulations on advertising and marketing? I'm not being sarcastic. If you need to increase regulation on credit lending, why not increase regulation on what drives the consumers' need to buy more than they need and more expensive stuff than they need, whether it's a house or a handbag?

Might require some real big changes in the law of the land, which would be impeded by some mighty well-funded lobbyists. AFAIK, advertising rests on the first amendment, which would bring in such a varied cross section of lobbyists that any such reform would go nowhere fast.

 

[Delawaredave5]

FYI...$42873 adjusted for inflation from 1980 to 2007 is $120962.86

This is encouraging. Are you sure numbers are current dollars ? I couldn't tell in article.

Would be stupid for authors to not adjust for inflation - but they are looking for the most "extreme chart" possible...

 

[cute fuzzy bunny]

I think I can safely prairie dog the numbers by saying that I dont know anyone at all that has even close to 120k worth of non-mortgage debt. What'd that be, a Mercedes and a Lexus with zero down and an extra $30k of credit card debt? As an 'average person'?

 

[HFWR]

I think I can safely prairie dog the numbers by saying that I dont know anyone at all that has even close to 120k worth of non-mortgage debt. What'd that be, a Mercedes and a Lexus with zero down and an extra $30k of credit card debt? As an 'average person'?

My mortgage debt is less than that, and "other" debt is $0: priceless!

 

[Sarah in SC]

I for one feel that CuteFuzzyBunny did not put the full effort required into derailing the thread--not even one picture of Vida Guerra for HFWR and the rest of the dirty old men!

 

[CitricAcid]

I think I can safely prairie dog the numbers by saying that I dont know anyone at all that has even close to 120k worth of non-mortgage debt. What'd that be, a Mercedes and a Lexus with zero down and an extra $30k of credit card debt? As an 'average person'?

I think the number includes mortgages and is not indexed to inflation, but then again it may not be the "median" person, but may actually be referring to the "average" person. In other words, Bill Gates makes $100,000,000 a year and his 9 neighbors each make $10,000. The "average" person (depending on how calculated) could make $10,000 a year or $10,010,000 a year. One person with a $600,000 mortgage, two $35,000 car loans and $50,000 of credit card debt ($720,000) makes up for 5 without debt to have an "average" of $120,000 each. And, considering the percentage of Americans who have SOME debt, it is likely that it is weighted upwards in this manner (in both measurements)

Also, I would agree about the buying on margin difference. A stock is intended to produce future income through dividends earnings or capital gains. By leveraging to buy a house, you are playing an investment (in the real estate market), but your alternative isn't to hold onto the money/spend it elsewhere (as it is in case of stocks) but is to rent. If you can own at $1000 a month (maybe save about $700 a year in taxes too) and rent at $700 a month. Would you be willing to spend that extra $250 a month to get into the real estate market and have the confidence of owning your own home? I am not saying anyone has to, but I am strongly for this idea/point.

Also, NWBound, I was trying to keep us on topic

 

[cute fuzzy bunny]

I for one feel that CuteFuzzyBunny did not put the full effort required into derailing the thread--not even one picture of Vida Guerra for HFWR and the rest of the dirty old men!

I know, I really didnt put my best effort into it. I'd make a few perfectly valid excuse, but real men dont whine.

I'm pretty sure my track record speaks for itself as far as my ability to fully and properly derail a thread. Heck, I think I'm the only person on earth who has ever made Ho$uc speechless.

 

[HFWR]

I may be dirty, but I'm not that old...

 

[Nords]

I know, I really didnt put my best effort into it. I'd make a few perfectly valid excuse, but real men dont whine.

C'mon, not even the one where Vida has "I love moderators!" tattooed on her, ah, assets?

 

[FinanceDude]

C'mon, not even the one where Vida has "I love moderators!" tattooed on her, ah, assets?

Where is Vida??

 

[cute fuzzy bunny]

C'mon, not even the one where Vida has "I love moderators!" tattooed on her, ah, assets?

Thats the only other one I havent used yet thats 'pg-13' rated. Everything else is a clear cut 'r'.

 

[NW-Bound]

I believe the $120K debt/person includes the mortgage. Recently, I saw a statistics on home ownership in the US. Quite a large percentage (IIRC >30%?) owns their home free of mortgage. It is a lot more than I would have thought. Many relatives and friends I know who are 50 or older own their home. Perhaps even the spendthrifts realize they need to own their home once they get near retirement age.

It may not be as bleak as people fear.

 

[Milton]

I think I can safely prairie dog the numbers

Okay, time for some prairie dog photos.