 Quote:
Originally Posted by ERD50
What difference is it to me if my house (on paper) goes from a market value of $400K to $350K, especially if I'm not selling?
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Like I said, two things:
1) The wealth effect. People spend less when they feel less rich.
2) Less equity extraction. People have been spending via home equity loans.
Both of these will potentially ding the economy. Now, add that to a credit crunch where both consumers and businesses will find it more difficult and more expensive to take on debt. The current bank write-downs are just the first symptom of a potentially nasty disease.
But, you're right that conditions will favor buyers and investors with lots of cash. 
Also, if your home is worth less than your mortgage, you tend to both feel bad and consider walking away from the house....
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