Equity Is Altering Spending Habits and View of Debt

[Craig]

Interesting, pretty balanced article:

http://www.latimes.com/business/la-f...home-headlines

August 28, 2005 latimes.com

Equity Is Altering Spending Habits and View of Debt

Mortgages used to be something people strove to pay off. Now they've become income tools, but risky ones, some financial analysts say.


By David Streitfeld, Times Staff Writer


As they happily watch their houses swell in value, Americans are changing their attitudes toward mortgage debt. Increasingly, a home is no longer a nest egg whose equity should never be touched, but a seemingly magical ATM enabling the owner to live it up or just live.

Homeowners took $59 billion in cash out of their houses in the second quarter, double the amount in the 2004 quarter and 16 times the average rate of the mid-1990s, according to data released this month by mortgage giant Freddie Mac.
....

[moderator edit]

[maddythebeagle]

Quote:

Anthony Hsieh, chief executive of LendingTree Loans, an Internet-based mortgage company, used a more disparaging term. "If you own your own home free and clear, people will often refer to you as a fool. All that money sitting there, doing nothing."

- That coming from a guy that wants to make money on more loans...

I dont view the average joe buying McMansions, not building equity, and/or using equity as a piggy bank as a problem. I think that it just means that they will probably need to work longer in life.

[modhatter]

I think it has a direct effect on the economy however. With so many young people faced with such huge mortgage payments each month, it will leave very little income for purchasing, which will in turn not be good for the economy and of course the stock market. Unless incomes rise to a level to support these high mortgages that is. Thieir current answer to this problem is taking on debt, running up their charge cards. This is not sustainable either. Eventually, you must pay the piper.

[wabmester]

Quote:

Originally Posted by maddythebeagle That coming from a guy that wants to make money on more loans...

I know that guy. He did the ER thing for a while after eTrade bought his first company for $30M. For about a year (during his non-compete) he just fished. Got bored, started another mortgage company, and sold that one last year to IAC for well north of $100M. Tough life.

[deserat]

Wow - I must say this thread being unearthed just 3-4 years later is quite an eye-opener. What I find fascinating is I was refinancing my house about the same time - to a 10 year payoff loan. When the notary came to my house, they asked how much I was taking out from the equity for myself - I said nothing. The look of shock on their face. And now see where the country is. Sigh.....

[2B]

Quote:

Originally Posted by deserat Wow - I must say this thread being unearthed just 3-4 years later is quite an eye-opener. What I find fascinating is I was refinancing my house about the same time - to a 10 year payoff loan. When the notary came to my house, they asked how much I was taking out from the equity for myself - I said nothing. The look of shock on their face. And now see where the country is. Sigh.....

It's good to know you're financially secure enough to pay for a couple of your neighbors' home loans. They weren't as foolish as you were. They bought those new SUVs every couple of years and spent a couple weeks in Europe every summer.

You are a true patriot!

[CuppaJoe]

Quote:

Originally Posted by deserat ... When the notary came to my house, they asked how much I was taking out from the equity for myself - I said nothing. The look of shock on their face. ....

Yes, shocking. Notary rules vary by state but as a notary in Calif. I'm not allowed to comment on the documents. Sometimes I have to shift to a different hat in order to talk to clients.