One small example: Just look at Haiwaii. People who bought a median priced homes in September for $ 600,000 just lost $ 150,000 in December. That is how much their home fell in value in three months. Real estate value is only one half of the equation. What happens when the mortgage company demands the buyer pay the difference because the home has lost value?
Another example: A good friend of mine has a beautiful six bedroom house. He owns it outright. He paid $ 50,000 cash for it 35 years ago. It was valued by his realtor at $ 1.5 million. So he has listed the house for sale. But my friend understands that his home is overvalued by at least $ 800,000. His house is for sale, but no one has even looked at the house for 60 days.
By your way of thinking, my friend's net worth is $ 1.5 million (excluding all his other assets). But he knows that his true net worth is closer to $ 700,000.
Of course, if you are correct, my friend is due for an $ 800,000 windfall. The answer you leap at repeatedly tells you to borrow even money. There are so many things to buy, and so little time to do it. "More, more, more," is the American way.
Well said ex-texan. Let's get even more of a rumble going with all those that are outsource crazy. Everytime I hear let's outsource this, or that, I have only one comment. Can we outsource all the cogresscritters and senators to India for $20,000, instead of what they get compensated for here in America?
What assets? Real estate? Since real estate makes up just 21% of our total household net worth, just how vulnerable is the average American when he has 57% equity in his home? The rapid appreciation in the real estate market is not a nationwide phenomenon. So, if a few markets experience a worst case correction of 20%, just how much impact is this going to have on the total real estate market and our net worth, of which only 21% comes from homeowner equity? This country has not experienced a year over year decline in the aggregate value of real estate since the 40's.
So, now you say the stock market is also overvalued. And you know this how? I am amazed by how many people here believe they know more than the markets. If this were really the case, you wouldn't be posting on FR, you'd be enjoying the scenery from your yacht along the Italian Riviera. ROFL!
What happens when the mortgage company demands the buyer pay the difference because the home has lost value?
If I'm paying my mortgage on a timely basis why would my mortgage company demand anything from me? Do you think the banks will make money on foreclosures? Is foreclosure something the banks want to do?
It was valued by his realtor at $ 1.5 million
Are you certain that the Fed values real estate the same was as this realtor?
The answer you leap at repeatedly tells you to borrow even money
The reason consumer debt is increasing is because of low interest rates and the increase in home ownership. The issue is not so much the level of debt but whether sufficient capital formation is taking place in a market-based way to maintain growth. It is. The fact that our household net worth continues to grow rapidly, in spite of this increase in debt is all you need to know.
As for the Federal debt; since 2001, the federal debt has increased by $2 trillion while our household net worth went up by $10.4 trillion. Our wealth is growing five times faster than our external debt. Our household assets are $65 trillion, which is more than twice what it was just 25 years ago, and is more than 10 times what it was in 1945. We've created more wealth in the past 25 years than the 200 years prior. Our per-capita assets are $89,800 which is the most of any country in the world and makes us the world's best savers.
You can preach and believe all the doom you choose but you can't back it up with any facts from reliable sources. To say that all assets are overvalued in a market economy is just silly. Remember, you predicted a nationwide meltdown in real estate values in this country by March of this year. We keep getting closer to that fateful month yet we see new home construction remaining strong in most areas of the country. I won't even bother to remind you what you predicted about bird flu.