Posted on 08/27/2005 11:08:50 PM PDT by Roberts
Homeowner Debt Increasingly Seen as Savvy Strategy # 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 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.
People are cashing out so quickly that the term "homeowner" may soon be inaccurate. Fifty years ago, Americans owned, on average, three-quarters of their house and the lender owned the rest. These days, it's approaching an even split.
This spend-now-rather-than-save-for-later phenomenon has produced undeniable benefits. Experts attribute much of the nation's economic growth to cash-out refinancings, home equity loans and other methods of tapping rising home values. And additional real estate investments financed by home equity have contributed to the rising home prices that bring owners such pleasure.
But the spending spree has a price. With the savings rate at zero, consumers' eagerness to tap home equity is only worsening their retirement outlook, financial advisors say.
If mortgage rates rise sharply or home prices fall, many homeowners could be in financial turmoil. They may be unable to service their loans, or even could find that their homes are worth less than their mortgages.
(Excerpt) Read more at latimes.com ...
Now you're talking about timing.
A person has ro know when to cash in his chips and walk away.
On the other hand, Ty became a multi-millionaire.
I think it has. And the 'gold' bandwagon was right behind it.
Real estate values have been skyrocketing around here for at least five years. I was unaware that gold has been a good investment as well. Anyways, the beauty of real estate investment is that it is always done (at least by smart people) with OPM.
Perhaps not as well as real estate, but not too shabby.
I've been hearing a ton of ads recently touting both real estate and gold as great investment opportunities -- buy now! That's why I say it's a good time to sell.
But what do I know -- I rode the stocks all the way down.
I know nothing about precious metals except the very rule-of-thumby rule of thumb that they go up when world stability goes down and vice versa. One thing I have seen that is very interesting is that vacation area housing (mainly the seashore) has gone crazier than California. The thing about that is that when economic recession hits (and it always does, sooner or later) the first thing people will try to sell off is their second home. THAT's when I'll buy one.
I think your instincts are correct - - sell when everybody's buying and buy when everybody's selling.
Yeah, timing is the basis for all Ponzi schemes. The first payouts go to the first investors from later investors. That becomes the basis for the pyramid until it ultimately collapses when a growing pool of foolish investors can no longer be recruited to grow the scam.
Yes, Ty made a fortune from Beanie Babies but there are no gated communites full of others who did likewise.
Now you're talking about Social Security.
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