Buy High, Sell Low! That's my motto!
PS. What your home is worth today is irrelevant unless you sell it today.
Yep.
Better duck. There are plenty of FReepers that will tell you equity is money in the bank. Heck, even the govt. includes that in your "household worth". Too many people think equity is concrete.
" PS. What your home is worth today is irrelevant unless you sell it today. "
The current value of your home is very relevant to the bank that actually owns it.
When all of those "creative" mortgages come to their balloon or higher-payments points, and people find out that they can't refinance, (as promised as a 'selling point') and can't sell, and can't make the payments --
Can you say "Banking Crisis"? (Hint -- the S&L bailout was a sandbox game compared to what could happen, here)....
With one exception: what your home is worth today is relevant if you were intending to refinance in the near future.
Of course, refinancing is a form of selling your home. In effect, you sell it to the new lender and pay off the old lender.
If a house no longer appraises at a certain value, the owner's ability to refinance his mortgage is limited by that lower valuation.
While that may be true on a micro level, there are series implications on the macro level. The first one that comes to mind is the home equity market. For better or for worse, many people tap into their home equity to pay for college educations, vacations, home improvements, and consumer goods. Pulling that money out of the economy will have a ripple effect.
If your home is assessed at more than it's worth you will pay more in taxes than you should.
You are precisely on target. If you could afford the payment, the fact the current market value has declined is pretty much irrelevant.
A residence is a long term investment and short term fluctuations should not be a worrisome consideration.
If you have an increas in the adjustable rate loan and want to re finance there may be some problems. That is however financial risk and was theoretically already paid for by the period of low payments.
Or if, as in the article, you want to refinance it to get out of the stupid ARM you got yourself into!
Its worth seems to matter a great deal to the county tax assessor and I have to pay him what he says.
Not completely irrelevant. If it drops by as much as described in the article, it could save you a serious chunk of change on your property taxes. Especially in Texas.
Unfortunately, not always true. The couple in this article are one example of the situation many are in or will be in soon. You see, they have an ARM that started w/ a teaser rate. Their payment is now $3000 and will double when the ARM adjusts. They need to refinance, but they can't refi because of what the home is worth today. They can't afford $6000 a month. They'll probably lose the home and kill their credit.
Maybe I'm a jerk, but I don't feel bad for them. They knew what they were getting into. If they didn't consider the risks, that's their own fault. I guarantee they didn't need a $800,000 home.
Or, unless you have a funny money mortgage coming due, like the guy in the story, whose payments are going from 3000 to 6000 per month. He'd probably like to refi that into a normal loan but guess what. He can't because the house's market value is now so much less than the amount owed.
If these people just had to sit tight and not sell or move, and everything else was staying the same, your simple minded response might apply. Welcome to the real world where people actually sometimes have good reasons for getting upset.