Comments on: What if houses were cars ? http://peterzaitsev.com/2009/01/28/what-if-houses-were-cars/ Personal thoughts, business, economics, politics Sat, 27 Feb 2010 01:18:11 +0000 hourly 1 By: admin http://peterzaitsev.com/2009/01/28/what-if-houses-were-cars/#comment-40 admin Fri, 20 Feb 2009 00:29:54 +0000 http://peterzaitsev.com/?p=22#comment-40 Nils, Sure houses do not have same deprecation aspects as cars. My point is rather looking at the Value house provides you (rental income or simply place to live it) same as we do with cars or other things. The appreciation can be probably best compared to the stocks - in general they go up though some bad companies become bankrupt same as there are bad areas where houses go down. I just think counting on these appreciation is a way to the bubble. Nils,

Sure houses do not have same deprecation aspects as cars. My point is rather looking at the Value house provides you (rental income or simply place to live it) same as we do with cars or other things. The appreciation can be probably best compared to the stocks – in general they go up though some bad companies become bankrupt same as there are bad areas where houses go down. I just think counting on these appreciation is a way to the bubble.

]]> By: Nils http://peterzaitsev.com/2009/01/28/what-if-houses-were-cars/#comment-39 Nils Thu, 19 Feb 2009 21:08:24 +0000 http://peterzaitsev.com/?p=22#comment-39 As long as there is no bubble, real estate prices are not subject to volatility or decline as strongly as for example cars. Interest rates are usually based on default-risk and market prices. The risk for the bank on credit default for real estate is not as high as the bank can still sell the house at market price. If however the outstanding debt is higher than the market price (which is unusual under normal circumstances but can happen if the price is artificially inflated as it was on the US housing market) there is a higher loss in credit default which is not covered by interest rates. The drop in house prices is in fact good for those who want to buy a new house or just switch over to a cheaper mortgage (move one door over, reduce downpayment in half...). It's of course bad for those morons who lent money solely on the basis of rising house prices, thereby inflating house prices (George Soros theory of reflexivity comes to mind). And it's bad for all of us because we have to bail them out. Still, houses are not cars. It's time people use a bit of common sense and don't solely rely on the bullshit that is taught at business schools. As long as there is no bubble, real estate prices are not subject to volatility or decline as strongly as for example cars. Interest rates are usually based on default-risk and market prices. The risk for the bank on credit default for real estate is not as high as the bank can still sell the house at market price. If however the outstanding debt is higher than the market price (which is unusual under normal circumstances but can happen if the price is artificially inflated as it was on the US housing market) there is a higher loss in credit default which is not covered by interest rates.

The drop in house prices is in fact good for those who want to buy a new house or just switch over to a cheaper mortgage (move one door over, reduce downpayment in half…). It’s of course bad for those morons who lent money solely on the basis of rising house prices, thereby inflating house prices (George Soros theory of reflexivity comes to mind). And it’s bad for all of us because we have to bail them out.

Still, houses are not cars. It’s time people use a bit of common sense and don’t solely rely on the bullshit that is taught at business schools.

]]> By: How do My fiance’ and I go about buying this house in a new subdivision? We are looking for 100% financing. | House Buying Survival http://peterzaitsev.com/2009/01/28/what-if-houses-were-cars/#comment-6 How do My fiance’ and I go about buying this house in a new subdivision? We are looking for 100% financing. | House Buying Survival Wed, 28 Jan 2009 12:13:47 +0000 http://peterzaitsev.com/?p=22#comment-6 [...] What if houses were cars ? « Peter Zaitsev [...] [...] What if houses were cars ? « Peter Zaitsev [...]

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