January 28, 2009

What if people would treat houses same way as we treat cars – meaning you purchase the car, often taking a loan for a few years.   Quite similar to the morgage,  just different loan amount and length.    The difference comes from the way we treat these loans –  with a car we know the value will go down and the car will become close to worthless when the loan is fully paid.  With houses we however assume price will just go up.

Things would be much safer if people would threat houses just the same way –  purchasing houses to leave in it,  considering morgage and expense and making sure rent covers the morgage and related expenses if this is house for rent.    Increase of house in value should be seen as an extra bonus not granted.

If people would treat the houses this way  the drop in houses prices would be rather seen in a positive way.    If you can but more   stuff for your dollar, stuff being cars  gas or house  is good for consumer.  Deflation can be concern for global economy but this is different story.

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