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Thread: Recession kicked median household wealth to 1992 level

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    Re: Recession kicked median household wealth to 1992 level

    Quote Originally Posted by Prof. Peabody View Post
    My home is paid off. I pay my monthly bills and $800 a year in taxes, how exactly is that a liability?
    According to the OP statistics, people investing mostly in their homes, lost money, while people investing in (other areas), saw gains.
    What do you call that?

    notice lpast is trying to imply some broader evil lurking below this. I mean, what are those who have enough to buy a house 10x over supposed to do to be "fair"? Just keep buying houses that way if the housing market drops, they lose just as much as someone middle class who invested heavily in their home? Makes no sense. All people should diversify if their goal is long term gains and they want to avoid short-term risk. That goes for anyone.

    A lot of people who lost jobs in the downturn, could then no longer afford the house note. I'm pretty sure they experienced the liability.

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    Re: Recession kicked median household wealth to 1992 level

    Quote Originally Posted by Prof. Peabody View Post
    My home is paid off. I pay my monthly bills and $800 a year in taxes, how exactly is that a liability?
    House come with all kinds of costs.
    Replace the roof, treat it for termites and tell me that isn't an expense.
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    Re: Recession kicked median household wealth to 1992 level

    With any investment their are risks, buying a house is an investment, thus it's a risk. It was not hard to see the housing crash coming. When lenders are loaning money to people that have no job, no money, and no credit, what does one expect.
    Last edited by Born Free; 06-13-12 at 08:19 AM.
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    Re: Recession kicked median household wealth to 1992 level

    Quote Originally Posted by Hicup View Post
    Um, not sure I agree Harry, of all the investments one can make, real estate is about as safe as it gets, housing crash of 2008 notwithstanding.

    Tim-
    I agree and disagree.
    Yes real estate can be a great investment, however, leveraging your primary residence (which has all the trappings of a constant liability) is very, very, very dumb.
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    Re: Recession kicked median household wealth to 1992 level

    Yes real estate can be a great investment, however, leveraging your primary residence (which has all the trappings of a constant liability) is very, very, very dumb.
    Not necessarily. This, like leveraging your retirement, for example, has its place.
    "I do not claim that every incident in the history of empire can be explained in directly economic terms. Economic interests are filtered through a political process, policies are implemented by a complex state apparatus, and the whole system generates its own momentum."

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    Re: Recession kicked median household wealth to 1992 level

    Quote Originally Posted by Rhapsody1447 View Post
    Paradigm shift complete.
    There should never have been a paradigm of housing-as-a-failsafe-investment to shift in the first place. The historic experience with real estate has been low appreciation over long periods of time, as documented by Yale economics professor Robert Shiller (co-creator of the Case-Shiller housing values index). Unfortunately, history is not given the attention it deserves, including in economics. A sound understanding of history can give one a sense of proportion and what's realistic.

    In today's testimony before the Senate Banking Committee, JP Morgan CEO Jamie Dimon stated that his firm's traders did not understand the risks involved in their hedging strategy. To borrow from Yogi Berra, that's "deja vu all over again." Lack of understanding of risk was one of the significant factors involved in the run-up of the housing bubble and the myriad financial instruments involved. Already, in some quarters, even the recent lessons of the financial crisis have been forgotten. That's not exactly a strong foundation from which to argue against new banking regulations. Instead, the experience demonstrates anew the limits of risk management.

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    Re: Recession kicked median household wealth to 1992 level

    Quote Originally Posted by Harry Guerrilla View Post
    I agree and disagree.
    Yes real estate can be a great investment...
    In cases, yes. But is far from the fail safe investment touted during the run-up in the housing bubble.

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    Re: Recession kicked median household wealth to 1992 level

    Quote Originally Posted by Khayembii Communique View Post
    Not necessarily. This, like leveraging your retirement, for example, has its place.
    Yes. That place is "paying for emergency, life-saving medical care". Things like starting businesses, financing education, buying investment property, or taking vacations... not so much.

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    Re: Recession kicked median household wealth to 1992 level

    Yes. That place is "paying for emergency, life-saving medical care". Things like starting businesses, financing education, buying investment property, or taking vacations... not so much.
    You can usually get lower rates by leveraging your home or taking a loan out on your retirement, so provided you have a reliable exit strategy in the case of complete failure you might be better off doing so. It's the same with any kind of loan: you need an exit strategy.
    "I do not claim that every incident in the history of empire can be explained in directly economic terms. Economic interests are filtered through a political process, policies are implemented by a complex state apparatus, and the whole system generates its own momentum."

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    Re: Recession kicked median household wealth to 1992 level

    Quote Originally Posted by Khayembii Communique View Post
    You can usually get lower rates by leveraging your home or taking a loan out on your retirement, so provided you have a reliable exit strategy in the case of complete failure you might be better off doing so. It's the same with any kind of loan: you need an exit strategy.
    Maybe, but we're talking about the average home purchaser, not you or Harry or Don.
    The sort of people that would be able to reasonably do what you suggest, aren't the same people who on average got crushed during the housing crisis. Remember these are people who didn't even get the first loan correct, no way they are going to devise an exist strategy and also get that right...

    Or rather, since they could have, and didn't, we know it's not the case that such advice is sufficient.

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