What if houses were cars ?

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.

3 thoughts on “What if houses were cars ?

  1. Pingback: How do My fiance’ and I go about buying this house in a new subdivision? We are looking for 100% financing. | House Buying Survival

  2. Nils

    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.

    Reply
    1. admin Post author

      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.

      Reply

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