Wednesday, December 26, 2007

Inadvertent Quote of the Day

by Ken Houghton

Louis Hyman sends a shudder through Ken Lewis's heart:
Homeowners cannot build equity in an overvalued house, no matter what the terms of the mortgage.

In the "ownership society," equity is all, and voting with your feet becomes the right thing to do.

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While I see where the post is going, isn't it totally wrong? As in, my fully amortizing payments on my mortage and equity loan increase my net equity regardless of whether The Ranch is valued "correctly."
[The antecedent of "it" in the first sentence is the Hyman quote.]
You're only building equity cet. par.; if the asset is declining in value, your payment would be better used elsewhere (as in, a savings account, since the RFRoR will never be < 0).
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