In America, people who have at least some equity in their homes, feel that they are rich.
The common parlance is, "You House Is Your Biggest Asset".
The real estate agents say this.
The banks giving out mortgages say this.
All the middle class people repeat this.
However, it is a complete fallacy.
It is a psy-op.
It is a way of getting the middle class in America to give up their legacy.
A way of getting people to spend money they don't have by making people believe there is "money in the bank" (their house)
Your House Is Not Your Asset
- An asset is something that puts money into your pocket. Your house (not a rental property) is constantly taking money out of your pocket.
- An asset is something you can sell to cover other expenses. You cannot sell the place you are living without serious consequences, like being homeless. After your living space is gone, your life is so very much harder to fix.
- Your house is an asset to the bank. Look at the banks balance sheets. It is claimed as an asset, therefor, it is considered your liability.
- It is Real Estate, the King's Estate, you never really owned it. The govern-cement can come get it back at any time.
Your house is your biggest liability. It is constantly taking money out of your pocket. Having a place to sleep consistently is a good expenditure of your resources, as long as you can afford it.
Living within your means is important... however, in America, there have been forces making sure that smaller, starter houses are eliminated. The bottom rung has been kicked out
House Prices Go Up? Or Is It Just Inflation?
House prices have not really been going sky high because of more demand, it is because people "afford" a house based on the mortgage payment. So, a lower interest rate, means a higher priced house you can buy... so all the house prices get bid up. (and now that interest rates are going up, house prices are going to fall, and mortgages are going to go away)
Banks raised the percentage of income that you could spend on a mortgage. This, again, raised the amount of money that could be borrowed on a house, causing prices to get bid up.
Banks also lowered minimum down payments required... causing prices to get bid up
And since the banks are on a fractional reserve lending system, they can make up as much money as they have reserves (your house is their reserves) so they can lend an infinite amount of money (limited only on current house prices), so they can keep feeding higher and higher house prices.
Isn't it interesting that as median wages have pretty much flat-lined for the last 50 years, home prices have gone up and up and up?
Along Came the Banks and said "Use Your House As An ATM"
After real estate agents have been telling people that your house is your biggest asset for forever.
"House prices always go up," they said.
Then the banks put paid to that feeling of being rich, because you had equity.
They came out with the HELOCs. And then they started all kinds of advertisements of using your houses equity to provide for children's college tuition, emergency house repairs, or just go on a vacation.
And thus, they turned that feeling of having money into an ATM machine.
The banks were able to seize all of that "equity" and turn it into minimum monthly payments forever.
But none of this was true. Your house's locked up equity never really existed.
And the people who spent it have destroyed our economy.
Capitalism work on having capital. Spending less that you make and then using that savings to make a bigger/better world.
A family grows more wealthy over time by continually increasing the family's wealth. That house that the children were raised in is the house for another generation to be raised in.
But now (most the boomers) have taken and squandered the family's wealth. And along with it, the nation's wealth.
All because they believed the lie that "Your home is your biggest asset".
And they looked at their home's equity as money that could be spent.
Now, America is broke and broken... and all those suburban houses are about to crash to zero.
How fitting.
The next generation will have to start at zero.