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" A False Sense Of Security? You Must Own A Home "

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A False Sense of Security? You Must Own a Home

Published: July 1, 2007
THE wonderful world of leverage has lifted homeownership to near-record levels, and we thump our chests with pride at the prosperity and middle-class life that possessing a home implies. Hovering in the background, however, is a glaring statistic: Never before have homeowners actually had such a small ownership stake in the houses they occupy.
The reason is debt. Home prices have gone up a lot, but borrowing against homes has gone up even more in almost all of the last 20 years. “Owners’ equity,” as the Federal Reserve calls the difference, is gradually eroding — a detail that millions of families ignore, focusing instead, perversely, on the rising dollar value of their homes.
“People believe their homes will continue to appreciate in value,” said Mark Zandi, chief economist of Moody’s Economy.com, “so that even if they take out money and reduce their equity, it will all come back very quickly.”

It is remarkable how similar the US and UK is when it comes to houses and the false illusion of wealth. When you consider that the US was established by Brits and Irish who still make up the vast majority of "anglos" it is not at all surprising that the same behaviour will be exhibited.

Edited by Realistbear

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