My mortgage broker friend swears to me that this is normal – that not ever paying off a mortgage is the new hotness and that it is what everyone else is doing. I guess keeping up with the Joneses means eternal servitude to Wells Fargo.
ContraCostaTimes.com | 04/30/2006 | Homeownership a struggle for many
Homeownership’s advantages, such as tax credits and rising home values, mean people can increase their loan value and have extra cash on hand for other expenses.
“In some way, you say that’s someone owns a home they can’t really afford, but it’s an investment, it’s making money for them,” Lawson said. “It’s a big asset, it’s a big chunk of money that keeps going up every year.”
For some consumers, homeownership is as likely an option as winning the lottery.
“In California, the starter home market has really disappeared,” said Tamara Draut, author of “Strapped: Why America’s 20- and 30-Somethings Can’t Get Ahead.”
Younger adults are struggling to make ends meet, Draut said, because many have student loans and start with low wages, which make it hard for them to save and build wealth.
“Definitely, this generation has resigned itself to live in debt to live in a middle-class lifestyle,” she said. Many consumers are comfortable with debt, but too much debt leaves people vulnerable, living paycheck to paycheck.
Some homeowners take advantage of rising property values to take on more debt and use the influx of cash to pay other debts, such as credit cards.
“The market keeps bailing people out of trouble,” Lawson said. “Because people don’t really get in too bad of position, they never really learn the lesson, and a year later they turn around and get themselves in the exact same spot.”
Deborah Bennett considers herself lucky — she bought her home in Pleasanton years ago, and her career as a computer scientist has provided steady, well-paid work.
The 59-year-old said she goes on the vacations she wants and buys what she wants.
“I feel sorry for the people who (are) just coming in,” Bennett said. “I have lived here since ’68.”
This isn’t surprising though – the California real estate is designed to as a massive transfer of wealth (meaning: future earnings) to the previous generation. Case in point? Prop 13.
(Thanks to Marin Real Estate Bubble for this find.)