William J Archambault Jr, makes some excellent points in this blog about equity, and the affect that defaults have on it.
Bill is someone that has been in this business for a long time, and has seen Real Estate go through several market changes over that period, and knows what he is talking about.
There's A Light At The End Of The Tunnel! It's one trick candle.
So many lose sight of equity's light when their homes seem up side down. Blinded by the darkness of ignorant despair they've lost their faith in the magic that is real estate, the magic of amortization!
Misled by those that think "equity" ever existed in the present tense "Equity" only exists in the past tense and the future tense. To buy a home you'll need 3.5%, 5%. 10% or 20% or more equity/money. You can prove you had it. But, once you've purchased the house you no longer have that money/equity. When you sell a house and receive your net proceeds you collect your equity/money, you've proved equity did exist in the future.
In between purchase and sale does equity exist? People will tell you can borrow against equity, harvest equity, but if you do that eliminates/consumes that equity, so once again equity only exist in the future or the past!
Why worry about equity in the present, since it doesn't exist between purchase and sale? Unless of course you have to sell!
Why default for lack of some thing you willingly gave up at the purchase of your home?
Why accept a lesser life-style, less personal control and security for lack of equity? Equity that doesn't exist in present and never did.
Equity is a trick candle burning at both ends! A candle teetering in both directions!
If you used an amortizing purchase money mortgage to finance your house equity can not be easily extinguished! Equity is a trick candle just like those on a kids birthday cake!
Equity always returns to the honorable! No matter how much depression the dishonorable cause. Given time amortization always returns equity.
Those that honor their notes continue to benefit from home ownership they continue with the sure and certain knowledge of a known payment. The sure and certain knowledge that they will have equity.
Unlike those that shun their honor, who's only sure and certain knowledge is that there rents will go up.
As we continue to lose jobs to foreigners both beyond and with in our boarders. As we repress jobs by taxing those that would offer them, many among us will be forced to default through no fault except poor voting!
Foreclosures devastate those with out a choice.
Foreclosures devastate local property values.
Foreclosures devastate Grandma and Grandpa's 401K and other retirement accounts, including pensions that invested in mortgage backed securities and bank stock.
Foreclosures devastate our economy.
Foreclosures devastate our National Debt.
Foreclosures devastate the very value of our dollar, both foreign and domestically.
Strategic defaulters are not victims of our problems they're a major cause of it's severity.
There's A Light At The End Of The Tunnelit's the sure, but flickering candle of equity!
Now you know the rest of the story There's A Light At The End Of The Tunnel!
William J Archambault Jr
The Real Estate Investment Institute
firstname.lastname@example.org 832-259-7078 or 702-516-1569
From my past: GRI 1975, FLI 1974, Catalyst from a client 1974 an agent that makes things happen, REII, The Real Estate Investment Institute 1995.
©William J Archambault Jr ©The Real Estate Investment Institute ©REII