Sunday, January 07, 2007
nobody put a gun to their heads
I've been wanting to use this picture for a while.
I've been thinking of the exuberance with which people have been taking out their rapidly increasing (but illusionary) home equity (particlarly in the US) to buy frivolities like Hummers, plasma TV's, hideous granite counter tops and Cancun holidays, etc. How could they? It blows my mind. Like any debt, the bank can call it at any time - though they tend not to as long as you make your payments. But what if they did?
What if you are sitting in front of your plasma TV, on your new Italian leather couch, looking out the window at your shiny Hummer, and you get a call from Human Resources telling you that you will be laid off in 2 weeks? Then a piece comes on the news saying the party is over, and housing prices are crashing. That $200K HELOC is going to look pretty scary - especially since your Hummer depreciated 30% as soon as you drove it off the lot.
Someone wrote a while ago (I think at VHB) about how in their parents' day it was shameful to take out a second mortgage on one's home. Are not HELOC's less secure than 2nd mortgages? Or is it just another way of expressing it?
Will all of those upside down on their mortgages look to the gov't to bail them out? Or will they just have to "suck it up"? After all, no one put a gun to their heads...
I won't shed any tears for them,or gloat, but I will put in a low-ball offer on their house.