mad anthony

Rants, politics, and thoughts on politics, technology, life,
and stuff from a generally politically conservative Baltimoron.

Sunday, March 15, 2009

If the value of a house drops, should anywone care?

I probably should stop reading political/economic blogs and watching news on TV - I think it's having negative effects on my blood pressure and general outlook on life.

But you can't really avoid it. I was at the gym today, and CNN was on the TV near the elliptical I was on. At one point, they had on two talking heads talking about the mortgage bailout plan. One (Steve Moore from the WSJ) commented that he felt bad for people who pay their mortgages and didn't like the bailout, and the other commentator (whose name I didn't catch) commented that "the whiners who are complaining should be thankful because without it the values of their house would drop" because of vacant foreclosures. He brought up the treasury figures that claim that the bailout would keep the prices of houses from falling by up to $6000.

Which may be true. But even if it is, why should I care if the price of my house falls by $6000? It's not like if it falls now it will never go up. And $6000 isn't that much - on a $200,000 house, it's 3% - not a huge drop, especially compared to the drops that many places have already had. And $6000 is the top figure, which probably comes from a more expensive house, so it's probably less than 3% for a 200k house.

The thing is that there are only three reasons to care about the value of your house:

1) you are selling it and want to get the most possible you can for it

2) you are trying to take cash/equity out of it through a Home Equity Line Of Credit (HELOC) or Home Equity Loan (HEL), and want the value to be as high as possible to get the largest possible loan.

3) you are calculating the assessed value for property tax purposes.

Well, 1 and 2 don't apply to me, and for 3, I want the value to be as low as possible. In fact, I actually got a letter a few months ago that Baltimore County had decreased the appraised value of my house, meaning my taxes will go down.

As far as 1 and 2 - yes, it's nice to have the value of your house be high enough that you can sell it without losing money, and owning a house does mean that I can't get up and move. And there is nothing wrong with taking out a HEL or HELOC - if you need to borrow money and have the equity, it's the cheapest way, since it's backed by real property and the interest is tax-deductible.

But there is no natural right to not have your house ever decline in value, to be able to move whenever you want without taking a financial hit, or to have equity to borrow against. While these are good things, I don't think they are good enough to make it worth subsidizing the mortgages of people who foolishly overextended themselves when buying a house, and I don't think the claimed benefits that "whiners" like me are supposed to get outweighs the harm and general unfairness of rewarding bad behavior.


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