There’s a lot of talk about housing market stabilizing. Some homeowners, for instance, see the value of their houses rise simply due the decreasing availability in their specific area. Unfortunately, from a bigger-picture perspective, a look behind the curtain reveals that the recovery from the bubble-burst has a long way to go. Seniors, in particular are getting killed by the foreclosure crisis
- There are still 23 percent of all loans in America that are underwater where the mortgage on the house is greater than the value of the home
- There are still almost 1.5 million homes in the shadow foreclosure inventory
- More than 1.5 million seniors have lost their homes and millions are still at risk
- Billions in home equity loans will require principal AND INTEREST payments to be made starting in 2012. And, many of these loans are backed by properties that are not worth the amount borrowed against them
Seniors are particularly unprepared because they have no way to increase their income. Many elderly are losing their homes because they cannot pay property taxes. Reverse mortgages are not available because there is no equity. Many more will lose their homes because they have used up all their assets and do not have enough income to stay in their homes and they live in a home that’s now worth about half what it used to be worth and part of their net worth has been consumed by the huge decline in housing values. Many of these people would have benefited from the kind of planning and strategies I offer where they treat their home as a place to live and not an investment….hence keeping their equity in their homes outside of their homes in an account that’s safe, accessible and earning a real rate of return.
Bottom line is there are many things you can do independently to succeed no matter how robust or disastrous the economy is; one of the great advantages of living in the land of liberty, freedom and rugged individualism. Unfortunately, your real estate is not one of them. You can do everything right, over and above and to the letter; but if your next door neighbor doesn’t exercise personal responsibility in his own back yard, yours will suffer as a result.
For those that still view their home as an investment, I’ll share a pop quiz I shared in a prior article in hopes that you might reconsider your position. Pop Quiz: If someone were to offer you an investment where you can pay more than the minimum contribution, but not less, which would result in loss of previous contributions, the money is not safe from loss of principal, is less safe with each payment, is not liquid, earns 0% rate of return, the tax liability increases with each payment, and when fully funded, no income is paid out, would you be interested? Before you passionately answer “no” with possible expletives, I just described your home….yeah the one you probably still view as an investment.
While your home is certainly your castle, it’s definitely not a savings account. Unless of course your entire neighborhood knows your PIN.