The American Dream - Equity Growth Has Helped To Destroy It

[GailL1]

 For many folks, their home is their only investment or a majority of it  - for many,  they think about the equity that it gains as a form of retirement financing - be that selling it for a hefty profit, holding it as a rental and thus creating a monthly income flow, or to even borrow against it in the form of a Home Equity line of some sort, including a reverse mortgage.

In our generation, we often bought one home and then sold it to buy or build another and then repeated the process.  Each time, we sold the 1st home at a good to even GREAT added value to help help pay for the next.  We were encouraged to do this by our tax laws - 

Our local governments also encouraged it because the more the assessed value, the more they can get from property taxes so for sure they want higher value housing to real this reward for all their citizens.

Equity is built by sales - whether the sales are of new homes or existing one - as long as there is no adverse conditions, as the sales increase in value, our home is worth more and we have taken advantage of this throughout our lifetime.

Even if we don’t make it to cash in the value-gained, our heirs can take advantage of what we may have missed out of if they are wise in their decision-making.  So for many people,  the home is a way to pass along wealth from one generation to the next.  

Now the real reason, why I am mentioning this is because Housing has gotten to be an affordability problem for the current home-buying generations - be it their 1st home or one they were planning on buying from their equity in the current one.  

Haven’t we all played a part in this housing affordability?  Yep, we have and now we are reaping some of the unintended consequences -  So think about this when we begin to talk about any solutions.  

Your comments are welcomed.

[sktn77a]

Looking back over my own home ownership history, our first house was bought in 1980 and we paid 14% interest on the mortgage.  Our second home in 1986 had a 9% mortgage.  Our third and final home was bought in 1991 and had an 8% mortgage.  Mortgage rates and affordability have been artificially low over the last 20 years.  I think they are approaching historic norms at present and folks may need some time to come to grips with that.

[GailL1]

@sktn77a wrote 

Mortgage rates and affordability have been artificially low over the last 20 years.  I think they are approaching historic norms at present and folks may need some time to come to grips with that.

============================

I mimic your experience - but that is outside the norm of those who have had these current low rates for years and years - it is their norm, so to speak.

But my point to this thread is more about what you and I did when we resold those homes - we got all this equity (or I did) but what happened is that the price of that particular home really escalated for the next person and so on . . . 

Has that added to the unaffordable nature of home prices today?  Sure has, but who could change it?

We have many middle class individuals pay cash for homes today - they have invested and saved and thus don’t have to worry about a mortgage - Thank goodness, I haven’t had one in the last 10 + years.  

“The American Dream” is a great goal but this dream is not a guarantee for everybody nor the want of everybody.  With the cost of home ownership from maintenance and repairs to insurance coverage, even more people are priced out of the home ownership dream especially if they are looking in some urban/suburban area for convenience or need.  

No government of our type can fix this.