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Friday, April 17, 2009

Negative Equity

The Council of Mortgage Lenders (CML) report that the number of people facing negative equity is coming close to 1M, at around 900,000.

Is this a bad thing?

Not necessarily:

1 In the last housing slump of 1993, the number peaked at 1.5M.

2 Many homeowners intend to "stay put", therefore the "value" of their house (unless they seek to raise capital from it) is irrelevant.

3 Approximately 66% of the 900,000 face shortfalls of less than 10%.

People need to grasp the essential truth that houses are not meant to be "pseudo investment" vehicles for raising finance for short term consumption, despite what the banks, loan companies and property porn shows would have us believe, but places to live in (ie homes).

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