In a message dated 8/12/02 2:42:34 PM, [EMAIL PROTECTED] writes:
<< I recall buying a couple of houses in Silicon Valley: put all your money down, plus whatever you could borrow from relatives;add your income to see how much you could afford to pay per month and get an 80% mortgage based on that; with the seller accepting a second as the difference from your down (often about 10%). Huge mortgage payment; interest is deductible; your "savings" is the steadily increasing equity value of the house. I do NOT know, but am interested, in how this "real savings" is included in the savings statistics. Also, I would guess that middle class wealth effects, where most stock is locked in IRA/401k plans, are based more on real estate equity wealth than on stock market wealth; dispite the much higher liquidity of the stocks, but again have only my gut feelings. Interest rates dropping should increase prices (and maybe reduce second mortgages?), but also encourage refinancing and borrowing/consuming that equity. I DO wish (too?) that I could offer more answers, rather than just questions I'm interested; thanks to Bill Dickens for his! Tom Grey >> I seem to recall during the early 1980s when the US economy looked poor compared to (at least some of the) western European economies that national savings rates were calculated without regard to homeowners' equity. Since, as I understood it, (western) Europeans were much less likely to own homes than are Americans, if you included homeowner's equity at that time American savings rates, which looked paltry compared to some of these western European savings rates, shot up quite remarkably, becoming comparable or even favorable to their western European "competitors." (I say "competitors" rather than competitors because people in the media and politics often view them that way, but I suspect that most people on the list would agree that, to the degree that it affects out incomes at all, it's better for us to have neighbors with higher incomes rather than lower incomes.) Sincerely, David Levenstam
