The Motley Fool Discussion Boards

Previous Page

Industry Discussions / Banks


Subject:  Re: Poll: Housing Bill Date:  6/30/2008  6:05 PM
Author:  rog56 Number:  84 of 101

Hi graybell,

Anything you do with tax money is subject to this objection.

My point is a specific objection that the idea props up asset prices and transfers wealth from renters to those who buy houses, when this latter group is already subsidized through mortgage tax credits.

I still think it would be a good way to jumpstart the economy and benefit everybody.

You are missing the point that your idea lavishly subsidizes people in a specific group. You seem to be suggesting that the rest of the population - many of whom are on lower incomes - might benefit from the crumbs that might drop from the tables of the subsidized group. That seems a very 19th or 18th century idea, and not one that I find to be defensible.

The only people to benefit from plunging home prices are those without homes who want to buy.

As someone else has suggested, is that not a group one might want to help, if one values the aspiration of wider access to home ownership? But anyway, your assertion is not correct. Plunging house prices also help existing homeowners with aspirations to buy a more expensive (e.g. larger) home. Most homeowners hope to 'trade up' in this way, over the years, so it is significant that lower house prices help them to do so.

For example, suppose that I own a house worth $400,000 but have a growing family and want to move to a $600,000 house. I would have to find or borrow an extra $200,000 to make the switch. Now, if house prices fall by 25%, my $400,000 house is now worth $300,000, and the value of the $600,000 house I want to buy has dropped to $450,000. Now, I only need to find or borrow an additional $150,000 to make the move - a saving of $50,000.
Copyright 1996-2019 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us