Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: GraceZ who wrote (17082)	3/20/2002 2:42:00 PM
From: LLCF	Read Replies (2) of 74559

<If you don't count the house as an asset do you then not count the mortgage as a liability? A home is an expense on the income statement, but you have to add it to the asset side of a balance sheet if you are going to put the debt against it as a long term or current liability.> I don't think there is an answer to this one... except to note that IF people keep taking loans on their assets as they increase in value that could be a problem... again, asset values fluctuate... debts don't.... more importantly the mortgage payments don't fluctuate [go up if they continue to borrow against it] vs the zero cash flow [negative actually] from the asset. So in reality using one out of two standard methods of valuing real estate values aren't actually increasing until it's sold. DAK

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