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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: reaper who wrote (7248)12/11/2002 1:03:16 PM
From: DoughboyRead Replies (1) of 306849
 
"perhaps one of the real estate apologists / brokers on the thread can eloquently explain to me how this poor woman is better off by OWNING her home"

I'll give it a shot: She's clearly better off in the home. What you forgot to calculate in is the fact that she is getting a better place to live for the money she pays. While the article does not describe the difference in housing, we have to assume that the house is nicer than the apartment she lives in. So she is getting benefit there that you have not priced in. Even if that benefit is slight, she is still acting rationally. She is getting equity in the property in the form of a gift of $4400 plus the forced savings component of her mortgage payment of around $1500 per year. Even assuming no appreciation in the property whatsoever, she is better off. The caveats are mentioned in the article: if the home builder boosts the price of the property by what it gifted to her, then it's more likely that she's bought an artificially inflated property. Clearly the loser in this situation is the lender, not the homeowner. They are getting stuck with a riskier loan, and have nothing to show for it. She is no worse off than she was in the beginning, even if she eventually is foreclosed on, and therefore is acting perfectly rationally.

Doughboy.
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