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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Moominoid who wrote (56406)	6/20/2006 9:42:21 AM
From: GraceZ	Respond to of 306849

Houses serve a purpose in the US far beyond a simple dwelling. People don't mention it much but being a homeowner confers on you a special status when it comes to financial transactions. Because the US has such a transparent and proven method for establishing clear title as well as a reasonably open method to value real property, real property can be used as a way to establish credibility for all kinds of transactions that require credit and trust. It also allows you to transact with strangers with some level of assurance that the two parties have assets which can be readily attached when transactions go bad, that people are who they say they are and that they can't up and disappear. This allows for a reasonably high level of trust between two parties who don't know each other personally and allows more transactions to occur. I remember when I was growing my business and trying to get secured loans to buy large pieces of capital equipment for my biz how difficult it was before I owned a house. I could get anyone to finance a car, but a large machine was almost impossible until I had built up equity in my house. A friend who also ran a capital intensive biz said to me, "They aren't lending you money on your machine, they are lending you the money with the idea that if you don't pay them back they'll put a lien on your house." Since I have had a few disputes with tenants over the years that I've been a landlord I've been frustrated by the fact that my options for recourse are usually limited to keeping their security deposit and eviction even if I take them to court and win while they can sue me and get restitution. This asymmetry most likely effects the renter's cost of borrowing, that it is highly likely that on a macro level, renters pay more to borrow than a homeowner does.