I recently saw an article which stated that for homeowners “their houses are like piggy banks.” But if you own your house, an increase in its value doesn’t seem to help you in any real way, since to realize that gain you’d have to sell it. But then you’d have to buy or rent another place to live, which would also cost more. It seems like the only concrete effect of a rising housing market for most homeowners is an increase in their insurance costs. Am I missing something?
In: 1833
Gentle increases in value are a sign of an expanding economy with accompanying mild inflation. This is usually good, and certainly better than decreases in value with accompanying contracting economy.
The rapid rises in value seen in America over the last 20 months is good for no one. These rapid rises start to be seen as unsustainable compared to income and this leads to a bubble which leads to a dramatic fall in values which leads to weak consumer confidence, contracted spending and a pull-down of the general economy. Jobs and homes will be lost, banks with be hurt and Wall Street will be pounded.
There is always a human cost of skyrocketing values. Families can no long afford to live near each other, strife rises, health issue rise.
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