Home Equity

Yahoo Finance has an interesting article and video that sums up how the home equity loan craze financed the boom years under George W. Bush. They demonstrate that had it not been for people taking money out of their home “equity” the American GDP would have shrunk in 2001 and 2002 and flatlined after that. In other words, people were spending money they did not have, taking loans based on alleged “equity” they had in their homes. Home equity, however, is an illusion. Until you sell your house, its value is simply a guess at best. A house is only worth what someone else is willing and capable of paying for it.

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