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It is a given that when you buy a home, you hope it increases in value.
Indeed, falling home prices in the Denver area and the nation, have caused a great deal of stress to the economy and homeowners. Surprisingly few people are taking advantage of record-low interest rates and reasonably priced homes, while the number of “strategic defaults,” in which people can afford to pay their mortgages, are walking away because they don’t want to want to pay a mortgage on a home that has declined in value. As they say during times of declining stock prices, “no one wants to catch a falling knife.”
But in today’s Wall Street Journal, George Posada, a CPA in Los Gatos, Calif., argues that we are better off if our homes lose value, instead of appreciating.
His case for this counter-intuitive stance is that appreciation results in increased property taxes and insurance costs. “For every other item that we consume – such as cars, shoes and rent – we want the price to decline,” he writes. He notes that homes generate no income, but plenty of costs. “I know no other “asset,” which has to be fed every month,” he writes.
Benefits of falling home values
Indeed, he goes on to say that he welcomes further declines in the value of his home, as that will bring reductions in property taxes and insurance. Of course, he is in better shape than most homeowners. Not only does he not have a mortgage, but he is not counting on his house for retirement, and perhaps most importantly, he has never used his home as an ATM.
He also writes that he is not a “parasite feasting on the beast (of rising home prices) as are home builders, real estate agents and state and local governments. Bottoming out would be beneficial for us all. It will allow activity to return which would benefit home builders and real estate agents.” He also said that a reduction in property tax collections would force local governments to go on a “diet,” and he can “live with that.”
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