One can't buy stocks without putting 50% down, right?
The government put that margin law in place for our own good, to rein in reckless speculation and preserve the integrity of the stock market - I guess.
So why does Big Government not only permit, but ENCOURAGE the masses to commit years' worth of their unconfiscated wages to buying homes with next to ZERO downpayment?
Remember, since it generally costs 6% to sell a home, any property bought with less than that percentage put down is a *fully levered transaction*.
But today, the government, via FHA and the ghosts of Fannie and Freddie, is underwriting mortgages across the country with, maybe, nominally 3% down but it's essentially a smokescreen. Look at this typical *blog post* (ad!) I found in a split-second:
HUD (Housing and Urban Development) is offering home buyers who qualify for FHA loans to purchase a HUD foreclosure with only $100.00 down payment!
And look at the Google ads it's esconced in:
Now it's bad enough that 0% down home *buying* has been sanctioned by Big Government...
But even worse is the additional leverage from 30 year mortgages. Loans of this length, they not only preserve effective *zero equity* status for years, they introduce an even worse ill - *wage slavery*.
I'm 35 years old. Why the bleep do I want to buy a house, and have the same monthly nut at age 65, that I do today? Thirty years is a freakin' eternity. Actually, the monthly nut will be higher when I'm in my 60s - on account of the mortgage interest deduction being less! And that's not counting higher property taxes either.
It wasn't long ago that everyone did 10 and 15 year mortgages. Consider that at a rate of 5.75% today:
$100,000 of borrowed money over 30 years requires $584 in monthly payments.
But the same payment, at the same rate, for a 15 year mortgage will only amortize $70,000.
So there you have it. If homeowners or the government did away with 30 year loans....housing affordability, and hence prices would fall a steep 30%.
Today's $250,000 valued home would only cost $175,000.
And today's $500,000 valued home would drop to $350,000 overnight.
Mind you, these drastic declines would occur only with a change in consumer demand and bank/government supply of debt. They only consider a return to sanity on the debt slavery front. But if the bond market, too, were to regain its sanity....and rates normalized just a bit(!)....look out below.
Leverage is leverage. It doesn't well matter if it's sanctioned by the government or if *everybody else* is doing it.