A Quote by Alan Greenspan
A decline in the national housing price level would need to be substantial to trigger a significant rise in foreclosures, because the vast majority of homeowners have built up substantial equity in their homes despite large mortgage-market financed withdrawals of home equity in recent years.
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Even though some down payments are borrowed, it would take a large, and historically most unusual, fall in home prices to wipe out a significant part of home equity. Many of those who purchased their residence more than a year ago have equity buffers in their homes adequate to withstand any price decline other than a very deep one.
The decline in home equity makes it more difficult for struggling homeowners to refinance and reduces the financial incentive of stressed borrowers to remain in their homes.
The first principle of the market economy is that it is comprised of many small buyers and sellers, which implies a substantial degree of equity. Another fundamental market principle is that costs are internalized in the producer's price.
You also need to understand that when you consolidate credit card debt into mortgage debt - like a home equity loan or a HELOC [ home equity line of credit ] - you're taking an unsecured debt and turning it into a secured debt.
Housing wealth - the net equity held by households, consisting of the value of their homes minus their mortgage debt - is the most important source of wealth for all but those at the very top.
Any substantial tax reform would involve substantial redistributions of tax burdens and substantial changes in asset values, and you need some 'lubrication' (i.e., transition rules).
I'm struck by the fact that by and large equity capital doesn't play a big role in new financing; it's either bonds or internal financing but not really equity. And therefore, it's not clear that anything which improves the equity markets has really much to do with the productivity of the economy as a whole.
As homeowners see the value of their homes decline, they become more likely to delay purchases of the big items - like automobiles, electronics and home appliances - that are ballasts of the American economy. When those purchases decline, large manufacturing firms, suddenly short on funds, could begin laying off employees.
If we don't figure out a way to create equity, real equity, of opportunity and access, to good schools, housing, health care, and decent paying jobs, we're not going to survive as a productive and healthy society.
If we dont figure out a way to create equity, real equity, of opportunity and access, to good schools, housing, health care, and decent paying jobs, were not going to survive as a productive and healthy society.
Everybody would be better off if they could buy housing for only, let's say, a carrying charge of one-quarter of their income. That used to be the case 50 years ago. Buyers had to save up and make a higher down payment, giving them more equity - perhaps 25 or 30 percent. But today, banks are creating enough credit to bid up housing prices again.
Even in the days of the tightest credit in 2008, HELOCs [ home equity line of credit ] and home equity loans were being made.
Suddenly, the world is realizing that gold is still a safe haven asset. We've seen pretty substantial losses in equity markets. I think this is genuine safe-haven buying.
We really wake up every day trying to build businesses. That is the goal of private equity. It's a misnomer out there that private equity profits by shrinking companies. In fact, it's just the opposite. Private equity creates value by growing great companies.
Back in 2005 and 2006, I argued as forcefully as I could, in letters to clients of my investment firm, 'Scion Capital', that the mortgage market would melt down in the second half of 2007, causing substantial damage to the economy.
Both HUD and the Department of Justice began bringing lawsuits against mortgage bankers when a higher percentage of minority applicants than white applicants were turned down for mortgage loans. A substantial majority of both black and white mortgage loan applicants had their loans approved but a statistical difference was enough to get a bank sued.
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