I was reading this article today http://finance.yahoo.com/focus-reti...ts-Your-Retirement?mod=retirement-preparation and there was a line that said this "According to a recent report from the Center for Economic and Policy Research, a Washington, D.C. think tank, the collapse of house prices that started in 2006 has wiped out more than $4 trillion in home equity..." It didnt get wiped out. It just got transferred. They never mention that home values went up more than $5 trillion a few years ago before they lost that $4 trillion in equity. Nothing was lost, it was just transferred. How do i know? Because I was one of the people that profited from the housing. Once i received my profit of 140k for owning my house for 4 years(which i only paid 148k for the house), I took that profit and planned to buy another property in another state. But instead of being greedy, i saw that propertys that were selling for 170k a few months earlier where selling for over 250k then so i said "Forget this...I'm renting until prices come down" (it was at this time that the media and all the realtors were SURE that property values would keep going up and and worst, they would just level off for a few years) Yeah right. Even in 2005 I knew there was a collapse coming alone with everyone else that sold all their property and rented. Anyone who has ever read "The Richest Man in Babylon" should know the 5th law of gold. "Gold flees from the man that would force it to impossible earnings or who followeth the alluring advice of tricksters & schemers or who trusts it to his own inexperience and romantic desires in investment." I dont know why we spend so much money on education and never teach kids about money.
Because naive and unqualified parents think they will learn everything from pubic schools. Yes, I said pubic purposefully, regarding the quality and focus of education available there.
How else will the middle classes prosper and invest? They can't do it by using scale and bullying tactics so they have to use their wile and invest in assets when the time is right, get out when the time is right and also not buy lottery tickets. Those who are uninformed will be the ones paying for the middle classes to improve their lot without working themselves into the ground. The less educated are the ones buying property or stocks at the top of the market and selling at the bottom. A lot of teachers to the working class are middle class, do you think they would share all of their knowledge or just enough for the working classes to turn up for work and buy lottery tickets? Of course the main thing you get from going to school/college/university is learning how to research, learn and think. If you choose not to learn/use these skills to your advantage then do you deserve to make money by buying a house with a mortgage you can't afford?
Those selling their houses with a profit, certainly got a lot more equity - from those buying. Those who took up more mortgages on their house to finance other projects, well - they now owe big at a real heavy risk. Those who saw their homes appreciate and did nothing - are maybe now seeing their homes depreciate - and still doing nothing, it never really mattered...
Interesting........ Here is how........ For example.... There is a 100 unit condo project.... The units are identical.... In 2000.....one sells for $100,000 Total value 100x $100,000 In 2005....one sells for $200,000 100x $200,000 In 2008....one sells for $80,000 100x $80,000 From 2000 to 2005, how much was gained ? From 2005 to 2008, how much was lost ? From 2000 to 2008, how much was lost ? How many transactions from 2000 to 2008 ? 3 Adam Smith's Invisible Hand..... The US/UK know Adam Smith all too well.....
Dont forget to add collection of rents and interest the bank made on a 100k loan in 2000 and a 200k loan in 2005 and now an 80k loan in 2008. When you think about it, there is still some extra money left over.