Mortgage Top Target for 42 Percent of Americans
July 1st, 2011
Not only would 42 percent of Americans like to eliminate their mortgages over any other debt, but the retail sector supports owning your home free and clear as well. “Small business owners and retailers nationwide should be encouraged to know Americans are willing to spend if they…no longer had a mortgage payment each month,” said Rick Hanna, executive vice president of sales and marketing for Dex One Corporation, in response to findings by his company indicating that about 42 percent of Americans cited their mortgage as the number one debt to eliminate[1]. Also interesting, a little over half would use the money saved to make home improvements while 25 percent would buy a car, indicating that Americans would spend the money they saved by eliminating their mortgage rather than just socking it away.
Historically, a mortgage has been considered desirable debt because of its relative immunity to inflation, the often-fixed nature of the interest that it accrues and the tax deductions associated with the monthly payment. However, with the federal mortgage interest deduction under fire and increasing numbers of properties “underwater” with more debt on them than the property is actually worth on the open market that perception seems likely to change. In fact, some experts like Minneapolis Fed president Narayana Kocherlakota argue that lowering the fraction of mortgage interest households can deduct from taxable income would protect the financial system in the event of another housing crisis[2]. Kocherlakota believes that people would be less willing to take on high-dollar, high-risk mortgages that their budgets might not necessarily be able to afford if the mortgage interest deduction provided less of an incentive. In fact, he suggests replacing the popular deduction all together with a tax credit that offsets part of the down payment on a home.
Do you think that mortgages are going to continue in their downward spiral of popularity, or will the home mortgage make a “comeback?”
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[1] http://nationalmortgageprofessional.com/news25703/mortgage-ball-and-chain-most-americans-wallets
[2] http://www.inman.com/news/2011/06/28/tax-break-mortgage-debt-incentive-risk
July 1st, 2011 at 9:53 AM
Mortgages will come back slowly but will pick up momentum when the supply of foreclosed properties declines. Leverage is and will forever be the mantra of business schools. Using other peoples money (OPM) to leverage your assets is the way that successful business people accumulate assets. Lending went over the top and lost control of pruduent underwriting practices because the cost of money got too cheap. The rate of interest will rise with mortgage and general credit demand. Underwriting will again regain equilibrium and Rational borrowering in the form of mortgages and other credit will again rise in earnest.
July 1st, 2011 at 6:43 PM
As long as there are houses to be sold, there will be mortgages. People in this day and age will not have the big down payments as in the past, but they still want to own their own home. The biggest problem for the housing market is that they need to stop pushing homeownership as a investment and start pushing it as a place to live that has potiential upside value with long term ownership! In other words, people need to stop using their primary residence as a ATM machine, and buy “investment” properties for that purpose.
July 2nd, 2011 at 1:38 PM
The flipping of home took the price up to where the average blue collar person could not afford the American dream.Flipping homes should be illegal. Now that the homes are affordable the jobs are not there.
July 5th, 2011 at 6:25 AM
Perhaps multiple families can purchase a home with a mortgage since Mcdonalds is our #1 employer now. Pretty sad when our politicians step off the plane from a visit to China and declare what an efficient place it is. Really? Then pack your sh** and move there.