Personal Finance: Americans leveraging homes like never before Thursday, August 9, 2001

By JANE BRYANT QUINN SYNDICATED COLUMNIST

Once upon a time, homes were like piggy banks. That's where people saved.

Now, you're treating homes as if they were credit cards. That's where you borrow when you're looking for extra money.

Home prices have been rising nicely in most parts of the country. The National Association of Realtors expects a median gain this year of 4.6 percent.

Normally, home prices fall during a slowdown or recession, but this time sales and values are holding up.

Homeowners are borrowing heavily against those gains, especially in the past two years. Some banks will lend more than 100 percent of what the property is worth.

Many banks let you make tiny down payments. Or they'll minimize your monthly payment. Wells Fargo Bank just launched a mortgage that lets you pay only interest (no principal) for the first five or seven years.

"People are stretching; lenders are stretching," says Nicholas Retsinas, director of the Joint Center for Housing Studies at Harvard University.

With real estate prices up, you'd think that Americans would be rolling in home equity. But as fast as they lay hands on it, they're borrowing it out.

Americans owned an average of 70 percent of the value of their homes in 1980. That dropped to 62 percent in 1990 and 55 percent over the past decade.

QUINN

-- Martin Thompson (mthom1927@aol.com), August 09, 2001

Answers

Wouldn't a reverse mortgage make more sense? This way you get a tax-free income.

-- QMan (qman@c-zone.net), August 09, 2001.