Retirement vs mortgage

[vanillabean]

Whenever the topic of mortgage comes up with a member of my retired parent generation, you can be sure without fail they’ll say to pay it off while you’re still working. It may be baffling given their background of solid pensions, but I feel confident the high mortgage rates of back then probably plays a key role, not to mention that there was also more of a debit mentality than nowadays.

The other day, I read an article, Why mortgage debt threatens boomers’ retirements. "The percentages of families whose debt payments are excessive relative to their incomes are at or near their highest levels since 1992.” But I say, that’s not because you carry a mortgage into retirement, it’s because the wages of most people have been stagnating for the last thirty years.

A few days earlier, I had read another article about the younger among us, Challenging what we know about the housing bubble. We thought the bubble was caused by greedy bankers and subprime borrowers. The first is still true, but the second is not. Those who overextended themselves were not so much the poor, but rather people richer than average residents.

[Revelate]

Not certain why there's necessarily a disparity in this; I simply see a house and my retirement accounts as different assets on the same personal finance balance sheet.

People do dumb things financially, and while the banks did get greedy so did the consumers; neither were utterly blameless, but who was going to complain?  Lenders were making money, and people were getting their idea of the American dream (ok white picket fence sort of optional now).  That said, positive feedback loops don't occur often in nature and there's very good reasons for that... financially it leads to bubbles like we saw.

[Anonymous]

You and i have a different definition of poor:

I define poor to be people whose assets -liabilities sheet is negative.

People with low income may own less stuff but it doesn;t make them poor.

People with high income who overspent may own more stuff but are still poor.

Financial illteracy is the problem. If people knew how to value assets and liabilities (and houses are both!), then they'd know how to value what Wall Street or Fannie and Freddie or whomever is peddling.

Too bad this country is dead set on destroying its subject knowledgable teachers and excusing mediocracy with the "math is hard" adage. Life is hard. Learning how to deal with it is a necesity.

[bada_bing]

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@Anonymous-own-fico wrote:

A few days earlier, I had read another article about the younger among us, Challenging what we know about the housing bubble. We thought the bubble was caused by greedy bankers and subprime borrowers. The first is still true, but the second is not. Those who overextended themselves were not so much the poor, but rather people richer than average residents.

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Be careful thinking that an opinion piece in the Washington Post is the equivalent of "true".

Plenty of blame to go around for the housing meltdown, but there isn't much doubt that ground

zero for the start of the chain reaction was looser lending standards typified by "no doc" loans.

I find statistical analyses of income stated on loan applications called "liar loans" just a bit -hmmmm-

suspect ? We may never know the real financial status of a lot of borrowers during the end of the housing

boom. We can say that by definition, their typical financial status wasn't up to the debt they took on though.

After the chain reaction got started, it was definitely sustained by "strategic defaults" by

people who could have made good on their obligations, but were not held to it. This fact skews

any analyses of the financial status of the people who defaulted. The end result didn't

punish the "greedy bankers" nearly as much as it did the general public and overall economy.