Cashing Out – Or – More People Acting Stupidly

Need more evidence of the eminent demise of housing prices? Cashing Out is a perfect example of people acting (mostly) stupidly. They are refinancing their homes AT HIGHER INTEREST RATES while taking out extra money, i.e. using their house as an ATM. The problem with this is that if the house price falls, which is highly likely, they are suddenly way underwater on their loan. What are they going to do if they have to sell? A shining example of the idiotic way so-called “experts” are thinking these days. “Above all, people need to ask themselves, “At the end of the day, what is the cheapest way to borrow this money,” said Bob Walters, chief economist with Quicken Loans. “You need to minimize the interest payments that you make.” What people need to be doing is reducing their indebtedness, not taking on more debt at a lower interest rate in an environment in which their house value could very well fall!

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