I think it depends on your risk tolerance and world view. I think the world is just going to get more wealthy and property prices, even when there are downturns, will eventually always appreciate if you buy in the right area. I'm not saying I can predict that, but in the area I live in there were houses in the $600,000 range that sold for far less than that during the downturn, and now they're right back at the pre-recession value.
On the other hand there are areas that have never recovered. I think as a general rule if you buy a place in a mixed-used development neighborhood you'll be able to weather the storms. At least that's my opinion (and take that for what it's worth).
Re:How Home Loans Have Changed since 2000
by PretzelFisch on Monday August 15, 2016 @06:45PM
(#12294087)
you borrowed money and already made the purchase, just like a loan for a car. Car's depreciate quickly but people don't default on the loan because they are underwater based on ltv.
Re:How Home Loans Have Changed since 2000
by joeblubaugh on Monday August 15, 2016 @07:56PM
(#12294489)
The debt is collateralized by the house - give up the house and let the bank pay for the risk they took on you. You're under no obligation to the bank to overpay for housing when things change - you're just not likely to get another mortgage either.
> You're under no obligation to the bank
Yes you are. You signed a contract. This gives you an ethical if not a moral obligation. You have a legal obligation to pay in all states, which is why the lender can foreclose on you if you fail to do so. In some states, you also have a legal obligation to make the lender whole if they can't recoup their loss with the foreclosure sale.
Continuing to make payments on a house when you're underwater on the basis that you can still live in it is a really bad idea. Even if you can afford the payments, why would you want to overpay for something? That's why so many people walked away from their houses during the real estate crash: when you have no guarantees that the asset you're paying for will appreciate in value back to the original value, it's a much more financially sound decision to ignore the sunk cost and cut your losses ASAP.