For the Past 14 or 15 years, the real estate market has experienced unprecedented appreciation and interest rates have been at or near historical lows. There two ingredients have brewed this thing I call the Housing ATM. People have been able to spend home equity, refinance, get equity lines of credit and go hog wild- all for lower monthly payments. This is all coming to an end. As interest rates go up and real estate values drop like a stone the free spending many American’s have enjoyed is history. I urge you to get a home equity line of credit on your home today, just to have it to have access to the asset while it is at today’s value. Once the home price drops you’ll no longer have the equity you had today and cannot access the same credit lines. Don’t spend money just because you have a home equity line. The disappearance of this phenomenon, higher interest rates, higher energy prices and general cooling off of the economy is likely to drastically change the way, carrying no bad debt and have all fixed rate debt (mortgages and student loans) you’ll most likely see no real change in your life. If you’re living beyond your means and running paycheck to paycheck you’ll likely feel the pain.
