Buying into the American dream of home ownership can be a sure road to financial distress, says Yale economist Robert Shiller.
"American mortgage institutions encourage people to take a leveraged position in the real estate market, which is quite risky because home prices can and do decline, as we have learned so painfully," Shiller writes in The New York Time.
"Leverage a risky investment 10 to 1 and you can expect trouble — and we have plenty of it today. More than 16 million homeowners owe more on their mortgages than their homes are worth."
Yet, while the crisis in the housing market shows that our current approach is far from perfect, "there is a certain wisdom behind it, related not only to economic stimulus but also to the preservation of a sense of national identity," Shiller says. (more)
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