My friend Kurt O’Keefe writes about the 6 trillion dollars in home equity than has evaporated in the mortgage meltdown.
When I look around me in the Silicon Valley and environs, I question just how real that equity really was.
Reckless lending practices made a vast pool of people potential buyers for a limited quantity of homes in a desirable part of the world. More buyers chasing fewer homes lead to huge increases in home prices.
This “equity”, the increased value in the surrounding homes, never would have existed had it not been for mortgage lenders passing out money like flyers at a rally. It was artificial from the beginning.
The correction is painful to those who bought or borrowed at the top, but the top was a man- made illusion.
May 1, 2008
