No One Does

We've recently made the acquaintance of a couple who've lived in Elk Grove since 1987 -- well, precisely, in the town of Franklin. Lived in the same house that whole time...yet can't forecast the day when their mortgage will be paid off.

I worked with a power dispatcher at WAPA who said the same thing in 1996 when I left -- he'd had a house since 1981 and by 1996 owed more on it then than the day he bought it.

Paying off mortgage debt, I believe, was perhaps drilled into the American psyche of former generations but it isn't for any of ours. It's not a function of personal finance anymore. True, I don't know the financial details of any of these people -- but there are hardly any who espouse any penchant for actually paying it off. Everyone wants to, but no one does. Granted, my reference is a handful of people in a region hard hit by foreclosures. It might not extend beyond Elk Grove...but I think it likely...

I learned about one couple in particular. He said his [fairly new] boat was paid for. Separately, she said they cashed out re-fi'ed "'cause everyone else was doing it and it seemed like a good idea at the time," leading to the current state of a perpetual mortgage.

That's a sublime statement: everyone else was doing it. It extends well beyond my own little circle of acquaintances methinks. In reviewing the foreclosure notices in the Ft. Collins newspaper last spring, mortgage balances on every home closed in 2005-2006 were all greater than the original note, leading me to believe that people never had any intention on paying their mortgages off. They lusted after the capital appreciation and gain, but hadn't considered that there's still the underlying mortgage that needs servicing.

Today we are propping up new home buying by at least $8,000 in federal tax credits, perhaps more if the states are throwing monies they don't have into these sorts of programs as well. It may appear that these owners are benefiting, but that the prices are artifically kept up because of it, that their taxes over the next thirty years will be paying that back, they aren't really gaining. And by offering the $8,000 credit against the down payment, we've done absolutely nothing to reinforce ideas of responsible personal finance. We will create yet another generation who will come to expect such things as these tax credits as an inalienable right.