I would have to agree with kewp on this. A lot of people were sold on the premise of it being the American Dream. That people could be invisibly building equity that they could later tap if they needed to. It is a dream that the RE industry uses to justify and support the high prices for housing.
Best thing to really do is look at it as a rent-buy decision, and go by the numbers. I do have to agree with the issue of lack of financial education. My personal opinion is that financial education should be one of the focuses of our K-12 education system. A person may have live with the consequences of bad or poorly informed financial decisions for years. It would be money well spent.
I did note in the referenced article, that the interest rates were rather high (avg noted about 10%). The only way you get those rates, even from Countrywide, is if you have a really bad FICO and negligible assets. Recently (Aug ’07), a friend of mine refi’d her place with Countrywide at about 5.8% for a fixed Jumbo amortizing loan. She has a FICO in excess of 700. I think she finally realized what I told her about her previous mortgage broker taking her to the cleaners (the refi ended up being at a lower rate than what her mortgage broker’s ARM would reset to). Even still, Countrywide pushed her to do a cash out. She did limit the cash out to a small amount.. but it looks like I still have to do some financial education with her. The cash out allowed Countrywide to increase the interest rate on the loan. (See Calc’d Risk section on Mortgage finance/Risk based Pricing, check on the pricing of points on the sheet shown.)
