Is This A Shrewd Reverse Mortgage Strategy?

It was in December 1989 that the Japanese stock market, the Nikkei, reached 38,915. Japan was seen as the economic power of the future, the country to emulate, the country that was buying our companies and best real estate.

Last week the Nikkei was at 14,489.44.

With home prices falling in most areas across the U.S., the great hope is that what we are seeing is a short-term decline, something that will quickly end and then home values will rebound.

It would be comforting to suggest that predictions in this area have been helpful, but that has hardly been the case. A succession of the “worst is over” comments have proved terribly wrong, and the moment when the economy will turn around gets pushed back further and further each month.

The experience with the Nikkei — and the corollary experience with Japanese property values — shows that long-term declines are not the stuff of fiction. Unlike the U.S., Japan had and has a strong currency, a good economy and excellent private savings.

One reason to consider a reverse mortgage is to get cash now, to buy more real estate while there is a buyers market — and to then sell the property when, hopefully, home values rise.

This is a strategy which would have made sense in many previous down markets in the U.S. — but as they say on Wall Street, past performance does not guarantee future results.

Until we know what those future results might be, we should all hope that the economic example of Japan does not loom in our future.

This entry was posted on Monday, June 9th, 2008 at 6:40 pm and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.