It appears people have truly lost the distinction between savings and credit. This woman actually believes the credit line was her money. If she believes she has equity (which is probably illusory,) she can always sell her house and get all the cash that really is hers.
<strong><a set="yes" linkindex="21" href="http://www.irvinehousingblog.com/2007/04/08/southern-californias-cultural-pathology/" rel="bookmark" title="Permanent Link to Southern California?s Cultural Pathology">Southern California’s Cultural Pathology</a> </strong>
<p><strong>Appreciation is Income</strong></p>
<p>Look at the difference between the behavior of rich and poor when it comes to home price appreciation. The rich view home price appreciation as adding to their net worth. If lower interest rates allow them to refinance, they will restructure their debt to pay off the loan more quickly in order to increase their wealth. Poor people view home price appreciation as income; free money for them to spend. If lower interest rates allow them to refinance, they will restructure their loan to pull as much home equity as possible and reduce their payment as much as possible so they can spend more. If any net worth happens to accumulate, they obtain a home equity line of credit and spend the appreciation as quickly as possible — it makes them feel rich even though it really makes them poor.</p>
<p><strong>Credit is Savings</strong></p>
<p>So how do the rich and poor deal with credit? The rich don’t carry consumer debt. Why would they pay interest on a credit balance when it almost always costs more than the income they earn on their savings? The rich will use credit sparingly and most often pay off any credit balances each month as the bill comes due. In contrast, the poor carry as much consumer debt as they can afford to service. Whenever they receive an increase in a credit line, they believe they have more money to spend, just like it was savings. In a strange way, a credit account is like a savings account, only it has a negative balance. In a savings account, the saver earns money; in a credit account, the spender loses money. Again, the rich have savings, and the poor have credit.</p>
<p><strong>Debt is Wealth</strong></p>
<p>There are a great many Southern California residents who live in big houses, and they believe that makes them rich. To them, the possession and use of an expensive house makes them wealthy even if they have no equity in the property. The rich buy less home than they can afford and work to pay off the debt in order to maximize their net worth. The poor stretch their finances to possess more home than they can afford with loan terms which never retire the debt, or in the case of negative amortization loans, actually increases their debt held against the property. This ensures they either never gain any equity or only gain it by appreciation, and as mentioned previously, if prices appreciate they quickly withdraw the gain to fuel more consumer spending.</p>
