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If a typical house can last so much longer than a typical generation time (~30 years), and the typical mortgage term of 30 years, then why isn't it more common for the average Joe to own a home outright? If most Americans actually have to pay rent/mortgage, then it would seem that, for whatever reason, in a sense the average housing unit is actually paid for 2-3 times over in its lifetime. What gives?
Population growth? If this is the answer to the riddle, then more and more people should be owning outright as population growth slows, right?
Once a house is "paid for" by the original owners, it doesn't stop being an asset. It continues to have value, and sometimes the value appreciates over time. If the original owners move or die, they or their heirs will sell the asset to a new buyer at a price commensurate with the market at the time, and the process starts over again when the asset changes hands.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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The average homeowner moves every 7 years. In our case, the first house was for just the two of us. When the second kid was on the way, we needed more room. Then after the third, plus other issues, we moved to another state. With this 3,000 sf house being in a great location and being plenty big enough, we have been here 23 years, but still won't pay it off. With the kids grown and on their own, we expect to sell and downsize when retiring in 3-4 years. I suppose we could make multiple payments and pay it off early but then we'd lose the tax deduction for mortgage interest. It's also typical for people to move to bigger or nicer, newer homes as their income grows over the years, or they just get tired of the same house. Things change, local schools may get worse, crime may increase, traffic or other noise can move into the neighborhood. The idea of staying 30 years to pay off a mortgage is very rare, and has been since about the 1960s. Lifetime renters either never have the cash for a down payment, just prefer not to do home maintenance, or are simply not motivated to buy, because their parents always rented and they don't see the benefits in buying. For me the biggest benefit is that the initial (fixed) mortgage payment stays the same, while income goes up. Despite small property tax increases, your spendable income goes up every year with your raises. With rent, the monthly payment goes up, often every year, and often more than the amount your income goes up.
If a typical house can last so much longer than a typical generation time (~30 years), and the typical mortgage term of 30 years, then why isn't it more common for the average Joe to own a home outright? If most Americans actually have to pay rent/mortgage, then it would seem that, for whatever reason, in a sense the average housing unit is actually paid for 2-3 times over in its lifetime. What gives?
Population growth? If this is the answer to the riddle, then more and more people should be owning outright as population growth slows, right?
Exactly. Because each seller wants to get back the investment they made so they can re-invest in their next house, etc.
Your plan might work if the first few buyer's, instead of selling, just walked away. And repeat until the original first (and only) mortgage was paid off. See how that would not be real popular ?
As said, the value of the house stays with the house, just ownership of that value changes each time it is sold.
And the banks keep making a profit each time a new mortgage is taken out.
I own many homes outright. I haven't had a mortgage since 1998. The last 5 homes I didn't bother with a mortgage. I haven't sold a home in 25 years.
You own them as rentals i'm guessing?
Did you live in each of them and then when you wanted to move just rented it out instead of selling?
I know that there are some people that use the strategy of moving into a home , fixing it up and selling it after 2 years because of the capital gain break of $250k for an individual or $500k for per couple.
Very few people are fortunate enough to pick out a home that will satisfy their needs/wants as their lives evolve through changes in income, family size, and location. The house of a young couple making 70k might be different than they want when making $120k and three kids, and again when empty nesters on retirement budget.
We sold our first house to downsize.
We sold our second house to move out of that city.
Combination of population growth, changing needs (moving... for whatever reason), using the house as an ATM, and buying too much house.
My house (built this past year... admitedly in a very low cost of living area) is 2k sqft. 1k living space and 1k shop.
It cost me just under $50k including solar (it's offgrid) and I paid cash.
Look at the size of housing (and family size) since WW2.
In Fairfield county I see a lot of older homes (maybe 50-75 years old) being demolished in favor of a more modern and bigger home. Think about it, you pay for an older home which probably still retains value for the land alone in FFC, then demolishing costs, then rebuilding costs. This is usually a dream home case on a prime lot location. The point is people with the resources, aka money, find value in it for themselves at least even if most would not do such a thing. You only live once right..
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