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Old 12-12-2017, 08:34 AM
 
6,070 posts, read 4,639,668 times
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Quote:
Originally Posted by JPrzybylski07 View Post
Isn't there a ton of credit card and student loan debt out there too?? I don't have any facts or statistics to present my case and questions here.. Just thinking about the big picture taking "facts" and confirmation bias out....


Even with mortgages equity and appreciation sounds great and all but what does it matter if everything else over the years also increases in value and price, seems like any appreciation and equity just get's washed out not even taking inflation into consideration...


I think a house is a forced savings account at best, and when you study an amortization schedule it's nothing to get excited about. Sure your house may double in price in just 5 years, but that means everything else did as well.


......
Mortgages account for almost 70% of household debt. Car loans are next.


The higher the inflation, the better the value of owning a house with a fixed mortgage. Suppose you have a mortgage for $1000/month and if you rented the cost would be $900. A decade or so down the road, the mortgage cost is still $1000 but the cost of renting could easily have increased to $1500 or more.


I certainly agree that buying a house strictly as an investment is a poor idea likely to result in a low and volatile rate of return. I also agree that a mortgage is a big commitment. There is some risk of declining property values or of losing a job and still needing to pay the mortgage. In 2008, many households faced both issues. I have owned 7 houses - some for just a year or so and one for several decades. None were great investments or losses but I certainly came out way, way ahead of what I would have spent to rent equivalent housing. The last time I rented was many, many years ago. The landlord sold the house out from under me. Before that I had a landlord who would not do repairs and the heat was bad. Before that the landlord was a PITA, often letting themselves in to inspect the property.
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Old 12-12-2017, 08:41 AM
 
Location: Fairfax County, VA
1,387 posts, read 680,278 times
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Quote:
Originally Posted by mathjak107 View Post
it was actually after world war II that the numbers soared . they came down from that level so 1985 was actually the re-kick off .
The first line in the 1985 NY Times article linked to above was....The United States has become a debtor nation for the first time since World War I...

Public debt is a completely different calculation.
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Old 12-12-2017, 10:23 AM
 
20,161 posts, read 16,379,042 times
Reputation: 37858
Quote:
Originally Posted by jrkliny View Post
Mortgages account for almost 70% of household debt. Car loans are next.


The higher the inflation, the better the value of owning a house with a fixed mortgage. Suppose you have a mortgage for $1000/month and if you rented the cost would be $900. A decade or so down the road, the mortgage cost is still $1000 but the cost of renting could easily have increased to $1500 or more.


I certainly agree that buying a house strictly as an investment is a poor idea likely to result in a low and volatile rate of return. I also agree that a mortgage is a big commitment. There is some risk of declining property values or of losing a job and still needing to pay the mortgage. In 2008, many households faced both issues. I have owned 7 houses - some for just a year or so and one for several decades. None were great investments or losses but I certainly came out way, way ahead of what I would have spent to rent equivalent housing. The last time I rented was many, many years ago. The landlord sold the house out from under me. Before that I had a landlord who would not do repairs and the heat was bad. Before that the landlord was a PITA, often letting themselves in to inspect the property.
The mortgage payment only stays the same if property taxes don't go up, but they do. And the more debt the Federal government carries, the less there will be for the states and they rise even more. My mortgage is only $450 or so, but between property taxes ($7800 a year), flood insurance and homeowners my mortgage payment is almost $1300. A decade down the road, the taxes and the insurance will both be higher, I may need to come up with thousands for a new roof or septic system or any number of things that will wear out in a decacde, so I don't think the higher rents necessary mean you automatically come out ahead.


Before this house (not even closed yet, it's that new a situation) I rented for 18 years, beginning at $650 a month and now $813 a month. Over the years as the fridge went. and the dishwasher, I called the landlord and had a brand new one delivered within a day or 2, while now I will have to pay to replace them. There are no hard and fast rules IMO about what is better.
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Old 12-12-2017, 10:35 AM
 
9,933 posts, read 4,540,842 times
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Quote:
Originally Posted by ocnjgirl View Post
The mortgage payment only stays the same if property taxes don't go up, but they do. And the more debt the Federal government carries, the less there will be for the states and they rise even more. My mortgage is only $450 or so, but between property taxes ($7800 a year), flood insurance and homeowners my mortgage payment is almost $1300.
with a property tax of $7800, and going with the average property tax around 1.5-2.5%, the house is $500,000 +/- $150,000

not entirely sure where people can get that kind of living space for $1300 rent

benefit of renting is the cost of not having to keep up the house to me, and not the straight $ difference, owning a house is a headache when you have to do the work or pay to hire someone to do it
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Old 12-12-2017, 10:56 AM
 
7,693 posts, read 4,941,560 times
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Property taxes vary considerably. In my part of Ohio, in the unincorporated townships, a typical rate is 1.5% - 2% of realistic market-value, whereas in the suburbs and “city”, it can be double that. Thus, for a $80K house, the annual property tax can be $3000, or $250/month. Insurance can be $1000/year. The upshot is that taxes and insurance can cost nearly the same as the mortgage-payment itself. So, if the house is entirely paid off, and the mortgage goes to zero, the cost of staying in that property hardly plummets from its former level.
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Old 12-12-2017, 12:48 PM
 
Location: Virginia
120 posts, read 67,920 times
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Quote:
Originally Posted by jrkliny View Post
Mortgages account for almost 70% of household debt. Car loans are next.

The higher the inflation, the better the value of owning a house with a fixed mortgage. Suppose you have a mortgage for $1000/month and if you rented the cost would be $900. A decade or so down the road, the mortgage cost is still $1000 but the cost of renting could easily have increased to $1500 or more.

I certainly agree that buying a house strictly as an investment is a poor idea likely to result in a low and volatile rate of return. I also agree that a mortgage is a big commitment. There is some risk of declining property values or of losing a job and still needing to pay the mortgage. In 2008, many households faced both issues. I have owned 7 houses - some for just a year or so and one for several decades. None were great investments or losses but I certainly came out way, way ahead of what I would have spent to rent equivalent housing. The last time I rented was many, many years ago. The landlord sold the house out from under me. Before that I had a landlord who would not do repairs and the heat was bad. Before that the landlord was a PITA, often letting themselves in to inspect the property.
I believe the student debt market is larger than the car loan market ($1.3 trillion vs $1.1 trillion)? I know, sad, right?

Buying a house could be considered good debt. The problem is times like 2008. If you were a good citizen and put down 20% on your house then AND you kept paying the mortgage throughout it all, you would have to stick around for a long while to see it just back to zero (and this does not take into account all the maintenance you would have been doing in the 10 years of waiting to get back to zero).

The whole debt thing assumes a certain degree of faith that the system is working as it should and that there will be a way to repay your debts by finding new and/or better employment (or the asset appreciating and being sold), that the economy is growing constantly, so on and so on. Right now, due to various concerns (environmental damage/climate change, country turning increasingly into a corporatocracy, tax laws being brought in against the middle class, rising costs of healthcare and burden of it on the ordinary person, increasing costs of education, automation and offshoring of jobs, increased challenges from other nations whose markets and economies are on the up and up and more attractive due to sheer numbers of consumers - like China, most of the money moving into a smaller and smaller % of the US population, so on and so on), this idea that the economy will keep growing is a really moot point. Everyone has their own opinions and education and outlooks, I personally would be borrowing very little and putting only the bare minimum down (e.g. better hang on to that cash than pay it up front to the bank and watch the house values crash once again).
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Old 12-12-2017, 12:57 PM
 
806 posts, read 360,134 times
Reputation: 1139
Quote:
Originally Posted by HeartWantsWhatItWants View Post
I believe the student debt market is larger than the car loan market ($1.3 trillion vs $1.1 trillion)?

Buying a house could be considered good debt. The problem is times like 2008. If you were a good citizen and put down 20% on your house then AND you kept paying the mortgage throughout it all, you would have to stick around for a long while to see it just back to zero (and this does not take into account all the maintenance you would have been doing in the 10 years of waiting to get back to zero).

The whole debt thing assumes a certain degree of faith that the system is working as it should and that there will be a way to repay your debts by finding new and/or better employment (or the asset appreciating and being sold), that the economy is growing constantly, so on and so on. Right now, due to various concerns (environmental damage/climate change, country turning increasingly into a corporatocracy, tax laws being brought in against the middle class, rising costs of healthcare and burden of it on the ordinary person, increasing costs of education, automation and offshoring of jobs, increased challenges from other nations whose markets and economies are on the up and up and more attractive due to sheer numbers of consumers - like China, most of the money moving into a smaller and smaller % of the US population, so on and so on), this idea that the economy will keep growing is a really moot point. Everyone has their own opinions and education and outlooks, I personally would be borrowing very little and putting only the bare minimum down (e.g. better hang on to that cash than pay it up front to the bank and watch the house values crash once again).
Except that is what happened last time... People had very little skin in the game so they didn't care if they were foreclosed since they had nothing to lose. Having skin in the game would motivate someone to find other solutions instead of just taking the easy way out through foreclosure. Coming into the game with 20% or more down might motivate someone to get a second job if they need be, or rent out a portion of their house, or through other creative means to avoid losing their skin...
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Old 12-12-2017, 01:01 PM
 
Location: Virginia
120 posts, read 67,920 times
Reputation: 324
Quote:
Originally Posted by JPrzybylski07 View Post
Except that is what happened last time... People had very little skin in the game so they didn't care if they were foreclosed since they had nothing to lose. Having skin in the game would motivate someone to find other solutions instead of just taking the easy way out through foreclosure. Coming into the game with 20% or more down might motivate someone to get a second job if they need be, or rent out a portion of their house, or through other creative means to avoid losing their skin...
The whole corporate world functions on the principle of cheap debt and bottom line. Nobody in their right mind will put more of their capital down than they have to. If the corporations can do it, why wouldn't you? At the end of the day it is about what you value more and your long-term outlook. No money down and you pay PMI but you hang on to your cash. Or plonk the 20% down and pray the economy doesn't go to the toilet again...

A lot of lawyered up folks with the means to keep paying their mortgages still went into foreclosure - not because they couldn't afford to pay but because it didn't make financial sense to.
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Old 12-12-2017, 01:02 PM
 
806 posts, read 360,134 times
Reputation: 1139
Quote:
Originally Posted by HeartWantsWhatItWants View Post
The whole corporate world functions on the principle of cheap debt and bottom line. Nobody in their right mind will put more of their capital down than they have to. If the corporations can do it, why wouldn't you? At the end of the day it is about what you value more and your long-term outlook. No money down and you pay PMI but you hang on to your cash. Or plonk the 20% down and pray the economy doesn't go to the toilet again...

A lot of lawyered up folks with the means to keep paying their mortgages still went into foreclosure - not because they couldn't afford to pay but because it didn't make financial sense to.
Interesting last concept you bring up....
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Old 12-12-2017, 01:03 PM
 
806 posts, read 360,134 times
Reputation: 1139
Quote:
Originally Posted by HeartWantsWhatItWants View Post
The whole corporate world functions on the principle of cheap debt and bottom line. Nobody in their right mind will put more of their capital down than they have to. If the corporations can do it, why wouldn't you? At the end of the day it is about what you value more and your long-term outlook. No money down and you pay PMI but you hang on to your cash. Or plonk the 20% down and pray the economy doesn't go to the toilet again...

A lot of lawyered up folks with the means to keep paying their mortgages still went into foreclosure - not because they couldn't afford to pay but because it didn't make financial sense to.
We will have to learn again that cheap money with low interest will get us in trouble again... I don't think anyone would say credit is as easy as it was 10 years ago, but it seems to be trending toward easier...
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