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Old 02-09-2016, 08:47 AM
 
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Theoretically, wouldn't any appreciation in my home just be sucked up on my purchasing of an equivalent home that has appreciated in the community?
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Old 02-09-2016, 08:53 AM
 
Location: NC
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Yes. Even worse, you would have lost the amount of money you paid in closing costs which could add up to 8-10% of the two transactions So there needs to be a very good reason for changing houses.
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Old 02-09-2016, 09:42 AM
 
Location: Raleigh
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Quote:
Originally Posted by hey_guy View Post
Theoretically, wouldn't any appreciation in my home just be sucked up on my purchasing of an equivalent home that has appreciated in the community?
I think that some (a lot) of people have the endgame plan of downsizing, to a smaller one story house or townhouse or condo. My parents have toyed around the idea but my Dad won't admit that he likes having a bigger house and I think moving to a smaller place would seem "less than" to him.

Honestly, the more and more I look at it, without a crystal ball telling you that the next RTP or whatever is coming to make your dirt more valuable, I think that the real reason you should by a house is to lock in your cost of housing. When I look at appreciation, even in a lot of nice areas, after you adjust for the new roof and periodic updates and everything else, even if your property value has doubled, you end up being around a 2% return. My math nerd uncle ran the numbers for me and I wish I still had the spreadsheet to show it. He used his house which had doubled in value during his ownership and concluded that from an investment perspective, he might as well have bought treasury bonds. But, he would still have bought to have a nice safe and stable place for his family.
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Old 02-09-2016, 09:49 AM
 
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For most people it's forced savings. 2% is better than 0% renting.
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Old 02-09-2016, 10:39 AM
 
Location: River's Edge Inn, Todd NC, and Lorgues France
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Quote:
Originally Posted by luv4horses View Post
Yes. Even worse, you would have lost the amount of money you paid in closing costs which could add up to 8-10% of the two transactions So there needs to be a very good reason for changing houses.
Also 6% for the realtor commission.
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Old 02-09-2016, 10:47 AM
 
2,189 posts, read 2,597,384 times
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Quote:
Originally Posted by JONOV View Post
I think that some (a lot) of people have the endgame plan of downsizing, to a smaller one story house or townhouse or condo. My parents have toyed around the idea but my Dad won't admit that he likes having a bigger house and I think moving to a smaller place would seem "less than" to him.

Honestly, the more and more I look at it, without a crystal ball telling you that the next RTP or whatever is coming to make your dirt more valuable, I think that the real reason you should by a house is to lock in your cost of housing. When I look at appreciation, even in a lot of nice areas, after you adjust for the new roof and periodic updates and everything else, even if your property value has doubled, you end up being around a 2% return. My math nerd uncle ran the numbers for me and I wish I still had the spreadsheet to show it. He used his house which had doubled in value during his ownership and concluded that from an investment perspective, he might as well have bought treasury bonds. But, he would still have bought to have a nice safe and stable place for his family.
This is exactly right, you lock in your housing cost so that in the future, you pay only property taxes on a paid off house, while others pay a mortgage plus property taxes, or they rent and keep paying rent increases. A private residence is not a money making investment although you can feel good about the equity increases, it is a hedge against future higher cost of housing, which indirectly allows you to make money by saving more as your cost of housing goes down relatively speaking.

Last edited by fumbling; 02-09-2016 at 11:20 AM..
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Old 02-09-2016, 11:07 AM
 
Location: Chapel Hill, NC, formerly NoVA and Phila
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A lot of people do eventually downsize or move to a lower-cost of living location in retirement. But, for many personal real estate transactions, (except for your first purchase, your last sale, or if you're moving locales), you're usually both buying and selling at any given time in the same location. So if the market is low, it's good for you as a buyer, but bad for you as a seller. And if the market is high, it's good for you as a seller and bad for you as a buyer.

But I agree, that you have to look at it as a buy versus rent scenario. You are locking in your "rent" price with a mortgage and building up equity over time.
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Old 02-09-2016, 11:55 AM
 
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Buying a home in hopes of making money is a bad idea. As others said, the benefit is that you lock in a predictable housing cost and simultaneously gain equity such that one day you own the house and pay only for the property taxes and maintenance to live there going forward.

Since people need a place to live, it is still a good investment strategy as long as you don't make too many mistakes along the way like buying more house than you really need. It's an investment that results in a savings versus an earnings.

With that savings, you could potentially retire to somewhere advantageous later in life (i.e. downsize to a cheaper location since you may no longer be concerned with commute to the rat race), so it's nice to have that option but I would never assume that's the end game. The fixed housing cost now and the future reduction of housing to near zero is the end game.
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Old 02-09-2016, 12:22 PM
 
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Not every house in a given city appreciates at the same rate. Buy in an up and coming neighborhood Improve the house. Sell. Repeat.

Or, as JONOV astutely said, recognize the primary purpose of buying a house is to fix your housing costs, plus to eliminate a house payment in retirement.
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Old 02-09-2016, 12:31 PM
 
3,231 posts, read 3,521,639 times
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Quote:
Originally Posted by luv4horses View Post
Yes. Even worse, you would have lost the amount of money you paid in closing costs which could add up to 8-10% of the two transactions So there needs to be a very good reason for changing houses.
Who pays this much in closing costs? Or do your totals include costs such as realtor fees/moving fees?
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