Have houses made people permanently rich? (Arcadia: renting, neighborhood, buying)

[Gentoo]

I think you have to go back further than the 70's to get the kind of appreciation that one would expect. My great aunt and uncle bought a beautiful home in Berkeley somewhere around 1960 or so for 9,500 or so. They had it appraised in '06 for 950,000. Today of course it's down to the low to mid 6k mark.

[EscapeCalifornia]

Originally Posted by Gentoo

I think you have to go back further than the 70's to get the kind of appreciation that one would expect. My great aunt and uncle bought a beautiful home in Berkeley somewhere around 1960 or so for 9,500 or so. They had it appraised in '06 for 950,000. Today of course it's down to the low to mid 6k mark.

Even buying in the mid 70's would put you in a really nice equity position today down here. My parents bought their house new in 1974 for something like $40k. Its easily worth $500k today. That works out to about a 7% annual appreciation. How many people got 7% raises every single year for the last 4 decades?

[Gentoo]

Originally Posted by EscapeCalifornia

Even buying in the mid 70's would put you in a really nice equity position today down here. My parents bought their house new in 1974 for something like $40k. Its easily worth $500k today. That works out to about a 7% annual appreciation. How many people got 7% raises every single year for the last 4 decades?

Good points.

[1AngryTaxPayer]

Well, it's not as rosy (depending on when you bought) once you take into consideration how much you gave back to the bank and Uncle Sam. A typical 200K loan will hurt over 30 years.

[k374]

Originally Posted by EscapeCalifornia

Even buying in the mid 70's would put you in a really nice equity position today down here. My parents bought their house new in 1974 for something like $40k. Its easily worth $500k today. That works out to about a 7% annual appreciation. How many people got 7% raises every single year for the last 4 decades?

Dont forget that they got to live in it as well!

[nmnita]

Originally Posted by EscapeCalifornia

Even buying in the mid 70's would put you in a really nice equity position today down here. My parents bought their house new in 1974 for something like $40k. Its easily worth $500k today. That works out to about a 7% annual appreciation. How many people got 7% raises every single year for the last 4 decades?

and while making the 7% or so appreciation they were getting a tax writeoff not to mention the initial investment was probably about 10 to 20% so they really had less than 10,000 invested at the beginning. Sure they made monthly payments, but they had to live somewhere and pay either mortgage payments or rent.

[nmnita]

Originally Posted by Ultrarunner

Excellent point... for many the only way to realize the gains is to cash out and move...

I would agree that many of our parents were very budget conscious...

Many were products of the Great Depression and being frugal is what got them through.

As I write... I know plenty of people paying more than a $1000 a year for cell phone... many double that just as with Cable...

Right there a person could save thousands a year by going without.

Remember when Cable first came to the neighborhood... it was $7.95 a month for the first year and Dad told the guy sitting at the kitchen table he had better uses for a hundred bucks a year...

oh we paid closer to $19 a month I think. What we remember was things like no commercials. We were the first section of our area to get cable (1986) I think. Look what we have to live with now?

[oddstray]

Depending what's meant by "rich", I doubt anyone got rich by owning one house. That, by itself, isn't even enough to retire on, though it would make a retirement a lot more comfortable.

[Ultrarunner]

Originally Posted by nmnita

oh we paid closer to $19 a month I think. What we remember was things like no commercials. We were the first section of our area to get cable (1986) I think. Look what we have to live with now?

No commercial interruptions was a big selling point... Cable Oakland came in around 1974 in my Oakland neighborhood...

Being a property manager it would seem cable/phone to all the rooms to be very important when apartment looking... not unusual at all back in the 1980's for lower rent units to have several phone lines... sometimes one per bedroom plus a house phone.

A fourplex I managed had 17 phone numbers and phone lines going everywhere...

As to houses making people permanently rich... yes... just as some have suffered huge losses.

No doubt many were wealthy beyond imagine when the market was at it's peak in 2006-07 around here...

Homes, like the one I bought in 88 for a hundred were pushing 500k and then dipped to below a hundred and now range from 160 to 180k... so in 25 years 60% appreciation at present levels.

The best areas always seem to fair better... such is life.

[DynamoLA]

Originally Posted by k374

I am talking about those who bought their homes in the 70s, 80s and in some cases in the 90s as well...even with the crash in home values these people are still sitting on assets that they bought at a fraction of their current values.

Not only have they got 30-40 yrs of rental value by living in these homes but they have also got hundreds of thousands in appreciated value with the profits tax free if they sell (due to the $250k/500k exemption in capital appreciation on homes). Most of these people would never be able to afford to rebuy their homes at the current value.

Do you think this opportunity will come again in the future? Are future generations going to be able to afford real estate like the previous generation did or is it going to be like some countries where the only way you own a home is if it is passed down from the previous generation.

With income declining, inflation rising and home prices starting to find a bottom at a level that is still seriously unaffordable (regardless of what the NAR says)...

Real estate is an asset just like stocks, gold, or a mattress stuffed with cash.

If you invest wisely in anything (well maybe not the mattress with cash), I would HOPE after 30 years you would see a good return off the investment.

If we get to the point where people cannot afford to buy a home, then real estate prices will drop. And California is not a monolithic housing market. Where you purchase is very important.