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As a Bay Area resident who bought his first home in 1959 I can't see prices ever going down. The apartment buildings I bought in 1964 and 1968 are cash machines.
you bought a business , not a home to live in . no one should confuse investment property with a home you consume yourself.
Huh? In 2014 dollars, insurance company losses on Hurricane Katrina came to better than $48 billion. For Hurricane Sandy, it was about $19 billion. In between was Hurricane Andrew at roughly $24 billion.
By the way, being "underwater" on a mortgage is similar to seeing a stock you bought go down. There is no real consequence unless you suddenly need to sell.
depends . if they wanted a reverse mortgage for income or an equity loan then yep it matters.
by the same token i am retired and live off my portfolio so each years budget is based on the portfolio's value , whether i sell or not .
When you own or rent you have payments, but you can pay as little as $150 a month for taxes and insurance, verses $750 a month for rent in a lower prices area.
So is it better to pay $45,000 in rent for 5 years and have nothing to show for it. Or have a home that is paid off and pay $9000 in 5 years for insurance and taxes and have an asset?
it may be better to rent and invest elsewhere the money that you would eventually have tied up in the home.
we rent and instead of having 6 figures tied up in the home we bought a share in a partnership that holds many property's and instead of 6 figures in the house we have multiple 7 figures now .
there is no such thing as having nothing to show if you rent if you have the money to have choices . it is all a question of how you invest elsewhere and the opportunity cost of not doing so . .
not everyone is an investor or can be , i get that . but to make a broad statement like if you rent you have nothing to show for it is not true one bit
it may be better to rent and invest elsewhere the money that you would eventually have tied up in the home.
we rent and instead of having 6 figures tied up in the home we bought a share in a partnership that holds many property's and instead of 6 figures in the house we have multiple 7 figures now .
there is no such thing as having nothing to show if you rent if you have the money to have choices . it is all a question of how you invest elsewhere and the opportunity cost of not doing so . .
not everyone is an investor or can be , i get that . but to make a broad statement like if you rent you have nothing to show for it is not true one bit
Most of us spend money to achieve what we think is important for our quality of life. Sure, I'd be financially better off renting a tiny studio apartment in a lousy neighborhood and investing the money elsewhere. I could also survive just fine on brown rice, beans, peanut butter, and bulk frozen vegetables and invest that money. The car? Bicycle, walk, or take the bus. The boat? A huge waste of money and needs to go. The vacation home at the ski resort? An even bigger waste of money.
I have a paid-for house where I recently dumped $200K+ in remodeling costs out of cash flow that might return 30 cents on the dollar if I had to sell the place. I plan to be carried out of the house in a pine box so I don't care. I freely admit that my self-image is very important to me and it's worth it to me to fling away money to live in a small, but very nice home in a good place where I feel good about living there.
We don't have any because they don't work. If they did, there would be nothing else.
Free Markets do work, and your Command Markets aren't working, plus your Command Markets are working worse than Free Markets ever could.
If you had Free Markets, then the home-owner would be responsible for obtaining mortgage insurance, instead of bleeding tax-payers dry.
In the alternative, the mortgage lender would be responsible for insuring the mortgage (and passing the costs onto the home-buyer either through higher closing costs, higher interest rates or a combination).
If either the home-buyer or the mortgage lender had to obtain their own private mortgage insurance, instead of bleeding the tax-payers dry, the financial predicament would not have been so bad.
Most of us spend money to achieve what we think is important for our quality of life. Sure, I'd be financially better off renting a tiny studio apartment in a lousy neighborhood and investing the money elsewhere. I could also survive just fine on brown rice, beans, peanut butter, and bulk frozen vegetables and invest that money. The car? Bicycle, walk, or take the bus. The boat? A huge waste of money and needs to go. The vacation home at the ski resort? An even bigger waste of money.
I have a paid-for house where I recently dumped $200K+ in remodeling costs out of cash flow that might return 30 cents on the dollar if I had to sell the place. I plan to be carried out of the house in a pine box so I don't care. I freely admit that my self-image is very important to me and it's worth it to me to fling away money to live in a small, but very nice home in a good place where I feel good about living there.
Lending standards have not relaxed much, if at all. The last home we bought, my credit score was an 822, gave them our tax filings for the last three years, gave them our list of assets, gave my and my wife's employers phone number, gave them our bank statements, etc.
They came back and complained that we didn't have a landline phone number.
All we use are cell phones. Google a landline number and it will tell you the address and name of the person. For a cell phone, nothing comes up. We seriously had to argue with them about it, like somehow not having a landline made us less credit worthy.
For all that trouble, and still being hassled over an insignificant thing like a damn phone line, I don't know how people who have bad or even just "ok" credit could be approved for a home loan. Even "good" credit borrowers are probably facing some trouble.
By the way, being "underwater" on a mortgage is similar to seeing a stock you bought go down. There is no real consequence unless you suddenly need to sell.
BUT it has a lot to do with your statement above about it not meaning anything if your portfolio is down. your value is your value whether you sell or not. like working on commission , you have a value that varies with how things are doing.
it makes zero sense when someone says it is only a loss on paper unless you sell.
it is the same thing if you buy an investment and it falls and you sell it and ride something else back up or if you keep the same money in play and ride the same investment back up .
in both cases your net worth is what it is regardless of selling or not . selling may only trigger a tax event but a loss or a gain is identical in both cases
same apply's to real estate .
just because someone has no reason to look or to utilize their net worth at any given time does not mean its value isn't real because they didn't sell something .
that is why they are called long term assets , because in the short term the moves may not effect you whether you sell one investment and buy another or keep the same one in play .
but there are times like in retirement where that value has quite an important meaning in the short term like when spending down or even going for a mortgage which is based on asset depletion if you are delaying ss . .
Last edited by mathjak107; 08-15-2015 at 04:30 PM..
Net worth is an intangible. It can go up or down because of events in never-never-land. No one lives there. The NNL effect can only reach you if you sell an asset, thereby sending yourself back to the real world.
If I've been living in a house and paying the mortgage on it every month for 40 years, what would it matter if in 14 of those 480 months, the place had technically been underwater? Answer: It would not have made any difference at all. Only if I had been forced to lock in a loss by selling during one of those 14 months would it have mattered.
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