[scorpio516]

Originally Posted by NOLA101

Sorry, but all the homes I've owned have been good investments, and good homes. I am careful to only buy in high-demand, high-cost areas where supply is limited.

I, personally, would never buy in Okemos, because it's a poor long-term investment. This is why it's cheap. I would rent in Okemos, so you can put all your cash in investments. Renting will never be more expensive once you factor in all the costs of ownership.

n=1

From 1952 to 2005, residential real estate has had a ROI of 6.9% ( Yet Another View on Why a Home Is One's Castle - Hasanov - 2009 - Real Estate Economics - Wiley Online Library ). That analysis conveniently ends in 2005. Case-Shiller shows that residential RE is almost exactly at 2005 levels today, so that lower's the 6.9% ROI.

Over the same time period, an S&P index fund would have returned 11.45%
Over the same period, 10 year t-bonds (the definition of risk free investment) returned 7.08%


SOOOOOO


Residential real estate is a horrible investment. You assume risk, yet you are penalized for it!

[magellan]

Originally Posted by scorpio516

n=1

From 1952 to 2005, residential real estate has had a ROI of 6.9% ( Yet Another View on Why a Home Is One's Castle - Hasanov - 2009 - Real Estate Economics - Wiley Online Library ). That analysis conveniently ends in 2005. Case-Shiller shows that residential RE is almost exactly at 2005 levels today, so that lower's the 6.9% ROI.

Over the same time period, an S&P index fund would have returned 11.45%
Over the same period, 10 year t-bonds (the definition of risk free investment) returned 7.08%


SOOOOOO


Residential real estate is a horrible investment. You assume risk, yet you are penalized for it!

Residential real estate is not a horrible investment. a) You have to live somewhere, might as well make some return on it. b) It all depends on when you buy and sell, and what you do with the home. And frankly you can't compare it to securities or mutual funds because you can buy and sell every day to hit those returns.

I've owned three homes in the last 18 years (2 primary homes and one rental), and I've made returns on all three, from about 4.5% to 11% a year, if you look at my purchase price vs my sales price.

Cash Shiller tends to be like Zillow = garbage in garbage out. You can't apply a national price index to local commodities.

Meanwhile, rental rates have skyrocketed in the last 3 years, at least here locally. It's now less expensive to own (PITI) than to rent in most cases here, taking all factors into consideration (upkeep, mortgage interest deduction, utilities, etc).

But I think this is getting way off topic from the OP's original question.

[beachmouse]

Originally Posted by magellan

Meanwhile, rental rates have skyrocketed in the last 3 years, at least here locally. It's now less expensive to own (PITI) than to rent in most cases here, taking all factors into consideration (upkeep, mortgage interest deduction, utilities, etc).

When we bought our Florida house in 2001, similar homes were renting for about $900-$950 per month, which was pretty much in line with PITI mortgages for similar at the time. Those homes these days rent for $1400-$1500/month. Homesteaded property taxes, so owner-occupied is limited to a 3% annual property tax increase. Homeowner's insurance down here went insane after the storms of 2004, but if you wanted to keep flexible with the cash flow, you could have refinanced a few times since purchase and are still probably paying in the $950-$1100 range depending on the insurance increase hit, a nice hedge against increasing housing costs. (We went the other way and did a 15 year note in 2003, and are looking to being mortgage-free shortly)

Investment return rate/appreciation is only one part of the equation if you're going to be in a location for an estimated five years or more.