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Try renting a $100K house for 30 years, of course you're not going to regain one dollar of what you have paid. Now tell me renting was a better deal than buying.
Didnt come close to saying renting was a better option, its why I've NEVER rented in my life.
Quote:
Originally Posted by Finn_Jarber
How many houses have you kept 30 years?
None, but the longer the holding period, the more equity one has.. You do realise that most of the premiums on the front end of a mortgage goes towards interest, right?
Didnt come close to saying renting was a better option, its why I've NEVER rented in my life.
None, but the longer the holding period, the more equity one has.. You do realise that most of the premiums on the front end of a mortgage goes towards interest, right?
So you owned a home when you were 18? That's nifty, how did you pull that off?
None, but the longer the holding period, the more equity one has.. You do realise that most of the premiums on the front end of a mortgage goes towards interest, right?
It really depends on your plan to pay it off. Right? It's cool if you dont want to call it an investment. Everyone if free to call it whatever they want.
It really depends on your plan to pay it off. Right? It's cool if you dont want to call it an investment. Everyone if free to call it whatever they want.
If you dont pay it off, then your liabilities extend out even longer..
If the price of gasoline or food, or even college dropped 20%, most of us would be overjoyed.
So why is it considered a catastrophe when housing prices drop?
Isn’t it funny how falling home prices are automatically assumed to be a bad thing? Yet a decrease in food prices, college, and gasoline would be good?
We have been systematically taught that housing is a good investment and that prices must go up. Ask your parents why they bought their house. One of the top 3 reasons will almost certainly be, “It was a good investment.” However, for many people in many situations, it is not. In fact, housing is can be a terrible investment. It shouldn't be looked at as an investment, it is shelter. No more than a car should ever be purchased as an investment.
Yet the illusion persists, whether it’s people begging to buy a million-dollar house with no research, or people saying things like, “I wish I’d bought more real estate” after incurring a paltry 1.2% return rate over several decades.
As a result, you get media reports that implicitly echo the cultural assumption that housing is a good investment. The way they describe the housing market — oops, “housing recovery” — influences and reflects our cultural assumption. Let’s take a look at a headline from a major national news publication:
"Housing prices rise by highest percentage ever. More news that the housing market is recovering."
Interesting…it’s a “housing recovery” when prices are getting expensive. Would you say that with toothpaste?
Also interesting: Why is it a painful decline when young people and other first-time buyers get more affordable housing, lower their debt burden, have more discretionary income not tied up in servicing mortgage debt?
What if we discard the assumption? Let’s try the following:
prices are become more out of reach for young people. Young paying their future earning to the old.
Or…prices reach a new level of expense, draining families of income for things like education, heath care and spending.
Affordability declines for first-time homebuyers.
As Warren Buffett said in his 1997 Chairman’s Letter to Shareholders,
“If you expect to be a net saver during the next 5 years, should you hope for a higher or lower stock market during that period?
Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall.
This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.”
For young people, every time the market goes down, you should be cheering for your own individual finances. You can acquire investments at lower prices and you have a long time for the market to grow.
Yet, paradoxically, lower housing prices do represent a clear risk to the American financial system, whose growth is predicated on consumer spending, which is in turn strongly influenced by housing prices. That’s why this obsession is so serious and confusing to many. Lower home prices actually increase discretionary spending. (Excluding foolish HELOC induced lifestyles of course)
Just because virtually every media presentation celebrates the “rapid increase” in housing values doesn’t mean that applies to you. “Higher house prices = good” is a cultural assumption and a very negative one indeed.
If the price goes down then your equity goes down and thus your ability to use that equity as a resource goes down. It also means your ability to relocate if you have to or want to goes down. It also means your credit rating goes down. It also means construction will down and all the related industries will suffer.
Well considering the most wealth that Americans have is in their homes. Its great for the owner if the home is is worth more, and more.
That was the case before 2008 but it turned out to be a false market. The stock market and home prices are based on optimism, sometimes buyers are overly optimistic.
On average, a $100K home, has a $1K a month mortgage payment, and a 30 year loan..
That means people will pay $360,000 for a $100K house, (yes taxes and insurance included)..
If you think you're going to regain $360K from that home when you sell it then its an investment, and that doesnt count maintenance costs either.
Good luck with that.
Well if you're smart and also lucky you can take the balance of the $360K and invest it. If you make over the cost of your mortgage and maintenance you've won the game!
Bernie Maddoff had lots of investors that profited from investing in his funds as well..
Fraud is fraud. Real gains are realized. I don't see the connection there.
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