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Fox
Joined: 04 Mar 2009
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 Posted: Tue Feb 23, 2010 4:28 pm Post subject: |
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| jaykimf wrote: |
| For about 30% more in cost we're getting a house that is more than 100% bigger. |
And, as I said, if the extra quality of life afforded by things like that extra space makes it worth it for you, then that's fine.
| jaykimf wrote: |
| More importantly, your $147552 figure assumes there will be no increase in rent over 30 years. Do you think that is likely? |
I think it's unlikely that rent will remain static over the next 30 years. I also think, though, that it's unlikely your property taxes, utilities, insurance, repair costs, and so forth will remain static over the next 30 years. Obviously I was roughly estimating; I have no way of knowing with any certainty how these things will change, or how certain costs -- like roof and boiler maintenance -- will affect you specifically.
| jaykimf wrote: |
| Try recalculating assuming a 2- 3% average annual rate of rent increase. Furthermore, what happens after 30 years? |
After 30 years you'd need to compare the value of your home to the value of the hypothetical alternative investment. After all, if that alternative investment turned out well, it's entirely possibly you could simply buy a home in cash, circumventing interest payments entirely and have money left over. Really the only question is how well that alternative investment would have to do in order to provide greater value than the home, wouldn't you say? As far as what other potential investments you could engage in, I have no particular suggestions. I'm just talking hypotheticals.
Purely as an aside, you can get far better than 1.5% on a savings account. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Tue Feb 23, 2010 9:36 pm Post subject: |
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| jaykimf wrote: |
| mises wrote: |
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| Wasn't it the mises institute that was predicting 15 years of depression and deflation? |
They're arguing amongst themselves about inflation/deflation.
The cost of your house is double what you paid, just from the loan. Then add in upkeep, property taxes, insurance and similar. Also the opportunity cost of the 'double'. You could have invested the difference.
What state are you in? Let's get specific. If you're in Wyoming or Oklahoma the numbers are much different from California etc.
And what makes you think America will be different from Japan? The Japanese credit/housing market blew up in 1989 and house prices are still way down from the 89 top. You shrug off the return on savings accounts while assuming your house will earn more. That is a very weak assumption. |
I really don't assume the house will earn anything--in real dollar terms. I do expect that within 5-10 years the monthly cost of renting will exceed my buying costs. As that approaches my monthly savings available to invest will gradually decrease, disappear and then reverse. I could be wrong and it might take 15-20 years but it will happen. (I'm confident enough to bet my money on it) Anyway, as I'm sure you know, the viability of the rent and invest the difference option depends largely on the spread between buying and renting (the amount available to invest) and the rate of return that can be earned on that investment. In our case the spread is relatively small to begin with and the investment options are limited. As I said, I want to diversify away from the stock market. |
Well, best of luck. I could very well be wrong. A close friend of mine (who is far more apocalyptic than me) has made buckets of money running a hedge fund. He recently bought a house because he reckons a fixed low rate creates a fixed payment that will be made meaningless by inflation. |
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pkang0202
Joined: 09 Mar 2007
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| Posted: Wed Feb 24, 2010 3:18 am Post subject: |
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| Buying a house is better than renting. Hands down. Renting builds zero equity. NONE. |
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bucheon bum
Joined: 16 Jan 2003
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| Posted: Wed Feb 24, 2010 8:15 am Post subject: |
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| pkang0202 wrote: |
| Buying a house is better than renting. Hands down. Renting builds zero equity. NONE. |
You're just going crazy with the oversimplifications today aren't you? Did you not read any of this thread??
And what about a person who bought a house that is now half the value s/he bought it for? They'll be lucky if it returns to the original value in a decade or two. |
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