17 Dec 09
Originally posted by telerionWell, one of the problems in achieving this is that a house is partially a positional good.
No, I don't think I can. I'll ask around though.
On the other hand, there has been considerable progress over the centuries in terms of what people can afford. Obviously we're not there yet, and it's debatable whether we will ever be. Maybe.
17 Dec 09
Originally posted by MelanerpesAs usual the tax incentive is in the wrong place. Home ownership should not be tax deductible -- home maintenance/improvements should be. This would mitigate the current trend which is that homeowners tend to spend money keeping their homes in good repair while renters/landlords do the minimum and those properties tend to deteriorate.
I'm looking at it from a general viewpoint. Obviously, there are a wide variety of ways of renting.
My main point is that many people make arguments for why owning a home is much better than renting -- the main one being that homeownership supposedly contributes to community stability because people who own a home are more likely to stay long-term.
...[text shortened]... . Those who clamor for "less gummint" might want to consider this as a major area to target.
If one wants to discourage "landlordship", one can increase property taxes on third and higher properties owned by the same person. That will put more houses on the market and keep prices down.
Owning a home is not like owning stock. Companies make money and pay dividends while a house can only depreciate. If you want to own a house -- fine, but there should not be an enormous incentive to purchase. More renters with tax incentives to keep their homes in good repair will result in well-maintained neighborhoods and a more fluid job market.
17 Dec 09
1 edit
Originally posted by spruce112358On the contrary, historically speaking houses are much more likely to appreciate over time than depreciate. I've owned my house for about six months and it's already gone up about $14,500. Of course, I bought at rock bottom so that's not the norm.
Companies make money and pay dividends while a house can only depreciate.
In contrast, I've probably gained about $800 or so in the stock market during that time frame. Mind you I only have a few thousand in equities, but still, by far my home has been my most substantial and profitable investment. Count back all the previous years that I was paying rent and I don't even want to think about how much money I flushed down the toilet.
Now add to the mix some of my mortgage payments goes toward the principle on my home, which is amost like paying myself. And whatever goes toward the interest is a tax writeoff.
17 Dec 09
Originally posted by spruce112358USAP beat me to it.
As usual the tax incentive is in the wrong place. Home ownership should not be tax deductible -- home maintenance/improvements should be. This would mitigate the current trend which is that homeowners tend to spend money keeping their homes in good repair while renters/landlords do the minimum and those properties tend to deteriorate.
If one wants to ...[text shortened]... homes in good repair will result in well-maintained neighborhoods and a more fluid job market.
I also just wanted to second that in general, at least in the US, buying a home is probably the single best investment you could make for long term appreciation.
Many of my clients bought homes around here in the 60s, 70s and 80s. Even now, during a down market, homes bought in, say, the mid 70s, are worth 8-10 times what they were purchased for.
17 Dec 09
2 edits
Originally posted by sh76It's been a great investment IF you buy that home with your OWN money. But most people don't do it this way. For it to be a good investment, the appreciation in a house's value has to be high enough to offset the cost of paying all that interest on your mortgage AND high enough to exceed the gains you could've gotten in the stock or bond markets.
USAP beat me to it.
I also just wanted to second that in general, at least in the US, buying a home is probably the single best investment you could make for long term appreciation.
Many of my clients bought homes around here in the 60s, 70s and 80s. Even now, during a down market, homes bought in, say, the mid 70s, are worth 8-10 times what they were purchased for.
One of the big downsides of investing in housing is that a house isn't like owning stock where you can just sell your whole portfolio in an instant if conditions warrant it. If the housing market is tanking and you want out, you are likely going to be spending many many months trying to sell something that absolutely NO ONE wants to buy.
17 Dec 09
1 edit
Originally posted by MelanerpesYou're forgetting the benefit you get of living there. So, you have to add the costs you saved of renting equivalent housing if you're going to subtract the cost of paying all that interest on your mortgage AND high enough to exceed the gains you could've gotten in the stock or bond markets. Of course, you also can't count both the mortgage interest and the potential gains on the same money. If you wouldn't have borrowed that money, you wouldn't be able to make money on it. The lost opportunity costs are only applicable to the cash you put down on the house.
For it to be a good investment, the appreciation in a house's value has to be high enough to offset the cost of paying all that interest on your mortgage AND high enough to exceed the gains you could've gotten in the stock or bond markets.
Oh, and the down real estate market seems to be ending, at least in my neck of the woods. Houses are selling more quickly than they did a few months ago. Prices have definitely stopped dropping and seemingly are starting to turn around. Down markets happen; but up markets are more common.
17 Dec 09
3 edits
Originally posted by sh76True. A major benefit of homeownership is not having to pay rent to someone else. That's probably the main advantage. If a renter can get a mortgage that's about the same as their rent payments, he spends the same amount of money as before but ends up owning something at the end.
You're forgetting the benefit you get of living there. So, you have to add the costs you saved of renting equivalent housing if you're going to subtract the cost of paying all that interest on your mortgage AND high enough to exceed the gains you could've gotten in the stock or bond markets. Of course, you also can't count both the mortgage interest and the pot eemingly are starting to turn around. Down markets happen; but up markets are more common.
On the other hand, the homeowner has to factor in all the costs of maintenance and landscaping that the landlord takes care of when you're renting. (of course, landlord quality is an important element). The renter also doesn't have to worry about losing his investment in case of fire, flood, vandalism etc, or paying for the insurance to cover these things (already factored into the rent).
And if the renter needs to move (say to take advantage of a new job offer), he can just gather up his things and go while the homeowner is stuck with all of the hassles of selling the old house and then buying the new one. And if a homeowner has to sell his house quickly (let's say the bank is about to foreclose) - he's probably going to have to settle for a price that is well below the theoretical "market value" of the house
And one of the big things that investment advisers always preach about is the importance of diversifying - making sure you don't have too much invested in any one thing. But the homeowner often ends up having a very large % of savings tied up in one single pile of wood & nails sitting on a plot of grass. And if that one asset should suddenly lose a lot of it's value...well I think a lot of people have found out what happens over the last couple of years.
17 Dec 09
Originally posted by KazetNagorraPeople of approximately retirement age need investment profit money MORE than younger people; especially if they intend to retire at that age.
Buying a house is generally a good investment if you're going to live in one place for a prolonged time. It's just a pity that by the time you reap the benefits, you are usually too old to have any real use for money.
17 Dec 09
Originally posted by MelanerpesWell, yes, houses go down in value; but their value does not usually disappear like, say, an investment in Enron or Worldcom stock.
True. A major benefit of homeownership is not having to pay rent to someone else. That's probably the main advantage. If a renter can get a mortgage that's about the same as their rent payments, he spends the same amount of money as before but ends up owning something at the end.
On the other hand, the homeowner has to factor in all the costs of mainte ...[text shortened]... ell I think a lot of people have found out what happens over the last couple of years.
As investments with high upsides go, residential real estate is typically a fairly safe one. The main problem with investing in residential real estate is that the costs involved in maintaining and paying a mortgage on it often are higher than the income that can be generated by renting it out. When you live in your own house, you don't have to worry about that,