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  #81  
Old Posted Jan 22, 2020, 9:01 PM
whatnext whatnext is offline
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Originally Posted by Crawford View Post
...and investors, and tenants, and families. My wife and I own her parents house, for a variety of reasons. Not sure why that should be disallowed.

I read that article and have no idea what they're talking about. The premise is wrong. Housing ownership has been a fantastic wealth-generating vehcile that distinguishes the Anglosphere from other developed nations. The UK is overall poorer than Germany but millions of UK households are much better off than their German counterparts due to homeownership. Germans traditionally rent, or if they own, inherit homes.
Who is happier?

Having travelled extensively in both countries, Germany comes across as by far more more prosperous.
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  #82  
Old Posted Jan 22, 2020, 9:13 PM
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Originally Posted by iheartthed View Post
To make your point, using an investment calculator that is based on the S&P 500 (https://dqydj.com/sp-500-return-calculator/) , if you had invested $100,000 in an index in 1989 then you could expect that investment to be worth roughly $1.3M today, assuming you did not add/remove a single penny since. That would correspond to buying a $100,000 house in 1989 and paying it off this year. The median home price in 1989 was around $125,000 and today its about $226,000. There are very few places where a $100,000 house in 1989 dollars is worth $1.3M today. The people who bought into places where that did happen just got super fucking lucky.

But if you had $100,000 in cash in 1989 then you probably knew that paying cash for a house was a bad investment decision, or at least someone should have told you that. You would have been much better off putting the $100,000 into the stock market and paying rent. If you paid $1,000 in rent every month for 30 years, you would have spent $360,000, and not been responsible for any maintenance costs. You would still be up almost $1M dollars.
You're picking a starting point that's right after the 1987 crash, though.

I'll counter with an apples-to-apples example of real estate beating stocks - you could easily have turned $100,000 of Sunbelt real estate around 2010 into $1M in a MUCH shorter timeframe than it took to do the same with stocks...
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  #83  
Old Posted Jan 22, 2020, 9:28 PM
iheartthed iheartthed is offline
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Originally Posted by lio45 View Post
You're picking a starting point that's right after the 1987 crash, though.
It doesn't really matter. The housing market has not performed as well as the stock market over any 30 year period with a starting point in the 1980s.


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Originally Posted by lio45 View Post
I'll counter with an apples-to-apples example of real estate beating stocks - you could easily have turned $100,000 of Sunbelt real estate around 2010 into $1M in a MUCH shorter timeframe than it took to do the same with stocks...
I'm sure you can find specific examples where the housing market might have performed better over a short period of time, but that's tangential to my point. I'm making the point that buying a house isn't really a great investment for the majority of people. Most people are unlikely to buy a home that appreciates faster than if they put that money into other investments. And a ton of people are likely to buy a home that doesn't even perform better than inflation, which means they might've been better off just sticking their money in a regular old savings account.

The best house to own is someone else's house, not necessarily your own.
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  #84  
Old Posted Jan 22, 2020, 10:11 PM
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Steely Dan Steely Dan is offline
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to me, the true benefits of home ownership transcend investment potential.

stability: as long as i live up to my end of the bargain with the mortgage payments, no one can kick my family out of our home. as our neighborhood continues to get wealthier, no landlord can ever jack the rent on us and force us to move out of our community. the value of that peace of mind is immeasurable when you're raising a family, IMO.

predictability: unlike rent, which only ever seems to increase over time, my mortgage payments will be exactly the same in 20 years as they are today.

pride: because i own it, i take much greater care with my home than i ever did with any of the rental properties that i lived in when i was younger. not that i was some savage who destroyed other people's properties, but when something is yours, you simply care more about it.

customization: because my home is mine, if i want to make changes to improve it or otherwise better suit my needs/desires, i don't have to seek the approval of some landlord who may not be on board with my plans. if i wanna redo a bathroom, boom, i redo a bathroom. i'm not at anyone else's mercy.



there probably are better investments than buying a home, but for all of the intangibles listed above, especially when it comes to family raising, i would never again want to be subject to the vagaries of the rental game. i enjoy calling my own shots way too fucking much.

besides, i think you'd be hard-pressed to find many financial planners who would say that home ownership, as one piece of a diversified investment strategy, is a bad idea in general.
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  #85  
Old Posted Jan 22, 2020, 11:10 PM
Baronvonellis Baronvonellis is offline
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Originally Posted by Investing In Chicago View Post
Oh boy, where to start with this….

I’m not triggered at all, but there are not words strong enough to describe how stupid of an idea it is to allow banks to adjust the principle of a loan because of built equity. If that was implemented in society, borrowing of money would come to a complete halt, the markets would crash, there would be complete chaos.
For those reading, this poster is stating he believes a bank should be able to loan somebody $300,000 for a home in the form of a mortgage, then 10 years later when the house is worth $340,000 - the bank should legally have the right to go back to the home owner and add $40,000 the the principle of their loan, because of…….i’m not sure why. That is seriously this guys stance. SERIOUSLY.

The very first thing you should learn about volatile markets is that past performance does not guarantee future returns - If you have a financial advisor telling you the market averaged 11.66% return during XXX time frame, so you should expect that moving forward over the long term….Fire him immediately. Seriously. Not saying you won’t earn that rate over the long term, but it’s not guaranteed. Most people use a threshold of around 8-9% as a good measure of long term gains.

No it is not a zero sum game, I don’t have the time to lay out each scenario investing the $60k in a mutual fund vs. put as down payment, but keep in mind that a couple things:
I’m assuming after the $60K this hypothetical person is still investing in the market via 401K and/or putting an additional post tax dollar amount into some sort of ETF. If this hypothetical person only has $60K to their name and has no ability to save any additional money, then they have no business purchasing a house they can’t afford. So to repeat, it is not a zero sum game, a savvy person can both purchase a home and invest in the stock market through some vehicle.

Tax benefits: Purchasing a home allows the homeowner to deduct Mortgage Insurance and Property Taxes, lowering the overall tax burden. Also keep in mind the 1031 exchange, very few people will grind out 360 payments over 30 years in the same house, real estate allows homeowners to “roll” the equity earned into a new home, tax free. So if the $300,000 home sells for $340,000 the $40,000 in equity is deferred tax, and can be put towards purchase of new home.

Paying down principle: Every month a portion of your mortgage payment pays down the balance of your principle, you are essentially paying yourself to live in your home. Additionally, with a mortgage you are locking in your payment regardless of what the housing market does (hint: it goes up long term), while renting, your monthly rent will surely increase over time, due to inflation.

The best approach is to Own Real Estate and invest in the stock market, not one or the other. I read a stat once that of a surveyed group of self-made millionaires, nearly 95% owned real estate. It’s a proven startegy, and the #1 wealth builder for the vast majority of Americans. If you choose not to invest long term in real estate, that’s your choice, but to try and deny PROVEN PATH to wealth is just plain foolish. Now it should go without saying, but individual circumstances may change this, but generally speaking this is true.
Ok, that was a thought experiment I came up with months ago, not sure why you keep bringing it up. You don't have to be rude about it if you disagree.

Yea, I know what "past performance does not guarantee future returns" means, although that generally applies to individual stocks. And I think 100 years of the overall market history is different than an individual stock in the short term. But don't take my word for it, Warren Buffet would tell you the same thing that the overall market goes up consistently over the LONG term.
Not sure where you got 8-9% from, that sounds like a random number, not based on 100 years of ACTUAL performance. If your only making that in a year, I would fire that advisor. Tesla went up that much this week.

Well that's the situation I'm in. I don't have $60k to my name to put up a downpayment. I have a 401k that I also put money in every week, but I'm not going to liquidate my 401k for a downpayment. Over the last 3 years I more than doubled my money I had picking stocks. I'm looking to get into day trading, you can do even better with that. I know people that started with $1000 and made $350k in a year day trading. At 21 I was living off a couple hundred bucks to my name, I don't know where you got the capital to buy real estate at 21, but that's great you could. I don't know anyone at 21 that could do that.

By the way I went to business school and they don't teach you anything about buying a house in school which is a shame. It would be nice if schools taught practical things.

Yea, I agree the best thing is to have real estate and stocks if you can. Not everyone can do both. I'm just saying maybe there are other options out there, if you actively trade stocks.

Since people generally aren't able to perfectly time real estate markets to buy the house they want to live in. You buy a house generally based on your job and where you live. With stocks it's much easier to time markets, and you can get out of positions instantly.
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  #86  
Old Posted Jan 23, 2020, 12:31 AM
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SIGSEGV SIGSEGV is offline
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Quote:
Originally Posted by Steely Dan View Post
to me, the true benefits of home ownership transcend investment potential.

stability: as long as i live up to my end of the bargain with the mortgage payments, no one can kick my family out of our home. as our neighborhood continues to get wealthier, no landlord can ever jack the rent on us and force us to move out of our community. the value of that peace of mind is immeasurable when you're raising a family, IMO.

predictability: unlike rent, which only ever seems to increase over time, my mortgage payments will be exactly the same in 20 years as they are today.

pride: because i own it, i take much greater care with my home than i ever did with any of the rental properties that i lived in when i was younger. not that i was some savage who destroyed other people's properties, but when something is yours, you simply care more about it.

customization: because my home is mine, if i want to make changes to improve it or otherwise better suit my needs/desires, i don't have to seek the approval of some landlord who may not be on board with my plans. if i wanna redo a bathroom, boom, i redo a bathroom. i'm not at anyone else's mercy.



there probably are better investments than buying a home, but for all of the intangibles listed above, especially when it comes to family raising, i would never again want to be subject to the vagaries of the rental game. i enjoy calling my own shots way too fucking much.

besides, i think you'd be hard-pressed to find many financial planners who would say that home ownership, as one piece of a diversified investment strategy, is a bad idea in general.


Thanks for posting this I was about to make a similar post. I'm still not very close to purchasing a place for various reasons (like not knowing where I'll be leaving in a few years), but the reasons that it's tempting see what you listed. Moving sucks and as a renter it can be unavoidable. And while I don't expect it to be a great investment, it's insurance against potential upward fluctuations in rent.

On the other hand, without knowing in advance how many children my wife and I might have (and what genders), it's difficult to know how big of a place to get ...
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  #87  
Old Posted Jan 23, 2020, 12:32 AM
Investing In Chicago Investing In Chicago is offline
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Originally Posted by Baronvonellis View Post
Ok, that was a thought experiment I came up with months ago, not sure why you keep bringing it up. You don't have to be rude about it if you disagree.

Yea, I know what "past performance does not guarantee future returns" means, although that generally applies to individual stocks. And I think 100 years of the overall market history is different than an individual stock in the short term. But don't take my word for it, Warren Buffet would tell you the same thing that the overall market goes up consistently over the LONG term.
Not sure where you got 8-9% from, that sounds like a random number, not based on 100 years of ACTUAL performance. If your only making that in a year, I would fire that advisor. Tesla went up that much this week.

Well that's the situation I'm in. I don't have $60k to my name to put up a downpayment. I have a 401k that I also put money in every week, but I'm not going to liquidate my 401k for a downpayment. Over the last 3 years I more than doubled my money I had picking stocks. I'm looking to get into day trading, you can do even better with that. I know people that started with $1000 and made $350k in a year day trading. At 21 I was living off a couple hundred bucks to my name, I don't know where you got the capital to buy real estate at 21, but that's great you could. I don't know anyone at 21 that could do that.

By the way I went to business school and they don't teach you anything about buying a house in school which is a shame. It would be nice if schools taught practical things.

Yea, I agree the best thing is to have real estate and stocks if you can. Not everyone can do both. I'm just saying maybe there are other options out there, if you actively trade stocks.

Since people generally aren't able to perfectly time real estate markets to buy the house they want to live in. You buy a house generally based on your job and where you live. With stocks it's much easier to time markets, and you can get out of positions instantly.
Ha. No offense, but somebody who doesn't have $60K to their name shouldn't be saying timing the stock market is easy. You'd be a multi millionaire if that were the case.
I spent the first 8 years out of college working for Morgan Stanley in Manhattan (worst 8 years personally best 8 years financially), and year over year it was proven that the VAST majority of people (including those in finance / investment banking) couldn't outperform the S&P500 over any extended period of time.
Trust me when I say timing the market isn't "easy". There is infinite amount of information on teh subject out there, I suggest you do some research and educate yourself instead of spewing nonsense on both investing in the stock market and real estate.
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  #88  
Old Posted Jan 23, 2020, 12:38 AM
DCReid DCReid is offline
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Maybe one point of the article is that policies may have had an unintentional effect of distorting the main value of a home as a place to live and not as a place to profit from. Seems like many owners come to view their home as an ATM machine where they can take out loans on the increasing equity or they can get bigger and bigger houses because they only need to put down 20% (or even less). It is odd that homes are bigger and bigger but family size is smaller and smaller. McMansions are popular again. I'm just as guilty - I can see myself as one person renting no more than a one bedroom but would not purchase anything home smaller than a 2 bedroom 2 bath that is more than 1200 square feet.
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  #89  
Old Posted Jan 23, 2020, 12:59 AM
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Originally Posted by Steely Dan View Post
to me, the true benefits of home ownership transcend investment potential.

stability: as long as i live up to my end of the bargain with the mortgage payments, no one can kick my family out of our home. as our neighborhood continues to get wealthier, no landlord can ever jack the rent on us and force us to move out of our community. the value of that peace of mind is immeasurable when you're raising a family, IMO.

[...]

pride: because i own it, i take much greater care with my home than i ever did with any of the rental properties that i lived in when i was younger. not that i was some savage who destroyed other people's properties, but when something is yours, you simply care more about it.

customization: because my home is mine, if i want to make changes to improve it or otherwise better suit my needs/desires, i don't have to seek the approval of some landlord who may not be on board with my plans. if i wanna redo a bathroom, boom, i redo a bathroom. i'm not at anyone else's mercy.
I think this is very important. The act of raising a family changes the dynamics to a whole new level. Its also where things like bills and costs go through the roof, hence why folks leave high priced cities or high priced neighboorhoods for affordability.

Single folks, have the world by the balls assuming they have an okay job. They can take the loss and rent, but with a family, now you have... depending on how many kids, 3...4...5+ mouths to feed, the dreaded DAYCARE COSTS, after school care, clothing, and all of this other bs one has to pay as to not end up in jail because until they are 18, yah can go to jail for poor management of kids.

AND this is assuming one doesn't have a wife who includes nails and hair into the monthly budget or a husband who buys useless stuff or has a spending problem.

Now for some folks that make great money, with a wife or husband who also has a poppin' career or job or income stream, this may not apply, and they can dish out $6k a month on a nice Manhattan apartment, but FOR THE MAJORITY, expenses matter.

So the lesson to be learned today kids is that if you have kids, expect a life style change. And in a big way! Or... one can continue to excel in a career, just date around, and not have kids, and be stress free. That is up to the person.

On a side note, may lead to the side effect of putting strain on ones career (for some, it does). A lot of stuff occurs when folks have kids. Probably much more than just getting married.
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  #90  
Old Posted Jan 23, 2020, 3:17 AM
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On the other hand, without knowing in advance how many children my wife and I might have (and what genders), it's difficult to know how big of a place to get ...
You can always climb the property ladder. That's what me and my wife have done. Before we met, I owned a small studio condo and she owned a one bedroom condo. After we got engaged, I moved into her place, and we rented out my old place. then just before our first child arrived we sold her place and used the $60,000 equity gain to buy a large 2 bedroom condo. Then about two years after the birth of our second child, we decided we had outgrown that place and used the $25,000 equity gain to trade up to a very large 3 bedroom/3 bath condo.

None of that might have been the absolute best possible way to use the equity gains in our home purchases, but when you parlay you equity gains into a new home, it all becomes tax free money!!!! And more importantly, we have the peace of mind of knowing that we are now locked into a home that is big enough for our family of four for the long haul, in a wonderful city neighborhood, one block away from a good K-8 school that our kids will be able to walk to every morning for the next decade. A lot of that shit is worth more than money to me.
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  #91  
Old Posted Jan 23, 2020, 3:35 AM
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You're picking a starting point that's right after the 1987 crash, though.

I'll counter with an apples-to-apples example of real estate beating stocks - you could easily have turned $100,000 of Sunbelt real estate around 2010 into $1M in a MUCH shorter timeframe than it took to do the same with stocks...
Only because it is far easier to leverage real estate purchases than it is for equities.
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  #92  
Old Posted Jan 23, 2020, 3:40 AM
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I've noticed that many home ownership proponents, leave out multiple factors when comparing it to a straight investment option, such as diversified mutual funds. Maybe your $300, 00 house increased to $400,00 over say, a 20 year period and you boast the $100,00 increase but let me ask you this:

- How much did you actually pay for that $300,000? Obviously this is based on the amount you put down and what your interest rate. So, what was your TOTAL cost of just the mortgage? Annual mortgage × 20 years
- What was your total property tax rate over the 20 years. I live in Texas, which has outrages property tax rate.
- what is your annual insurance policy rate over 20 years?
- what is your annual maintenance fees or Capitol improvement fees per year?
- what is your realtor fee if you were able to turn this into a liquid asset?

Yes, you get the tax deductions but you have to consider EVERYTHING and subtract those from the profit you think you are making.

I'm guessing after you look at all the factors you lost money in this home ownership investment.

There are many reasons to buy a home, but as an investment, compared to a mutual fund, would have to make it a very poor investment. Mutual funds have very little overhead.
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  #93  
Old Posted Jan 23, 2020, 4:23 AM
jd3189 jd3189 is offline
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Originally Posted by Steely Dan View Post
to me, the true benefits of home ownership transcend investment potential.

stability: as long as i live up to my end of the bargain with the mortgage payments, no one can kick my family out of our home. as our neighborhood continues to get wealthier, no landlord can ever jack the rent on us and force us to move out of our community. the value of that peace of mind is immeasurable when you're raising a family, IMO.

predictability: unlike rent, which only ever seems to increase over time, my mortgage payments will be exactly the same in 20 years as they are today.

pride: because i own it, i take much greater care with my home than i ever did with any of the rental properties that i lived in when i was younger. not that i was some savage who destroyed other people's properties, but when something is yours, you simply care more about it.

customization: because my home is mine, if i want to make changes to improve it or otherwise better suit my needs/desires, i don't have to seek the approval of some landlord who may not be on board with my plans. if i wanna redo a bathroom, boom, i redo a bathroom. i'm not at anyone else's mercy.



there probably are better investments than buying a home, but for all of the intangibles listed above, especially when it comes to family raising, i would never again want to be subject to the vagaries of the rental game. i enjoy calling my own shots way too fucking much.

besides, i think you'd be hard-pressed to find many financial planners who would say that home ownership, as one piece of a diversified investment strategy, is a bad idea in general.
All great points. I hope to be in the level of wealth in which I can enjoy buying and investing in a home.
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  #94  
Old Posted Jan 23, 2020, 4:26 AM
lio45 lio45 is offline
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Originally Posted by Investing In Chicago View Post
Ha. No offense, but somebody who doesn't have $60K to their name shouldn't be saying timing the stock market is easy. You'd be a multi millionaire if that were the case.
My reaction exactly - this guy says it's easy to get great returns year after year yet can't spare a tiny $60k?!? Not exactly convincing.

It's obviously not doable in every single market, but back in 2004/2005 it only took me one year to set aside enough of a cashdown to buy my first building. Still possible today in many cities.

Nice things about real estate is that it's 1) safer than stocks and 2) much more hands-on than stocks.

I still owned some stocks back then I and remember quickly realizing that with my building, I could take it into my own hands to do a bunch of things to improve profitability and create value, while by contrast, with my stocks, I could only sit and hope the directors/management would be doing these exact same things.
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  #95  
Old Posted Jan 23, 2020, 4:29 AM
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Only because it is far easier to leverage real estate purchases than it is for equities.
Leverage is the key word here. In stock market terms, it's like 5x margin trading for free, with tax benefits to boot.
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  #96  
Old Posted Jan 23, 2020, 4:32 AM
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Only because it is far easier to leverage real estate purchases than it is for equities.
Sure, but that's always been part of the calculation, and therefore, part of the appeal.
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  #97  
Old Posted Jan 23, 2020, 5:51 AM
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Originally Posted by Bailey View Post
I've noticed that many home ownership proponents, leave out multiple factors when comparing it to a straight investment option, such as diversified mutual funds. Maybe your $300, 00 house increased to $400,00 over say, a 20 year period and you boast the $100,00 increase but let me ask you this:

- How much did you actually pay for that $300,000? Obviously this is based on the amount you put down and what your interest rate. So, what was your TOTAL cost of just the mortgage? Annual mortgage × 20 years
- What was your total property tax rate over the 20 years. I live in Texas, which has outrages property tax rate.
- what is your annual insurance policy rate over 20 years?
- what is your annual maintenance fees or Capitol improvement fees per year?
- what is your realtor fee if you were able to turn this into a liquid asset?

Yes, you get the tax deductions but you have to consider EVERYTHING and subtract those from the profit you think you are making.

I'm guessing after you look at all the factors you lost money in this home ownership investment.

There are many reasons to buy a home, but as an investment, compared to a mutual fund, would have to make it a very poor investment. Mutual funds have very little overhead.
You still need a place to live and after 20 years, you have $400,000 in equity you otherwise wouldn't have had if you merely rented. Presumably you'd be investing in equities either way but your provided house a safe recession proof investment. Bonds and utilities aren't get rich quick options either but they are popular.
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  #98  
Old Posted Jan 23, 2020, 12:24 PM
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You still need a place to live and after 20 years, you have $400,000 in equity you otherwise wouldn't have had if you merely rented. Presumably you'd be investing in equities either way but your provided house a safe recession proof investment. Bonds and utilities aren't get rich quick options either but they are popular.

Not true, you can rent (even in the heart of the city) and have your investments add up to $400k. With renting, it is more of a fixed monthly cost with taxes already rolled in. If you think it's too high, you can always find a new apartment that fits within your budget that allows you to invest. Renting comes with less overhead costs...water/ trash + renters insurance which is peanuts compared to home insurance. Also, your transportation costs are typically less because you have more options closer in and your maintenance costs are zero.

Home ownership is great for a number of reasons but not because it's a good investments.....there are better, quicker, cleaner ways to amass that $400 k we were talking about. And actually the point of my post was that you were spending WAY more than $400 k to get there..WAY more. It's just not the best way...homeowners typically fail to record ALL the costs associated with home ownership when bragging about their increase in value. You cant leave those out to make it a fair comparison.
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  #99  
Old Posted Jan 23, 2020, 1:18 PM
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With renting, it is more of a fixed monthly cost with taxes already rolled in.
I'm not clear how renting is a "fixed monthly cost" and a standard mortgage isn't. You're also not considering the costs with investing. Investors are in a higher tax bracket and pay considerable capital gains taxes every year.

But the biggest reason that a regular, non-wealthy person is more likely to put money towards a home is because he needs somewhere to live. No one needs to invest (outside of retirement accounts, but that's not what we're talking about).
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  #100  
Old Posted Jan 23, 2020, 3:05 PM
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Again, the question isn't whether home ownership is a bad idea for everyone. It's whether it's a good idea for the government to actively incentivize it. The sort of people who are marginal homeowners are the people who have the hardest time affording things like property tax and paying for adequate property maintenance - the exact people for whom home ownership often isn't the best idea. Regular middle/upper middle class families would buy homes anyway, so they don't really need things like the mortgage deduction in order to do so.

If our general goal in terms of public policy is to ensure that housing remains plentiful and relatively affordable, spending less money subsidizing home ownership and more money dealing with supply issues (particularly for affordable housing) seems a better bet.
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