Home Ownership: the path to slavery

[Index piker]

Quote from saxon22:

I think many people do not realize that having a house paid off frees a lot of money toward other projects.

huh? You mean as opposed to freeing up that lump sum or extra principle payment from day #1 and letting the time value of money work for you.

Face it, it's all about comparative rates of return vs loan rate and since most mortgage interest is tax deductible the hurdle rate is much lower.

 

[mastertrader12]

I agree , living within your means is a sign of your integrity.

 

[Mike Morrison]

Quote from peilthetraveler:

Wow...you pay 2500 per month in total expenses and your house is paid off? I have an $1100 per month mortgage and even with that my expenses are always under 2k per month(including food in that expense) I too have a family of 4. What are you doing...eating out at red lobster 5 days per week?

Maybe I should have worded that different.

I probably should have said, "I could live for under $2500/mo". The truth is we spend a boatload more than that. Yes, we live a pretty nice life, but if the income wasn't there for some reason we could still live pretty well for next to nothing really. Thats more what I meant.

 

[ashatet]

4-5% a year appreciation, yes agreed. Now subtract the 3% property tax and insurance(2.5% after the tax writeoff). Then you have the house upkeep and maintenance for another 1% per year for new houses and 2% for older houses. There is not much long term return left on the house as an investment.

But you save on the rent and probably live a better life than renting. This is where the return of the house comes from.

Quote from Covertibility:

From a site, Free By 50 which uses Shiller's housing data.

Home price appreciation

1890 to 2007 3.44%
1900 to 2007 4.22%
1920 to 2007 4.03%
1948 to 2007 4.87%


Or roughly splitting up before WWII and after:
1890 to 1939 0.75%
1940 to 2007 5.45%

Or the past 100 years, 1907 to 2007 : 3.78%

If you break it down into decade chunks we get:

1890's 0.53%
1900's 1.40%
1910's 3.30%
1920's -0.70%
1930's -0.45%
1940's 8.16%
1950's 2.67%
1960's 2.57%
1970's 8.12%
1980's 5.86%
1990's 2.84%
2000+ 9.27%

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So you live in an asset that appreciates 4-5% in the modern era, and if its in an area that's not dependent on manufacturing, that's even better. This doesn't appear to be slavery to me.

 

[hottpotat0]

we moved from seattle to midwest-bought a bank owned with cash 32K no more mortgage!
better quality of life-surfing lake MI-more than i was in the PACNW-life is good -banks only selling to folks with cash-god was good to us

 

[longterminator]

wait til the people in new york and san francisco find out they're not worth 3x as much as the rest of the country

 

[TraderZones]

Quote from ashatet:

4-5% a year appreciation, yes agreed. Now subtract the 3% property tax and insurance(2.5% after the tax writeoff). Then you have the house upkeep and maintenance for another 1% per year for new houses and 2% for older houses. There is not much long term return left on the house as an investment.

But you save on the rent and probably live a better life than renting. This is where the return of the house comes from.

The return on the house is also that, after you pay off the debt, you are done. When you rent, that goes right into the time of your funeral.

 

[MX2101]

For ownership by a person who is an employee, how does the risk of needing to relocate for a job play into this discussion?

I'm thinking that unless becoming a landlord is part of the plan, someone who has to relocate may become a trader rather than a buy and hold to death homeowner.

I've relocated five times in a 25 year career. Assuming I could have bought a home each time, I wonder how I would have done? I think probably pretty well, but adverse events happen.

 

[Misthos]

Quote from MX2101:

For ownership by a person who is an employee, how does the risk of needing to relocate for a job play into this discussion?

I'm thinking that unless becoming a landlord is part of the plan, someone who has to relocate may become a trader rather than a buy and hold to death homeowner.

I've relocated five times in a 25 year career. Assuming I could have bought a home each time, I wonder how I would have done? I think probably pretty well, but adverse events happen.

It depends... don't forget real estate commissions (if you use a realtor) and other closing costs - title co fees, etc.... Title Cos are the biggest ripoff - title insurance is a scam, or at least how they price it.

 

[dcvtss]

Quote from TraderZones:

The return on the house is also that, after you pay off the debt, you are done. When you rent, that goes right into the time of your funeral.

What about property tax, insurance and maintenance? You are never done whether you rent or own.