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re: How inversely related are housing prices and interest rates?
Posted on 1/9/13 at 6:48 am to ItNeverRains
Posted on 1/9/13 at 6:48 am to ItNeverRains
quote:
I look at a house differently than a mutual fund. You can always rent your entire life, I enjoy home ownership and the perks I feel that come with it.
I think we are on the same page. I'm saying don't buy a home because it may increase in value. I'm saying be a homeowner because homeownership in and of itself is a good thing.
I believe it's almost always (financially) better than renting over the long run. It's just not going to beat traditional investments.
Posted on 1/9/13 at 7:24 am to ZereauxSum
quote:
I believe it's almost always (financially) better than renting over the long run. It's just not going to beat traditional investments.
It's something that's inherently difficult to compare to regular investments, because it's extremely difficult to separate the consumption aspect of homeownership from the investment aspect.
The historical data seems to indicate that you might be able to expect about a 1% appreciation in real value per year (compared to about 6-7% for stocks), but even so, how much of that is consumption of a depreciating house that constantly needs maintenance, and how much of that is investment in the real estate upon which the house is constructed?
When you factor in all the complications involving interest tax deductions, capital gains loopholes, insurance, landlord-tenant duties & responsibilities, etc., the big picture just gets more and more confusing.
Probably the best rule of thumb to go by is the multiple of home price to rental costs. When it gets too high, that's a red flag.
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