|
Posted by Don on May 28, 2008, 6:02 pm
On 2008-05-27 15:54:13 -0700, beliavsky@aol.com said:
> Economic Scene
> Time to Buy? The Conversion of a Renter
> By DAVID LEONHARDT
> Published: May 28, 2008
> http://www.nytimes.com/2008/05/28/business/28leonhardt.html
>
> I think this article on the buy vs. rent decision is good, but the
> author ignores a factor in favor of buying -- over the long term,
> house prices can be expected to rise at the rate of inflation, on
> average.
In the area where I live, this buy-vs-rent issue comes up a lot in
financial columns in the newspapers, in lectures and seminars put on by
advisors of various types, and elsewhere. If you know a little about
the person giving the advice, it is usually easy to predict which
position they will advocate. Most who strongly urge "buy" are real
estate professionals and a few fee-only financial planners. Those who
urge "rent" are almost always stock brokers or commissioned mutual fund
sales people. Big surprise! Nothing like a little unbiased financial
advice for the education of consumers.
Here is where it gets ugly: Back during the tech boom when stocks were
all the rage, some financial advisors were recommending to seniors who
owned their homes free and clear to take out home equity loans and put
the money into mutual funds. The calculations on paper were convincing.
In the long run stocks have always increased in value. So why let all
that money sit in a house untouched. Real estate is a thing of the
past! Look at what stocks have been doing in just the last few years!
Besides, interest rates on bank loans are low. You can make money with
a cheap bank loan and stocks that are sure to go up!
A lot of seniors took the bait, and a few lost their homes and
unwillingly became renters. Personally I have never heard of a single
person who actually profited from this strategy. After the tech stock
bubble burst arount 2000, you didn't see much of this kind of advice
any more and many of these former "advisors" were nowhere to be found.
My guess is that almost all successful financial planners with good
reputations who have been in business a long time own their own homes,
and that almost all successfull and affluent real estate brokers have
quite a bit of money in stocks.
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.
| 
Yahoo! 
Google 
Windows Live 
del.icio.us 
digg 
Netscape 
XML Sitemap