|
Posted by Don on July 10, 2008, 8:45 pm
> I don't think that a house provides inflation protection since they
> generally rise in value with inflation. From an economic standpoint,
> it may actually be better to spend the mortgage money on consumption.
> But having said that, I agree with you that a house may provide a
> useful psychological crutch to get folks to accumulate wealth when they
> might not otherwise do so.
It is some protection, because rent increases over the years, while
mortgage payments do not. And monthy payments for rent never end, while
mortgage payments do!
--------------------------------------
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.
|
|
Posted by on July 11, 2008, 8:45 am
> Don wrote:
> > Although it can be classed as
> > shelter you must have and use every day, the house nevertheless
> > increases in value over the years and provides a slow build-up of equity
> > and inflation-protection that renters do not have. Putting money into a
> > mortgage payment every month is a lot better than wastefully spending
> > it.
>
> I don't think that a house provides inflation protection since they
> generally rise in value with inflation.
What? Rising in value with inflation is the definition of inflation
protection. Of course, homes also provide a "yield" equal to what it
would to rent a similar living space, from which costs such as
property taxes, home insurance, and maintenance must be deducted.
--------------------------------------
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.
|
|
Posted by Don on July 11, 2008, 12:29 pm
On 2008-07-11 05:45:26 -0700, beliavsky@aol.com said:
> What? Rising in value with inflation is the definition of inflation
> protection. Of course, homes also provide a "yield" equal to what it
> would to rent a similar living space, from which costs such as
> property taxes, home insurance, and maintenance must be deducted.
I read an article in a newspaper by a responsible financial columnist
(the name escapes me) who claimed there are only two circumstances
where long-term renting makes more sense than long-term home ownership.
The first is the case of a depressed economy in a town where a factory
has closed down, house prices have dropped, and it looks like they will
never recover. The second is simply when you can't afford it: If you
don't have enough saved for a substantial down payment, then don't go
for easy credit and just keep on renting until you have enough saved.
If you have the cash and the economy is not totally dead, then home
ownership is the way to go. That point of view makes good sense. We
need to re-emphasize what has been known to financial planners and
commonly taken to be the rule for a long time: A home is the best
INVESTMENT you will ever make!
--------------------------------------
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.
|
|
Posted by on July 11, 2008, 1:19 pm
> On 2008-07-11 05:45:26 -0700, beliav...@aol.com said:
>
> > What? Rising in value with inflation is the definition of inflation
> > protection. Of course, homes also provide a "yield" equal to what it
> > would to rent a similar living space, from which costs such as
> > property taxes, home insurance, and maintenance must be deducted.
>
> I read an article in a newspaper by a responsible financial columnist
> (the name escapes me) who claimed there are only two circumstances
> where long-term renting makes more sense than long-term home ownership.
> The first is the case of a depressed economy in a town where a factory
> has closed down, house prices have dropped, and it looks like they will
> never recover. The second is simply when you can't afford it: If you
> don't have enough saved for a substantial down payment, then don't go
> for easy credit and just keep on renting until you have enough saved.
Yes, but if you have zero net worth and can somehow qualify for a
mortgage, buying a home is like buying a call option. If the home
appreciates, you benefit, but if it depreciates and you turn in your
keys, the lender eats the loss. That's the law in non-recourse states
such as California, and it seems to be the reality in other states as
well. There is also the possibility the government will bail you out,
as Congress is now considering. I won't defend the morality of this
approach to buying a home.
--------------------------------------
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.
|
|
Posted by Don on July 11, 2008, 4:03 pm
On 2008-07-11 10:19:20 -0700, beliavsky@aol.com said:
> Yes, but if you have zero net worth and can somehow qualify for a
> mortgage, buying a home is like buying a call option. If the home
> appreciates, you benefit, but if it depreciates and you turn in your
> keys, the lender eats the loss. That's the law in non-recourse states
> such as California, and it seems to be the reality in other states as
> well. There is also the possibility the government will bail you out,
> as Congress is now considering. I won't defend the morality of this
> approach to buying a home.
That may be possible, but I would guess it is a very risky plan. If a
person has zero net worth and pays the mortgage every month on time and
house prices kept on appreciating, then that person will indeed build
up equity and profit over the years. But a person with zero net worth
could have some bad habits as to saving vs spending and may end up in
trouble if the same habits continue. And then if he turns in the keys
he is not likely to get another chance to invest in much of anything
for years to come.
--------------------------------------
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.
|
| Similar Threads | Posted | | causes of subprime crisis | October 30, 2007, 9:26 am |
| what's the fuss about subprime crisis? | August 11, 2007, 3:59 am |
| A Good Look at the Subprime Mess | October 27, 2007, 1:52 pm |
| Re: conforming mortgages | August 16, 2007, 9:54 am |
| Finding info on bank's subprime exposure? | January 9, 2008, 3:04 pm |
| Escrow account rules with mortgages | February 8, 2007, 2:18 pm |
| Study defends option ARM mortgages | September 24, 2007, 10:36 am |
|
|
Yahoo! 
Google 
Windows Live 
del.icio.us 
digg 
Netscape 
XML Sitemap