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Posted by Elle on July 11, 2008, 3:05 pm
> 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!
Things have changed, from the standard deduction having
risen somewhat disproportionately higher to home prices
going higher. Unless one does much of one's own home
maintenance, then the cost of upkeep, taxes, and insurance
often mean renting is the better option. Columnist Paul
Krugman of the NY Times recently added another twist: Job
insecurities mean that one may have to move a few times
during the course of one's work life. The transaction costs
of buying and selling a home and having a house mortgage can
eat into any financial advantage a home offers, too.
The only thing I expect when I purchase a home is a nicer
quality of life than an apartment. I do not bet on its value
going up or even holding.
People talk about rent being money thrown away. What one
puts into one's home year after year to maintain the lawn,
shrubbery, concrete, roof etc. is also money thrown away
until the house finally is sold again.
We disagree about a home being the best investment a person
can make. The best investment a person can make is to live
within their means and save regularly. If this means no
house, then they are still doing quite well.
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Posted by Don on July 11, 2008, 4:15 pm
> The only thing I expect when I purchase a home is a nicer
> quality of life than an apartment. I do not bet on its value
> going up or even holding.
I can say the same thing about my stock and mutual fund investments
(without the nicer quality of life). They have done OK and not actually
declined in value over the years, but the house I live in has increased
in value far, far more.
> We disagree about a home being the best investment a person
> can make. The best investment a person can make is to live
> within their means and save regularly. If this means no
> house, then they are still doing quite well.
I certainly agree with that. But I wouldn't call that plan an
investment. It is a matter of acquiring habits and discipline early on
that make successful investment possible at a later time.
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Posted by Dave Dodson on July 11, 2008, 5:49 pm
> I can say the same thing about my stock and mutual fund investments
> (without the nicer quality of life). They have done OK and not actually
> declined in value over the years, but the house I live in has increased
> in value far, far more.
Don't think that is a universal comparison. Here is the rate of return
over the years on three houses I have owned
Year Price Current ROR S&P500Ret AvgInfl
1972 $40000 $151000 3.76% 7.19% 4.76%
1980 $103000 $404000 5.00% 9.19% 3.12%
1986 $142000 $241000 2.43% 8.41% 3.15%
Year = year I bought house
Price = what I paid
Current = Zestimate from Zillow.com
ROR = rate of return from purchase year until now
S&P500Ret = geometric average ROR of S&P 500 from purchase year until
now
AvgInfl = geometric average rate of inflation from purchase year until
now
I'm not sure I have the information I would need to calculate the rate
of return on my actual investments over the given time periods, so I
have included the S&P500 as a proxy for that. I've also listed the
average rate of inflation over the time periods.
You can see that the S&P500 was superior to all three of my houses
over the time periods shown. Only one of my houses has a ROR exceeding
the rate of inflation, whereas the S&P500 did surpass inflation over
those time periods.
Dave
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Posted by Mark Bole on July 11, 2008, 7:46 pm
Dave Dodson wrote:
> Don't think that is a universal comparison. Here is the rate of return
> over the years on three houses I have owned
>
> Year Price Current ROR S&P500Ret AvgInfl
> I'm not sure I have the information I would need to calculate the rate
> of return on my actual investments over the given time periods
Has there ever been rental income, or are all three of these houses
simply personal residences that you occupy at different times of the
year? Over those multiple decades, have you never invested in any
improvements, or had any casualty/theft losses?
That third house, the one that didn't even come close to doubling in
value over the last twenty-two years, that was a stinker, wasn't it?
-Mark Bole
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Posted by Elle on July 11, 2008, 8:09 pm
Re a 1986 house whose appreciation lagged (oh the horror!)
inflation
> That third house, the one that didn't even come close to
> doubling in value over the last twenty-two years, that was
> a stinker, wasn't it?
Surely you are not sporting the recently fashionable
attitude of those who expect much appreciation from their
houses, are you? <wink> Stinker, come on. A house is more
than an investment. In such real estate one dines, puts a
bed, raises one's family, and grows trees. The stuff of a
healthy life, hopefully.
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