Quote:
Originally Posted by c1pher
DC and California are atypical of national market trends. Nationally, houses from 1963-2008 earned, on average about 4% per annum. Obviously that means some markets gained and some have lost.
And again, although your house gained in value $200k, you’ve probably paid double at this point of what the original sale price was just with interest included. Tax deductibility on mortgage interest only maybe gives you a third of what you paid back. Again, not saying you won’t make money, but it will be far less than you think. And I am providing a rule of thumb. There’s clearly variability in all of that.
The other thing to consider is that for most people, a home is a major investment. You are putting a lot of trust into one instrument that it will gain value, when typically you invest in your 401k or stock market, you will diversify whatever you put in across several different markets and investment types. A house is a singular market and opens you up to wider market ups and downs.
I’m not here to tell anyone what to do, just sharing my experiences. I will say that while your home in DC May have gained $200k, my navy friend in Hampton Roads has lost $70k in value from the original purchase price.
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Unless you got into some really screwed up mortgage/home purchase, you will always get equity out of the house paying into it. Doesn't matter what your total cash out lay is. With renting, it's 100% guaranteed you will have zero to show for it in the end because your payments don't go to owning anything.
I really don't look at my house as an investment solely. It's a place I live in. We all have to pay for a place to live in. I would rather have my payments go into something I will have some equity in. It may sound harsh but renting to me is just flushing money down the toilet. Now I know not everyone has the means to buy property due to market prices and having to come up with a down payment. But one should set this as a goal.
I swallowed my pride and moved back in with my parents after college so I could pay down debt and save up money to get into my first place. Once you get into your first home (provided you didn't get into a questionable property), moving on to the next property is typically easier. Especially when the Feds allow you to shelter $250k of appreciation if you're single or $500k if you're married to sink into your next home.