Quote:
Originally Posted by Atticus
First off, not sure where you get the 3% figure. The avg annual real estate appreciation in this country since 1968 is 6.4%.
Second, compare apples to apples. If you're renting a place instead of owning if you're lucky you're going to be paying what the owners mortgage is, most likely a little higher. You cant make your argument by saying I would have a $1200 mortage on a $225,000 home but I'm living in a $100k home so I'm only paying $600 and investing the rest. You have to compare what the mortgage costs would be on owning the $100k home.
Third, you're completely discounting the tremendous tax benefits home owners receive that renters do not.
Real estate for investment purposes (ie 2nd and 3rd rental properties) you might have more of a case as you have to put additional money down and the tax breaks arent as great but there is zero argument or sense in choosing to rent when you could buy. Unless of course you only plan on being in a location for a limited amount of time.
|
You are right, I was off on my 3%.
Quote:
U.S. Census data
The price of new homes increased by 5.4% annually from 1963 to 2008, on average. (U.S. Census, PDF) New homes aren't the best yardstick -- we'd really prefer to see sales of existing homes. But if new homes are all the U.S. Census gives us, then that's all we have to go on.
First, let's account for the fact that the average new home size exploded from 983 s.f. to 2349 s.f. from 1950-2004, or about 1.6% per year on average. (NPR) So a big chunk of the increase isn't inflation, it's that bigger homes cost more money. Once we factor that in, the price of new homes per square foot went up by only 4.2% annually from 1963 to 2008.
And now let's compare that rate to the general rate of inflation, which was 4.4% for the same period. (CPI, BLS) As predicted earlier, the rate of real estate inflation and the general rate of inflation are almost identical.
|
New home appreciation is 5.4%, general inflation is 4.4%.
Tax breaks, sure, those are nice... but is it enough to justify the rest? If you want to buy a house, buy a house. Don't buy a house because you think it's something amazing investment. It isn't. The math says the opposite time and time again.