Posted on 08/25/2005 11:56:51 AM PDT by hubbubhubbub
WTF? You must be kidding. I saved in IRA's and equities most of which have not even come close to the increase in equity I gain in my house.
There is a $500,000 tax FRee deduction against that equity, and there is now reverse mortgages whereby one can receive checks from their lenders.
This idea that a home is not a valid investment for one's future in just LOONY, ask almost any homeowner who bought, and stayed in their homes through a business cycle.
What am I missing?
Yes, because now you are homeless.
Right now society values gold at $439.80 per ounce. When is the history of mankind has gold been worthless. I beg you to answer.
That would be true only if you're right now living in the stock certificate and that selling the stock would mean that you'll have to go move in with your parents.
Let's be honest. We buy a house to live in it. If we say that our biggest investment is our house, then we're admitting that we spent too much money on the house and we now don't have enough money left over for savings' investments.
"and move into something smaller"
That also costs $2M, unless of course you plan on living in a tent or trailer court.
That's like saying all stocks cost as much as Berkshire Hathaway.
"It seems that this guy wants us to limit the measurement of savings to cash in banks."
The exact opposite my friend. The author is utilizing the classical economics definition of savings. All income that is not consumed is savings.
S = I - C
I can turn a stock into cash and spend it with out borrowing against it. If you want to spend the value of your house you have to either sell it or borrow against it. Clearly borrowing against your house isn't savings, you have to pay the money back. If you sell your house the only way to get the value of of it is to purchase a cheaper home. How many people do that?
Man, I can't wait to buy forclosed real estate when this bubble bursts.
My hunch is that (barring societal financial chaos) with population growth about to explode (lots of immigrants, short generations) there will be tremendous demand for housing in the next 5-20 years and housing prices in many markets will reflect that demand. Of course, if a bird flu or other microorganism starts killing us all off, SELL SELL SELL! The population growth thingey is a Coloradan's perspective, I'm sure it is shared in many parts of the country. And don't get me wrong I love Mexicans and think they are one of the greatest immigrant groups in our history, but they're the backbone of this unprecedented population growth out west.
"mexicans"
I never thought of it this way, I tend to agree. There are 3 different Mexican families living in my neighborhood in Northern VA. I got no problem with them btw :) But it just shows you that they are buying, or other people are buying and they are renting. Truth to tell, I have a lot more problems with "white" renters than Mexicans. The Mexicans work for a living.
Thanks for the refreshing, hopeful comments on the next 5-20 yrs.
Just the part about how you're consuming part of your savings. Sure, there are some people who buy and sell houses and make a profit, just like there are people who buy and sell cars and make a profit. Years ago my brother in law inherited some money and he decided to 'invest' it in a new Mercedes Benz. (True story.) It didn't work because he was not being honest with himself. If he were, he'd have done his homework and first found a car buyer, maybe not driven the car, etc. What he was missing was the fact that he used the investment fig leaf to try to cover up his consumption diddlydoo. He never fooled anyone.
Now I'm sure you're much smarter than my brother-in-law. You're taking into account all the money for finding, buying, maintaining, and paying taxes on a home, and then calculating the rate of return over the period of time you're owning it. Like you would any other investment. Then the extra money (not the whole amount) you're putting into the house really is saving. Of course, then it becomes a dicey conflict of interest.
I recently paid down my mortgage an extra $25,000 initially using funds from a 0% credit card offer. The interest payments immediately went down $1,500 per year, and $42,000 over the life of the loan. Sounds like savings to me.
The best way home equity qualifies as savings is the way it lets you trade up in home value. You take your equity out of House A and use it to help you buy House B, a better house.
This has worked well over the years and continues to work well so long as your equity in House A is not phony equity.
nice try. since when is not owning a home homeless ?
Let me try simple english with you. If you own one house that you live in and then you sell it, you are homeless until such time that you acquire another residence.
No it's not. If you now wanted to use that $25,000 for consumption you would have to refinance.
And buying a house is what... spending money on crack?
The headline is inane. Housing is like any other asset. Some have more risk attendant, and that risk can vary, but wealth is wealth. What the guy meant to say, is, in his opinion, if you want to preserve your savings, sell your house and rent.
God invented the leasehold to prevent that either/or.
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