Now, alternative reasons for buying or building a house, however, is understandable so long as one can afford the payments. The want for privacy or doing what one will is a bonus. Those I've known that bought a cheap house and got it paid off in a short time wound up the best - even if their house lost value, it wasn't so important during selling time (if they even move). No house payments makes life easier.
Warren Buffet has said that he never invests in trends or industries, but only in specific companies. Likewise, we could apply a similar rule to real estate. If you are allowed to get into a time machine and go back to New York City in 1985, then you should definitely buy up some buildings in Soho. They might look like burned out derelicts now, but this neighborhood is going to turn around in an amazing way. Likewise, a few years later, in Williamsburg. Also Berlin circa 1995, after the initial surge of investment had stopped, and people were having second thoughts about whether integration would ever work. Likewise much of Florida in 1924. Likewise Tokoyo in the 1970s. And I would argue, right now in Krakow, Poland. The idea is to buy real estate when most people think a city is semi-dead, before it rebounds. As Warren Buffet has said "Be greedy when others are fearful, and fearful when others are greedy.
In the USA, a combination of low interest rates, government subsidies, foreign money seeking safety, and pure hype has managed to keep many cities in a situation where they seem to have permanently over-valued real estate. Anyone buying a home there runs the risk of losing money.
Then there are the places like Detroit, which are either dead forever, or the turnaround is so far in the future that you could probably find better places to invest your money.
But overseas, I believe there are places where you can invest in real estate, and see the kinds of amazing returns that you would have enjoyed if you could go back in time and invest in any of the turnaround cities that I mention above.
Of course, it does take courage to invest in a city that most others are still betting against.
lose out on things like
being able to get the
landlord to fix the leaky
roof
My observation is that house values usually don't go down. Since people refuse to sell at a lose. But values can go up really slowly. Like it may take years and years.
Where were you between 2009-2012?
When you have to sell you sell. You got divorced, or transfered, can't make payments, neighbor got foreclosed? You are taking a loss.
>But values can go up really slowly. Like it may take years and years.
This is just inflation - subtract taxes, maintenance and opportunity cost
As for whether a condo makes its money back - suppose someone doesn't plan to sell it? A place to live is more than a profit/loss or investment decision. As the article mentions at the end.
My aunt and grandmother made money on a condo some years back - but that was before the bubble burst.
Submitters: the guideline is "Please use the original title, unless it is misleading or linkbait." Rewriting to make something more misleading or linkbait is driving the wrong way down a one-way street.
However there are reasons not to own a house like wanting to be very mobile, not wanting the responsibility, wanting to live in more of a "group" environment, etc. If you live on the edge and can't save money then you shouldn't own a house because if you loose your job you won't be able to continue making the payments.
I dropped $400 on a new lawnmower this spring, $7K on a new roof a couple years ago, $800 on a new kitchen stove last year. Two years ago it was a washer and dryer for $1500 or so. It adds up.
My mom is retired and on SS and her rental is cheaper than her income and is the same every month. I worry about my retired MiL living in her house, she's one furnace replacement away from a panic sale or having to take out an heloc.
That's nice if you can get into a rent controlled house and don't have a landlord that decides to "reoccupy" the property for whatever reason. Renters in most areas do not have these assurances.
And it's wrong, too. "Never pays off" is simply stupid. My parents bought their house for $250k and sold it 20 years later for $1.4M cash. To say it didn't pay off is simply ridiculous. My own house is worth 50% more in 3 years, obviously unsustainable, but nonetheless worthwhile, especially given rents.
Going from $250K to $1.4M over 20 years sounds good, but it's only a ~10% annual return.
Buying a house is making a calculated risk that you will stay in one area. While it will cost money in the short run, rent (in most places) tracks with inflation but a mortgage doesn't.
Now, it doesn't make sense to keep moving/upgrading every 5 years. If you do that (as I have over the last decade), don't buy a house.
>| Shiller's work, however, says that you shouldn't buy a house simply because you're hoping to pump money out of it in the long run.
I think the point of the article is just that it won't ALWAYS pay off (especially at a 10% growth per year thing). This should be common sense but maybe isn't. Lots of things should factor into a purchase decision. If timed right, a home can very much be a good investment, but is absolutely not without risk.