The Motley Fool Discussion Boards
Investing/Strategies / Retirement Investing
|Subject: Re: Home Ownership not a good investment||Date: 4/29/2014 2:46 PM|
|Author: ptheland||Number: 74898 of 81360|
When I moved to Houston in 1981,
I'll see your 1981 Houston and raise you a 1974 Huntington Beach. Modest 3 bed, 2 bath house in a non-descript tract cost about $40k. With a 30 year loan at 6%, the monthly payments would have been around $240. Add taxes, insurance and maintenance, and you're probably near that $400 a month apartment rent.
So over the next 33 years you can make the same investments as the Houston renter.
30 years later, the mortgage cost drops to zero, although the taxes, insurance and maintenance have probably increased to perhaps something about that $675 a month for the Houston apartment.
So monthly outflow is about the same for housing.
While oil engineering jobs are scarce in Orange County, there were a lot of aerospace engineering jobs available over that time frame. Those engineering salaries also saw something close to a 4 times increase. So over time, the cash available for investing was about the same and the accumulated investments would therefore be the same.
Except that the homeowner has, well, a home. Worth $500k or so.
Once again, home ownership vs. renting is not an easy decision. Crystal balls are very handy. And home ownership CAN be a better choice than renting.
The reality is that homes generally go up in value at about the rate of inflation. Some will do better than inflation, some worse. I think the key to home ownership is a long-term commitment to staying in that house. Conventional wisdom says don't buy unless you plan to stay put at least 5 years. I'd say you need 10 to 15 at a minimum to make a home purchase a good choice. Less than that and renting is probably the safer route.
|Copyright 1996-2016 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us|