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Houses/Condos as 'investments'

Again, a lot of 'ifs'.

Housing is not guaranteed to go up each year. there have been many markets over the past 40 years where housing prices stagnated, or lagged inflation. There have been many markets (usually region specific) where housing prices dropped 30%. I hesitate to call a house an investment. Yes, it has net worth, but you can't count on appreciation, and log that as long term savings. It is like a individual stock.....no way can you project it is going to go up 10.8% /yr.

One should not assume a house will always appreciate, and certainly not 7% a year. I can tell you that houses in Dallas suburbs have gone up about 2% a year for the past 10 years - there is still lots of land (even more than in 1990) available to build new houses, and buyers prefer new to old. Prices of applicances and other systems are less than they were 10 years ago (production efficiencies).

Talk to people in California - in one year, house prices have gone from 30% over 'market price ' , ie, offer 30% more than asking price, to less than market price in just one year.....the bubble is burst.....if California keeps having energy problems, who knows what prices will do.
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Long term, 20-30years, the market has historically returned 10.8%. However, short term, it has not.....from 1928 to 1938, it didn't do too well.....if I recall, it took from 1929 to 1950s for the market to recover......and many stocks never did (bankrupt).

Over a five year period, it is a crap shoot as to whether the market will be 'up' or down , and how much.
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That said, putting all your eggs in one basket, whether it is all equities and no equity in your house (ie, 95% mortgage), or all equity in the house, no stocks, is NOT a wise plan usually.

If one is aiming at a debt free, financial independent state, about the only annual itemized deductions one should have would be real estate taxes..... and as the mortgage balance drops towards zero, the tax 'savings' on mortgage interest also goes to zero...


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