moldybluecheesecurds 2

Wednesday, March 28, 2007

Houses are homes, not investments

While you're still better off building equity instead of paying rent (and deducting mortgage interest from your taxes), my friend at 28th Avenue notes that the housing market isn't the greatest right now.

The big thing: don't expect a lot of value appreciation in your home in the next couple years. 28th links to Calculated Risk, which quotes Fed Chair Bernanke:
To the downside, the correction in the housing market could turn out to be more severe than we currently expect, perhaps exacerbated by problems in the subprime sector. Moreover, we could yet see greater spillover from the weakness in housing to employment and consumer spending than has occurred thus far.
Update 4/12: Check out the comments from EKM, where he links to an amazing tool posted by the New York Times for calculating whether it's better to rent or buy in your particular area.

2 comments:

EM said...

According to this article, my threshold for when buying becomes a better financial decision is anywhere from 6 to 9 years, depending on how you jiggle inflation and taxes, etc...

That's assuming a 5% return on investments, which is not hard to achieve.

Also, the costs of homeownership and improvement are likely averaged across all homes, when I feel I'm making the choice between renting, or buying an older property which probably needs more in terms of improvement costs (mine has).

I would not encourage anyone to buy a house right now if they're renting, and I certainly wouldn't want to be a seller. My advice would be to learn more about investing in financial markets and continue to rent (wait for prices to fall, or stagnate, as inflation proceeds).

If I had known in 2003 what i know now, I would have continued to rent. I'm not sure I would have learned what I've learned without owning a house though, so I'm not sure how you put a price on that.

EM said...

By "this article" I meant "this tool."

Your tool truly,

EKM