free4now
Thinks s/he gets paid by the post
- Joined
- Dec 28, 2005
- Messages
- 1,228
It would be really interesting if SWR calculations like FIRECalc could somehow include homeownership in the mix. It wouldn't be easy to do... have to probably manufacture some data or go monte carlo on home appreciation. But it would be useful. When I'm doing the calculations of SWR including my home I often end up making assumptions that are conservative, like assuming no appreciation.
In the end, it's almost always appreciation that drives whether buying a home is an economically beneficial move. In order to decide whether the home makes sense for you, you have to take into account volatility and worst cases. Assuming 6-7% constant appreciation will give you an over optimistic SWR. For the same reason that assuming 10-11% constant stock growth minus 3-4% inflation gives you an incorrect SWR of 7%.
In the end, it's almost always appreciation that drives whether buying a home is an economically beneficial move. In order to decide whether the home makes sense for you, you have to take into account volatility and worst cases. Assuming 6-7% constant appreciation will give you an over optimistic SWR. For the same reason that assuming 10-11% constant stock growth minus 3-4% inflation gives you an incorrect SWR of 7%.