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Old 02-24-2018, 09:17 AM   #41
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A. Already showed the calculations for staying in a home. And I was generous enough to not even include home equity gained in the equation at all...

B. The equity doesn't "reset", it takes a hit due to buy/sell costs. In the long run, buying results in a paid off home for most owners AND that equity can be accessed in one way or another if desired (HELOC, reverse mortgage, etc) and should they decide to. It's math.

That's just financial though. It doesn't include intangibles like desired to have the flexibility to easily move quickly, hating ownership, etc.
But your tables are no more than a theoretical exercise.

People simply don't stay in the same place for 50 years.

Transaction costs for residential real estate are huge, akin to a large front-end (and even larger back-end) load compared to other forms of investing.

Accessing the equity (which is very little in the first 15-20 years on a 30-year loan) costs even more in fees, especially with a reverse mortgage.

That matters because you've chosen to accept a much lower historical real rate of return by "investing" in a home, rather than deploying that capital to other investments.
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Old 02-24-2018, 09:40 AM   #42
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Originally Posted by ncbill View Post
But your tables are no more than a theoretical exercise.

People simply don't stay in the same place for 50 years.

Transaction costs for residential real estate are huge, akin to a large front-end (and even larger back-end) load compared to other forms of investing.

Accessing the equity (which is very little in the first 15-20 years on a 30-year loan) costs even more in fees, especially with a reverse mortgage.

That matters because you've chosen to accept a much lower historical real rate of return by "investing" in a home, rather than deploying that capital to other investments.
Edit:
Ya know what, nevermind, believe what you wish. You're welcome to think that everyone in the world moves every year and that landlords are all losing money because renting is cheaper than owning in your opinion. That's not going to impact the truth at all.
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Old 02-24-2018, 10:04 AM   #43
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It has been a while since my family vacationed in Jackson Hole (ok, Wilson) - we were there every year for at least 10 years - but the Idaho side of the Tetons is not a high demand area unless you like to ski Targhee. If you want security in property values buy a place in the 'Hole', even a small fixer. Odds are home prices there are like a barbell. Low cost homes purchased by Federal employees and service workers, high priced homes for the wealthy. Look in the middle.

Alternatives would be Sun Valley, Coeur d'Alene.
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Old 02-24-2018, 10:09 AM   #44
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To the OP: I didn't read your prior thread, and perhaps your wish list was laid out in more detail there. I'm not sure what your priorities include, so all that I can say is to think about expanding your search area a bit. The communities in this area that aren't so tourism focused will have less expensive housing.

Some of those places should be cheap enough that you shouldn't have too much concern about how far the value may drop in a downturn. (i.e. buy a home for $250k, look at pricing history and guess that it won't drop by more than $50k bar some catastrophe)

Those less tourism focused towns will also have lower rental rates - the difference in rents is greater than the difference in purchase prices in my experience. (and that's certainly the case for shorter term rentals during peak seasons)

What's the draw for Tetonia? If it's "to be near the mountains", then what about a less expensive town nearby, like Rexburg or Idaho Falls? If living a "resort community" is a must, then you're going to pay a premium... In my lifetime I've seen much larger price swings in resort pricing than in more non-tourist areas. Big Sky is my best example of that - as a kid they were practically giving away condos. Now things there are sky high in my opinion.

You're also going to have to be OK with the religious majority in the state, the mormons. For most folks that's not really an issue, but for a minority of people it's a deal breaker.
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Old 02-24-2018, 10:14 AM   #45
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We built our MD house in 2008, and almost immediately watched the value drop by ~35%. Now 10 years later we're still down about 25% (crappy micro-market), not even adjusting for inflation. But it's a beautiful place to live, and we wouldn't have sold it anyway so the value doesn't really matter.

Now we are thinking about moving closer to DD and the girls, and I must admit the loss in value is a bit painful. But it's a home, not an investment, so we'll do what makes us happy vs. being held hostage by price. Even if it was an investment, it still a better one than my investments (much smaller) in Enron and WorldCom.
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Old 02-24-2018, 12:17 PM   #46
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I am not aiming this comment at any particular person, but many people find the forum's "ignore" function to be helpful. Here is how to use it:

http://www.early-retirement.org/foru...tml#post739553

I like to post this information now and then in the hopes that it will enhance someone's enjoyment during their time here at the ER Forum.
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Old 02-24-2018, 05:11 PM   #47
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I'm thinking of adding that information to my sig line, so I can annoy people with a clear conscience.
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Old 02-24-2018, 05:22 PM   #48
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I'm thinking of adding that information to my sig line, so I can annoy people with a clear conscience.
What makes you think you're not already doing that?

j/k
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Old 02-24-2018, 06:59 PM   #49
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I'm thinking of adding that information to my sig line, so I can annoy people with a clear conscience.
But if you tell everybody, then how could I earn my pay? I think I'll ask for a raise from $0.00/hour to $0.00 each and every 60 minutes.
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Old 02-24-2018, 08:24 PM   #50
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Old 02-25-2018, 10:01 AM   #51
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I believe that rising interest rates will actually increase the price of real estate. For at least a couple of years
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Old 02-25-2018, 03:10 PM   #52
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I believe that rising interest rates will actually increase the price of real estate. For at least a couple of years
In the short term higher interest rates hurt prices because of affordability. But higher interest rates also mean inflation (usually) so if they stick around that generally means higher prices, in the long run.

Think of how housing got short term killed by rates in late 70s then took off when rates moderated.
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Old 02-25-2018, 03:25 PM   #53
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the age wave means that more and more baby boomers are retiring and this will steadily drive prices up (even if there is a dip) for 20 years.
I have no idea how one could draw such a conclusion.
Steadily up? Steadily up with a dip?
For 20 years?
Due to boomer retirements?

With something as hyperlocal as real estate, anyone trying to make a prediction regarding the value of a single house for 20 years is on a fool's errand, IMHO.

Your house may be worth more in 20 years. It may not.
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Old 02-25-2018, 06:13 PM   #54
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Old 02-25-2018, 06:42 PM   #55
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In the short term higher interest rates hurt prices because of affordability. But higher interest rates also mean inflation (usually) so if they stick around that generally means higher prices, in the long run.

Think of how housing got short term killed by rates in late 70s then took off when rates moderated.
I disagree. Rate hikes bring in late buyers storming in that missed the low. Currently we are no where near how house poor many where in the 80's. There room for higher prices. But volume will be low as staying put will be the norm.

Will check back here in two years to see if I was right.
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Old 02-25-2018, 09:29 PM   #56
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Awesome!
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Old 02-26-2018, 01:12 AM   #57
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Why are you so concerned about the value of your residence?



Treat it as a home, not an investment.


Uh, because this board is mainly about money?
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Old 02-26-2018, 01:39 AM   #58
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I'm a little late for the earlier fireworks, but...
Part of the argument lost in rent vs. own debates is that successful landlords are making money. I personally know dozens of landlords. None are losing money (except for tax "losses"). If renting long term truly was more profitable than owning, landlords would move their money and invest elsewhere.
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Old 02-26-2018, 07:01 AM   #59
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I personally know dozens of landlords. None are losing money (except for tax "losses"). If renting long term truly was more profitable than owning, landlords would move their money and invest elsewhere.
So you are saying if a landlord is "unsuccessful", they will invest elsewhere, leaving only "successful" landlords - which is exactly the condition you say you know.

So perhaps survivor bias is at work in your circle of dozens?

I personally only know a few landlords. Several of them are now ex-landlords (they were "unsuccessful").
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Old 02-26-2018, 07:12 AM   #60
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So you are saying if a landlord is "unsuccessful", they will invest elsewhere, leaving only "successful" landlords - which is exactly the condition you say you know.

So perhaps survivor bias is at work in your circle of dozens?

I personally only know a few landlords. Several of them are now ex-landlords (they were "unsuccessful").
I work with a lot of RE Investors and I know both. The ones that know how to buy right, select good tenants and maintain the properties themselves are doing great. The ones that get into RE with the thought of easy money, want to be hands off and pay others to do everything, usually lose their shirts and are "unsuccessful".
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