If you happen to go to you tube and read the first comment you will see it is someone proclaiming that house prices are out of whack with incomes. This very same argument has been put forth now for nearly 10 + years. The first rumblings of it came in 2002 but it reached its peak in 2007. It always ends with a prediction such as 'get ready for the bubble to burst', or 'its going to crash'. I have this vision of the person on the other end devilishly laughing as finally the plan has been executed! (que audio clip)
The odd thing about it is that if you actually took the advice of pundits like Garth Turner back 10 years ago (The Little Book of Real Estate Wisdom) and decided to rent. The scenario would be something along these lines:
An average family home for rent in the 905 - $1800 x 12 = $21 600 x 10 years = $216,000
The price increase of the home you would buy now 40% more = $250,000
Less the taxes you paid on that home $3200 x 10 years* = -$32 000
Less maintenance that does not add to value $1000/ year*= - $10 000
Cost of not being in control of the roof over your head? = Priceless
How about all that interest paid in 10 years? Well the rates have been the lowest in history. Anyone care to do a 25 year amortization table for $200 000 loan at 4/% principle and interest? If you did I would agree that there was a lot of interest paid. However, home loans are stacked interest heavy up front, and the principle to interest scale at 10 years would be starting to balance. As a bonus you would probably renewing at a rate of 3% or less.
But most importantly, for the last 10 years you have lived in your own home and were the master of your own destiny: Nothing like getting settled in while your house sells 3 times in 10 years and each new landlord has a differing idea of property maintenance, or how many inspections are needed (quarterly, monthly?)
Hmmmmm, so your shower is coming apart and you want a nice spa master bathroom with tumble marble tiles? Sorry no can do, but here is your 99 cent glazed tile and we are going to fix only the bottom half of the shower because the mold did not make it beyond the three foot mark.
I realize this is a simplistic analogy. Heck there have been entire books written about why you should rent and not own. However myself, for one, would not feel so great about spending over $200,000 to pay for my landlords mortgage and not be in control of what I want to do with my home, irregardless of the theoretical chance that 30-40 years down the road I would have been just as well to rent.
Well I guess if the market is going to crash and burn may as well wait a few more years, after all you have waited 10 already...
DS
* Costs that would be paid by your landlord
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