Will Inflation pay off my home?

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Topic Author
m@ver1ck
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Will Inflation pay off my home?

Post by m@ver1ck »

YoY increase in home prices in our area are 30%. Crazy market - just wondering if it's going to get crazier still. I don't know what I don't know - just know that I don't know everything - and can't predict the future.

Pure speculation here - but if I do buy in this crazy market (and sell my existing home at the same time) - how many years before inflation kicks in and pays my home off for me?

Current home will probably sell for 1.3M to 1.5M (paid off). New homes are now in the 2.3-2.4M range.

Will 900K be worth anything in 10 years at the rate at which things are going?

Can I use leverage to my advantage? I could always sell and move to a LCOL in 10 years.

Doing the math - it really depends on how stocks do vs. the new home does. If it breaks even - I'd have lived in a better home for 10 years - and got the same returns as on the stock market.
Concentrated risk and all that...

However - looking at stocks and real estate prices - specially in areas like this (seattle metro) - and the bay area, home prices seem to be closely co-related to the stock prices - so if the stock prices don't keep going up, folks won't be able to buy properties at astronomical prices. Duh!

Stock/Bond appreciation is supposed to be meager - inflation is supposed to be high.. but I know things go south ?

What am I missing?
RosieQ
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Re: Will Inflation pay off my home?

Post by RosieQ »

In most places homes are already priced at maxed out 2 working professional salary (around where I live in HCOL California). I just don't see how it can go any higher without corresponding wage growth. Who will be there to pay for the houses? Wages go up 1-2%, house up 30% and after just a few years then 0.1% are all that's left and they don't want your run of the mill house.
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willthrill81
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Re: Will Inflation pay off my home?

Post by willthrill81 »

Market appreciation in housing is a speculation (i.e., there is no income stream or future earnings being purchased), not an investment.

It seems clear that falling interest rates have been at least partly responsible for the current spike in housing prices in many/most markets around the country, but that can't last forever.

In most HCOL areas, renting makes much better financial sense than does owning.
Last edited by willthrill81 on Tue Apr 13, 2021 11:40 pm, edited 1 time in total.
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
Small Savanna
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Re: Will Inflation pay off my home?

Post by Small Savanna »

If home prices are peaking, that's a good time to either downsize or hold on to the house you've got. Obviously nobody knows exactly when the peak will occur, but there will be one.
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willthrill81
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Re: Will Inflation pay off my home?

Post by willthrill81 »

Small Savanna wrote: Tue Apr 13, 2021 11:40 pm If home prices are peaking, that's a good time to either downsize or hold on to the house you've got. Obviously nobody knows exactly when the peak will occur, but there will be one.
If we could sell right now, we would. But there's nowhere less costly that we would rather be. So we're staying put.
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
Topic Author
m@ver1ck
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Re: Will Inflation pay off my home?

Post by m@ver1ck »

RosieQ wrote: Tue Apr 13, 2021 11:33 pm In most places homes are already priced at maxed out 2 working professional salary (around where I live in HCOL California). I just don't see how it can go any higher without corresponding wage growth. Who will be there to pay for the houses? Wages go up 1-2%, house up 30% and after just a few years then 0.1% are all that's left and they don't want your run of the mill house.
It’s the RSUs that are causing the spike - not ordinary wage growth.
You can try plotting Seattle area and bay area home prices against tech indexes or even VTI.
This might be a case where I’m seeing a pattern where none exists...

I could sell my home and all my vested stock and them I would be in 400K mortgage if I bought a 2.2M home.

Dunno - the numbers seem ok - but just seems stupid buying a 2.2M home.

The same size homes were 1.5M a few years ago...
lazybones18
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Re: Will Inflation pay off my home?

Post by lazybones18 »

Best to renovate your existing house or the make a addition to it if possible.
i wouldn't buy a new house if its not absolutely necessary

I live in Los Angeles and instead of buying/upgrading to a new house i decided to renovate and build a brand new ADU. Will cost me around $200-250k for an additional 1200 sq ft 2 story house on the land I already have.
todaysBob
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Re: Will Inflation pay off my home?

Post by todaysBob »

m@ver1ck wrote: Tue Apr 13, 2021 11:51 pm Dunno - the numbers seem ok - but just seems stupid buying a 2.2M home.

The same size homes were 1.5M a few years ago...
Few years? Try few months. I am also in Seattle suburb(Sammamish) and have been observing the market from fall to now.

Couple of sales from fall - https://www.redfin.com/WA/Sammamish/113 ... me/2080478, https://www.redfin.com/WA/Sammamish/236 ... /170472015

Similar listings today - https://www.redfin.com/WA/Sammamish/348 ... /174665560,
https://www.redfin.com/WA/Sammamish/183 ... /174880436, https://www.redfin.com/WA/Sammamish/240 ... e/22524337
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JoeRetire
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Re: Will Inflation pay off my home?

Post by JoeRetire »

m@ver1ck wrote: Tue Apr 13, 2021 9:28 pm Pure speculation here - but if I do buy in this crazy market (and sell my existing home at the same time) - how many years before inflation kicks in and pays my home off for me?

What am I missing?
Inflation doesn't pay off your home, you do. Over the long term, inflation can make the mortgage payments seem trivial.

Nobody knows what inflation will be down the road. We can only look at the past and guess for the future.
I could always sell and move to a LCOL in 10 years.
That's always true, but has nothing to do with inflation.

Real Estate is hyper-local. Some housing markets will rise higher than inflation, some will not.
When the time comes that you want to sell, your local market may be up while your target market may be down - or not.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
Topic Author
m@ver1ck
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Re: Will Inflation pay off my home?

Post by m@ver1ck »

This looks like folks made a killing on Bitcoin and Tesla and are cashing in.
Californiastate
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Re: Will Inflation pay off my home?

Post by Californiastate »

We bought our first home in a HCOL area in '89. IIRC we had a 9.5% fixed rate which was decent at the time. Wages have risen since then but mortgage rates have plummeted. IMHO people know the current rates won't last and they are scrambling to lock them in. I still don't see housing tanking upon the initial rate uptick. Money goes where it's treated best. People, including Jeremy Siegal, believe the stock market will correct when inflation finally shows it's ugly face in the future. That money has to go somewhere. Bonds still won't be attractive. IMHO that leaves real estate when mortgages would still be historically low.

Will inflation pay off your home? They are counting on it paying down the national debt too.
SuperXmas
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Re: Will Inflation pay off my home?

Post by SuperXmas »

Need full employment and wage growth for sustainable inflation. Looks at mortgage applications - already hitting a wall with the modest increase in rates and massive increase in prices.
milktoast
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Re: Will Inflation pay off my home?

Post by milktoast »

m@ver1ck wrote: Wed Apr 14, 2021 9:39 am 100% agreed. Apart from the $$ aspect - I just hate wasting money - and I don’t need a 4500 sqft home. What’s worse is that these homes have a 1800sqft yard at best.
Actually the linked homes have larger yards. Which is why they are so expensive. I happen to think that the developer homes (including the linked ones) are monstrosities. But these at least aren't outsized for their lot.

The tracts of 3500-4500 sqft homes sitting on 1/6 acre are even worse. Big ugly homes with no proper proportions pushing up against the property lines. Ugh. But the linked homes are on nearly a half acre, so the scale of the lot and the home are better.

We have a fully custom architect designed home. 3800 sqft on half an acre. Attention to detail and architectural consistency (one style properly executed, not a mishmash of random crap) adds an extra 30% cost per sqft without gaining you anywhere near that much in resale. So developers just pound out soulless crap.

Oh well. The good news is that the area has jobs. And no, inflation won't pay your mortgage. And rising property values doesn't make you rich. But it does increase your property taxes.
Inframan4712
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Re: Will Inflation pay off my home?

Post by Inframan4712 »

I recently read two articles about investment firms (including foreign firms) buying whole neighborhoods from builders. The builders never even put them on the market. Then the firms rent the houses out.

That's certainly a good partial explanation for the lack of inventory and the bidding wars for houses that ARE on the market.
Somethingwitty92912
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Re: Will Inflation pay off my home?

Post by Somethingwitty92912 »

I treat homes as a discretionary item. It’s far from an investment. Why not do crypto? What if beanie babies make a comeback!
drk
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Re: Will Inflation pay off my home?

Post by drk »

m@ver1ck wrote: Tue Apr 13, 2021 9:28 pm Can I use leverage to my advantage?
Yes, you can. If you expect inflation to run high, and home prices to continue increasing, do a cash-out refinance.
Carguy85
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Re: Will Inflation pay off my home?

Post by Carguy85 »

5000 sq ft is a mansion?? 🤔 anyhow....the above comments are a slippery slope....think about it.
Shalom Aleichem
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Re: Will Inflation pay off my home?

Post by Shalom Aleichem »

Somethingwitty92912 wrote: Wed Apr 14, 2021 6:16 pm I treat homes as a discretionary item. It’s far from an investment. Why not do crypto? What if beanie babies make a comeback!
I think the answer is because you have to live somewhere and you have to pay money for that. Either rent or a mortgage. The advantage of the mortgage I think is that it forces you to save money. Most of the people here have discipline to save otherwise but probably most people in general do not. I don’t think you can live in crypto but you can live in a house. There’s a certain amount of security that you get with a house that you do not get with those other things.
Shalom Aleichem
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Re: Will Inflation pay off my home?

Post by Shalom Aleichem »

Carguy85 wrote: Wed Apr 14, 2021 6:27 pm 5000 sq ft is a mansion?? 🤔 anyhow....the above comments are a slippery slope....think about it.
Definitely a slippery slope. I think there is a big difference between something that is an unambiguous externality such as a paper plant polluting the cities water as compared to some thing ambiguous and uncertain like claiming one person buying a big house or taking an airplane flight is destroying the environment for someone 1000 miles away. We could say that eating meat or chicken takes resources away from raising plants and no one should be allowed to eat animal protein. Or take an airplane flight. Or drive a car. Unless there is a clear unambiguous externality, thank goodness we live in America and you can do what you want to do and I can do what I want to do. I wouldn’t want a 5000 square-foot house on a 5001 square-foot lot. I would love a small house on the beach or a small house with lots of land. But to each his own. Buy what you like and buy what you can afford.
homebuyer6426
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Re: Will Inflation pay off my home?

Post by homebuyer6426 »

m@ver1ck wrote: Tue Apr 13, 2021 9:28 pm What am I missing?
You missed not buying a $55K home like me. :wink:
av111
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Re: Will Inflation pay off my home?

Post by av111 »

Look at the recent spate of threads on this forum about how much house can I buy. Really smart people are going through the same logical path and are picking up nice homes in crazy markets paying 25 to 30% over asking, outbidding 30+ offers with offers without any contingency. They are expecting inflation will make the mortgage payments trivial while killing stock market returns. Many of us are voting for stay the course even when stocks are at multi year high. Who knows what will happen but I bet some big macro change that will affect a lot of investors will happen in this year
AV111
Somethingwitty92912
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Re: Will Inflation pay off my home?

Post by Somethingwitty92912 »

Shalom Aleichem wrote: Wed Apr 14, 2021 8:13 pm
Somethingwitty92912 wrote: Wed Apr 14, 2021 6:16 pm I treat homes as a discretionary item. It’s far from an investment. Why not do crypto? What if beanie babies make a comeback!
I think the answer is because you have to live somewhere and you have to pay money for that. Either rent or a mortgage. The advantage of the mortgage I think is that it forces you to save money. Most of the people here have discipline to save otherwise but probably most people in general do not. I don’t think you can live in crypto but you can live in a house. There’s a certain amount of security that you get with a house that you do not get with those other things.
Sure, I think hyperbole was understood in my statement. What I am saying is assuming you purchase in the right neighborhood at the right price at the right time, you should match inflation on a home. That’s a crappy bet, which is why I treat it as a consumption item.
Shalom Aleichem
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Re: Will Inflation pay off my home?

Post by Shalom Aleichem »

Somethingwitty92912 wrote: Wed Apr 14, 2021 10:49 pm
Shalom Aleichem wrote: Wed Apr 14, 2021 8:13 pm
Somethingwitty92912 wrote: Wed Apr 14, 2021 6:16 pm I treat homes as a discretionary item. It’s far from an investment. Why not do crypto? What if beanie babies make a comeback!
I think the answer is because you have to live somewhere and you have to pay money for that. Either rent or a mortgage. The advantage of the mortgage I think is that it forces you to save money. Most of the people here have discipline to save otherwise but probably most people in general do not. I don’t think you can live in crypto but you can live in a house. There’s a certain amount of security that you get with a house that you do not get with those other things.
Sure, I think hyperbole was understood in my statement. What I am saying is assuming you purchase in the right neighborhood at the right price at the right time, you should match inflation on a home. That’s a crappy bet, which is why I treat it as a consumption item.
Got it. Sometimes it’s hard to recognize sarcasm or joking around on the Internet. In this forum there are plenty of people who think that buying a house is a poor investment. It can be a very good investment. I don’t mean necessarily because of capital gains but because a lot of people don’t have the discipline to save and it forces saving. For most people I think it is a great investment specifically for this reason to ensure they will have a roof over their heads in their old age. I would preface what I am about to say by saying this might be crazy but… Except it actually is not crazy. I recently refinanced my house. I had a pretty low interest rate mortgage but could refinance for even less. It was enough of a difference but it was worth it. It crossed my mind that the rate is so low that maybe I should take money out of the house. So I ended up taking a ton of money out of the house at a ridiculously low interest rate because it was low enough that long-term I could not take the money out. I’m not using it to splurge. It’s all being invested. In certain circumstances the house is almost like a bank. Some people are really foolish and borrowing at 4% or 5% to invest. That is crazy. We’re taking money out of their house to buy a boat. Also crazy.
000
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Re: Will Inflation pay off my home?

Post by 000 »

willthrill81 wrote: Tue Apr 13, 2021 11:40 pm Market appreciation in housing is a speculation (i.e., there is no income stream or future earnings being purchased), not an investment.
You're purchasing an income stream of imputed rent. For example:
willthrill81 wrote: Tue Apr 13, 2021 11:41 pm If we could sell right now, we would. But there's nowhere less costly that we would rather be. So we're staying put.
:wink:
BabaWawa
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Re: Will Inflation pay off my home?

Post by BabaWawa »

willthrill81 wrote: Tue Apr 13, 2021 11:41 pm
Small Savanna wrote: Tue Apr 13, 2021 11:40 pm If home prices are peaking, that's a good time to either downsize or hold on to the house you've got. Obviously nobody knows exactly when the peak will occur, but there will be one.
If we could sell right now, we would. But there's nowhere less costly that we would rather be. So we're staying put.
Willthrill81, you've always got the RV. Put the the home proceeds in Bitcoin and hit the road for a year. :moneybag
Somethingwitty92912
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Re: Will Inflation pay off my home?

Post by Somethingwitty92912 »

Shalom Aleichem wrote: Wed Apr 14, 2021 10:59 pm
Somethingwitty92912 wrote: Wed Apr 14, 2021 10:49 pm
Shalom Aleichem wrote: Wed Apr 14, 2021 8:13 pm
Somethingwitty92912 wrote: Wed Apr 14, 2021 6:16 pm I treat homes as a discretionary item. It’s far from an investment. Why not do crypto? What if beanie babies make a comeback!
I think the answer is because you have to live somewhere and you have to pay money for that. Either rent or a mortgage. The advantage of the mortgage I think is that it forces you to save money. Most of the people here have discipline to save otherwise but probably most people in general do not. I don’t think you can live in crypto but you can live in a house. There’s a certain amount of security that you get with a house that you do not get with those other things.
Sure, I think hyperbole was understood in my statement. What I am saying is assuming you purchase in the right neighborhood at the right price at the right time, you should match inflation on a home. That’s a crappy bet, which is why I treat it as a consumption item.
Got it. Sometimes it’s hard to recognize sarcasm or joking around on the Internet. In this forum there are plenty of people who think that buying a house is a poor investment. It can be a very good investment. I don’t mean necessarily because of capital gains but because a lot of people don’t have the discipline to save and it forces saving. For most people I think it is a great investment specifically for this reason to ensure they will have a roof over their heads in their old age. I would preface what I am about to say by saying this might be crazy but… Except it actually is not crazy. I recently refinanced my house. I had a pretty low interest rate mortgage but could refinance for even less. It was enough of a difference but it was worth it. It crossed my mind that the rate is so low that maybe I should take money out of the house. So I ended up taking a ton of money out of the house at a ridiculously low interest rate because it was low enough that long-term I could not take the money out. I’m not using it to splurge. It’s all being invested. In certain circumstances the house is almost like a bank. Some people are really foolish and borrowing at 4% or 5% to invest. That is crazy. We’re taking money out of their house to buy a boat. Also crazy.
Did you have to pay closing fees again? I can’t ever seem to find a place that was willing to waive enough of them to make that worth it.
Californiastate
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Re: Will Inflation pay off my home?

Post by Californiastate »

Somethingwitty92912 wrote: Wed Apr 14, 2021 6:16 pm I treat homes as a discretionary item. It’s far from an investment. Why not do crypto? What if beanie babies make a comeback!
It depends on the area. SF Bay Area real estate has been going up, over time, my whole life. The tax advantages of real estate are hard if not impossible to duplicate. The $250,000 capital gains exclusion is one big example.
t00sl0w
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Re: Will Inflation pay off my home?

Post by t00sl0w »

Inframan4712 wrote: Wed Apr 14, 2021 5:58 pm I recently read two articles about investment firms (including foreign firms) buying whole neighborhoods from builders. The builders never even put them on the market. Then the firms rent the houses out.

That's certainly a good partial explanation for the lack of inventory and the bidding wars for houses that ARE on the market.
That's a big thing happening where I am.
It also creates an entirely new discussion about a different problem that this creates for regular people who want to buy a home but cant now...and may not ever be able to if "rental investing" sticks around for big money.
BogleFan510
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Re: Will Inflation pay off my home?

Post by BogleFan510 »

Predicting inflation years out is a very difficult task and I would look skeptically at anyone who claims to know for certain.

We owned a home for almost 20 years, where each consecutive year brokers were claiming rates would rise so you need to lock in a fixed rate. We didnt and saved thousands of dollars with ARMs that went into stocks instead. I see a spike after the pandemic stimulus and rebound but do not see long term inflation pressures in my crystal ball.
Shalom Aleichem
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Re: Will Inflation pay off my home?

Post by Shalom Aleichem »

Somethingwitty92912 wrote: Thu Apr 15, 2021 8:10 am
Shalom Aleichem wrote: Wed Apr 14, 2021 10:59 pm
Somethingwitty92912 wrote: Wed Apr 14, 2021 10:49 pm
Shalom Aleichem wrote: Wed Apr 14, 2021 8:13 pm
Somethingwitty92912 wrote: Wed Apr 14, 2021 6:16 pm I treat homes as a discretionary item. It’s far from an investment. Why not do crypto? What if beanie babies make a comeback!
I think the answer is because you have to live somewhere and you have to pay money for that. Either rent or a mortgage. The advantage of the mortgage I think is that it forces you to save money. Most of the people here have discipline to save otherwise but probably most people in general do not. I don’t think you can live in crypto but you can live in a house. There’s a certain amount of security that you get with a house that you do not get with those other things.
Sure, I think hyperbole was understood in my statement. What I am saying is assuming you purchase in the right neighborhood at the right price at the right time, you should match inflation on a home. That’s a crappy bet, which is why I treat it as a consumption item.
Got it. Sometimes it’s hard to recognize sarcasm or joking around on the Internet. In this forum there are plenty of people who think that buying a house is a poor investment. It can be a very good investment. I don’t mean necessarily because of capital gains but because a lot of people don’t have the discipline to save and it forces saving. For most people I think it is a great investment specifically for this reason to ensure they will have a roof over their heads in their old age. I would preface what I am about to say by saying this might be crazy but… Except it actually is not crazy. I recently refinanced my house. I had a pretty low interest rate mortgage but could refinance for even less. It was enough of a difference but it was worth it. It crossed my mind that the rate is so low that maybe I should take money out of the house. So I ended up taking a ton of money out of the house at a ridiculously low interest rate because it was low enough that long-term I could not take the money out. I’m not using it to splurge. It’s all being invested. In certain circumstances the house is almost like a bank. Some people are really foolish and borrowing at 4% or 5% to invest. That is crazy. We’re taking money out of their house to buy a boat. Also crazy.
Did you have to pay closing fees again? I can’t ever seem to find a place that was willing to waive enough of them to make that worth it.
Zero fees. That what they said and I didn't find any hidden fees. It was a sweet deal! 2% 15 year fixed with a big chunk of cash taken out of the house! I'm very excited.
Somethingwitty92912
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Re: Will Inflation pay off my home?

Post by Somethingwitty92912 »

Californiastate wrote: Thu Apr 15, 2021 8:50 am
Somethingwitty92912 wrote: Wed Apr 14, 2021 6:16 pm I treat homes as a discretionary item. It’s far from an investment. Why not do crypto? What if beanie babies make a comeback!
It depends on the area. SF Bay Area real estate has been going up, over time, my whole life. The tax advantages of real estate are hard if not impossible to duplicate. The $250,000 capital gains exclusion is one big example.
Past performance doesn’t equal future returns. Office space and business real estate are in the crapper, look at malls right now. I fully expect to see the SF an LA areas crash an burn in my life time due to a variety of reasons, Covid, work from home, delivery, pollution, a desire to return to rural living. I could go on, but I digress. Area as you said along with the right property combined with the right financing, sure that could be a great investment, but so could just about anything else with the right timing, investment, and financing.

I’d never account for more than 2% gain in real estate real return, an I’d be happy/surprised if I got that.
Somethingwitty92912
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Re: Will Inflation pay off my home?

Post by Somethingwitty92912 »

Shalom Aleichem wrote: Thu Apr 15, 2021 10:59 am
Somethingwitty92912 wrote: Thu Apr 15, 2021 8:10 am
Shalom Aleichem wrote: Wed Apr 14, 2021 10:59 pm
Somethingwitty92912 wrote: Wed Apr 14, 2021 10:49 pm
Shalom Aleichem wrote: Wed Apr 14, 2021 8:13 pm

I think the answer is because you have to live somewhere and you have to pay money for that. Either rent or a mortgage. The advantage of the mortgage I think is that it forces you to save money. Most of the people here have discipline to save otherwise but probably most people in general do not. I don’t think you can live in crypto but you can live in a house. There’s a certain amount of security that you get with a house that you do not get with those other things.
Sure, I think hyperbole was understood in my statement. What I am saying is assuming you purchase in the right neighborhood at the right price at the right time, you should match inflation on a home. That’s a crappy bet, which is why I treat it as a consumption item.
Got it. Sometimes it’s hard to recognize sarcasm or joking around on the Internet. In this forum there are plenty of people who think that buying a house is a poor investment. It can be a very good investment. I don’t mean necessarily because of capital gains but because a lot of people don’t have the discipline to save and it forces saving. For most people I think it is a great investment specifically for this reason to ensure they will have a roof over their heads in their old age. I would preface what I am about to say by saying this might be crazy but… Except it actually is not crazy. I recently refinanced my house. I had a pretty low interest rate mortgage but could refinance for even less. It was enough of a difference but it was worth it. It crossed my mind that the rate is so low that maybe I should take money out of the house. So I ended up taking a ton of money out of the house at a ridiculously low interest rate because it was low enough that long-term I could not take the money out. I’m not using it to splurge. It’s all being invested. In certain circumstances the house is almost like a bank. Some people are really foolish and borrowing at 4% or 5% to invest. That is crazy. We’re taking money out of their house to buy a boat. Also crazy.
Did you have to pay closing fees again? I can’t ever seem to find a place that was willing to waive enough of them to make that worth it.
Zero fees. That what they said and I didn't find any hidden fees. It was a sweet deal! 2% 15 year fixed with a big chunk of cash taken out of the house! I'm very excited.
Congrats nice find. 👍
surfstar
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Re: Will Inflation pay off my home?

Post by surfstar »

Carguy85 wrote: Wed Apr 14, 2021 6:27 pm 5000 sq ft is a mansion?? 🤔 anyhow....the above comments are a slippery slope....think about it.
5000 sq ft is freaking huge. That's larger than many parcels in a developed city.
Inframan4712
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Re: Will Inflation pay off my home?

Post by Inframan4712 »

t00sl0w wrote: Thu Apr 15, 2021 9:32 am
Inframan4712 wrote: Wed Apr 14, 2021 5:58 pm I recently read two articles about investment firms (including foreign firms) buying whole neighborhoods from builders. The builders never even put them on the market. Then the firms rent the houses out.

That's certainly a good partial explanation for the lack of inventory and the bidding wars for houses that ARE on the market.
That's a big thing happening where I am.
It also creates an entirely new discussion about a different problem that this creates for regular people who want to buy a home but cant now...and may not ever be able to if "rental investing" sticks around for big money.
I agree. But if the bubble bursts and these companies go bankrupt, it could be an even worse housing crisis. In the previous one, some *individuals* were doing strategic defaults, some were holding on as long as they could, etc. But corporations will behave differently, and not for the better, IMO.
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Re: Will Inflation pay off my home?

Post by Inframan4712 »

Shalom Aleichem wrote: Thu Apr 15, 2021 10:59 am
Somethingwitty92912 wrote: Thu Apr 15, 2021 8:10 am
Shalom Aleichem wrote: Wed Apr 14, 2021 10:59 pm
Somethingwitty92912 wrote: Wed Apr 14, 2021 10:49 pm
Shalom Aleichem wrote: Wed Apr 14, 2021 8:13 pm

I think the answer is because you have to live somewhere and you have to pay money for that. Either rent or a mortgage. The advantage of the mortgage I think is that it forces you to save money. Most of the people here have discipline to save otherwise but probably most people in general do not. I don’t think you can live in crypto but you can live in a house. There’s a certain amount of security that you get with a house that you do not get with those other things.
Sure, I think hyperbole was understood in my statement. What I am saying is assuming you purchase in the right neighborhood at the right price at the right time, you should match inflation on a home. That’s a crappy bet, which is why I treat it as a consumption item.
Got it. Sometimes it’s hard to recognize sarcasm or joking around on the Internet. In this forum there are plenty of people who think that buying a house is a poor investment. It can be a very good investment. I don’t mean necessarily because of capital gains but because a lot of people don’t have the discipline to save and it forces saving. For most people I think it is a great investment specifically for this reason to ensure they will have a roof over their heads in their old age. I would preface what I am about to say by saying this might be crazy but… Except it actually is not crazy. I recently refinanced my house. I had a pretty low interest rate mortgage but could refinance for even less. It was enough of a difference but it was worth it. It crossed my mind that the rate is so low that maybe I should take money out of the house. So I ended up taking a ton of money out of the house at a ridiculously low interest rate because it was low enough that long-term I could not take the money out. I’m not using it to splurge. It’s all being invested. In certain circumstances the house is almost like a bank. Some people are really foolish and borrowing at 4% or 5% to invest. That is crazy. We’re taking money out of their house to buy a boat. Also crazy.
Did you have to pay closing fees again? I can’t ever seem to find a place that was willing to waive enough of them to make that worth it.
Zero fees. That what they said and I didn't find any hidden fees. It was a sweet deal! 2% 15 year fixed with a big chunk of cash taken out of the house! I'm very excited.
Can you share the lender? I'm sitting at 2.5% and 15 years and would love to get your rate.
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KingRiggs
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Re: Will Inflation pay off my home?

Post by KingRiggs »

surfstar wrote: Thu Apr 15, 2021 11:22 am
Carguy85 wrote: Wed Apr 14, 2021 6:27 pm 5000 sq ft is a mansion?? 🤔 anyhow....the above comments are a slippery slope....think about it.
5000 sq ft is freaking huge. That's larger than many parcels in a developed city.
That's a nice-sized home here in flyover country. Only over 9k square feet or so is considered "big"...

Different strokes...
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Re: Will Inflation pay off my home?

Post by surfstar »

KingRiggs wrote: Thu Apr 15, 2021 11:37 am
surfstar wrote: Thu Apr 15, 2021 11:22 am
Carguy85 wrote: Wed Apr 14, 2021 6:27 pm 5000 sq ft is a mansion?? 🤔 anyhow....the above comments are a slippery slope....think about it.
5000 sq ft is freaking huge. That's larger than many parcels in a developed city.
That's a nice-sized home here in flyover country. Only over 9k square feet or so is considered "big"...

Different strokes...
When you have to hide from the weather, you do need more indoor living space. Just seems excessive to heat/cool, furnish, clean, etc...
steve r
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Re: Will Inflation pay off my home?

Post by steve r »

m@ver1ck wrote: Wed Apr 14, 2021 9:39 am ... Apart from the $$ aspect - I just hate wasting money - and I don’t need a 4500 sqft home. What’s worse is that these homes have a 1800sqft yard at best.
Will inflation pay off your home? Maybe. Maybe not. But understand there are listing agent cost of buying, selling agent costs, (these costs are shared by buyers and sellers) real estate transaction tax cost, moving / redecorating cost, higher property taxes in the new home, etc. It is worth noting (for others) most of these cost also occur if downsizing. I call these transaction costs. Of course when home prices soar wildly, transaction costs seem trivial ... but they are not trivial, particularly if prices become stagnate or decline.

If you think you need a new home and can afford it, I say go for it. But I would refrain from doing so based on expectations another series of large home price appreciations. These may or may not occur, and if they do occur they need to be large enough to justify the transaction cost. The only sure thing by going upscale is you will be locking into higher costs.

Find a home you like and can stick with and "Stay the Course."

IMHO on price speculation, as pointed out by others, if borrowing rates go up, things may reverse. I wouldn't speculate on the idea "prices are falling" either by downsizing -- at least in part because of the transaction costs associated in doing so and the chance that my speculation is wrong. Even renting can be costly if rents rise.
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Walkure
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Re: Will Inflation pay off my home?

Post by Walkure »

Somethingwitty92912 wrote: Wed Apr 14, 2021 10:49 pm
Shalom Aleichem wrote: Wed Apr 14, 2021 8:13 pm
Somethingwitty92912 wrote: Wed Apr 14, 2021 6:16 pm I treat homes as a discretionary item. It’s far from an investment. Why not do crypto? What if beanie babies make a comeback!
I think the answer is because you have to live somewhere and you have to pay money for that. Either rent or a mortgage. The advantage of the mortgage I think is that it forces you to save money. Most of the people here have discipline to save otherwise but probably most people in general do not. I don’t think you can live in crypto but you can live in a house. There’s a certain amount of security that you get with a house that you do not get with those other things.
Sure, I think hyperbole was understood in my statement. What I am saying is assuming you purchase in the right neighborhood at the right price at the right time, you should match inflation on a home. That’s a crappy bet, which is why I treat it as a consumption item.
To be fair, defining an asset that matches inflation over time as a "consumption item" is a uniquely Bogleheadish attitude that borders on oxymoronic. The only thing that is being "consumed" simpliciter is the opportunity cost of the asset's price, which, this being an investing forum, is the only part of the asset most folks here consider real. It takes a lot more than that to be a "crappy bet," which is to say, negative expected return. In today's market, expected zero percent real with fully-deferred and partially-excluded capital gains treatment is a perfectly respectable bet. Throw in low, long-term, non-callable, nominal-rate leverage from the mortgage and the fact that you are receiving imputed rent on top of this and it beats the pants off any other asset class.
Californiastate
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Re: Will Inflation pay off my home?

Post by Californiastate »

Somethingwitty92912 wrote: Thu Apr 15, 2021 11:20 am
Californiastate wrote: Thu Apr 15, 2021 8:50 am
Somethingwitty92912 wrote: Wed Apr 14, 2021 6:16 pm I treat homes as a discretionary item. It’s far from an investment. Why not do crypto? What if beanie babies make a comeback!
It depends on the area. SF Bay Area real estate has been going up, over time, my whole life. The tax advantages of real estate are hard if not impossible to duplicate. The $250,000 capital gains exclusion is one big example.
Past performance doesn’t equal future returns. Office space and business real estate are in the crapper, look at malls right now. I fully expect to see the SF an LA areas crash an burn in my life time due to a variety of reasons, Covid, work from home, delivery, pollution, a desire to return to rural living. I could go on, but I digress. Area as you said along with the right property combined with the right financing, sure that could be a great investment, but so could just about anything else with the right timing, investment, and financing.

I’d never account for more than 2% gain in real estate real return, an I’d be happy/surprised if I got that.
California has been scheduled to fall off the continent since the Gold Rush. News of it's demise has been exaggerated.
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Re: Will Inflation pay off my home?

Post by KlangFool »

m@ver1ck wrote: Tue Apr 13, 2021 9:28 pm
Current home will probably sell for 1.3M to 1.5M (paid off). New homes are now in the 2.3-2.4M range.
m@ver1ck,

If you are confident that inflation is going up, you do not need to sell your house and buy a new one to take advantage of it. Just get a new 30 years fixed interest rate mortgage and invest the money.

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Carguy85
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Re: Will Inflation pay off my home?

Post by Carguy85 »

surfstar wrote: Thu Apr 15, 2021 11:39 am
KingRiggs wrote: Thu Apr 15, 2021 11:37 am
surfstar wrote: Thu Apr 15, 2021 11:22 am
Carguy85 wrote: Wed Apr 14, 2021 6:27 pm 5000 sq ft is a mansion?? 🤔 anyhow....the above comments are a slippery slope....think about it.
5000 sq ft is freaking huge. That's larger than many parcels in a developed city.
That's a nice-sized home here in flyover country. Only over 9k square feet or so is considered "big"...

Different strokes...
When you have to hide from the weather, you do need more indoor living space. Just seems excessive to heat/cool, furnish, clean, etc...
My house is on a 218,000 square ft piece of land..😀.smallish slice out in the middle of flyover country no doubt. The first time I heard of yards being measured in square feet (one of the hgtv shows in Hawaii) it made me smile. I’m very great full for people that like to live in the city.
Shalom Aleichem
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Re: Will Inflation pay off my home?

Post by Shalom Aleichem »

Somethingwitty92912 wrote: Thu Apr 15, 2021 11:21 am
Shalom Aleichem wrote: Thu Apr 15, 2021 10:59 am
Somethingwitty92912 wrote: Thu Apr 15, 2021 8:10 am
Shalom Aleichem wrote: Wed Apr 14, 2021 10:59 pm
Somethingwitty92912 wrote: Wed Apr 14, 2021 10:49 pm

Sure, I think hyperbole was understood in my statement. What I am saying is assuming you purchase in the right neighborhood at the right price at the right time, you should match inflation on a home. That’s a crappy bet, which is why I treat it as a consumption item.
Got it. Sometimes it’s hard to recognize sarcasm or joking around on the Internet. In this forum there are plenty of people who think that buying a house is a poor investment. It can be a very good investment. I don’t mean necessarily because of capital gains but because a lot of people don’t have the discipline to save and it forces saving. For most people I think it is a great investment specifically for this reason to ensure they will have a roof over their heads in their old age. I would preface what I am about to say by saying this might be crazy but… Except it actually is not crazy. I recently refinanced my house. I had a pretty low interest rate mortgage but could refinance for even less. It was enough of a difference but it was worth it. It crossed my mind that the rate is so low that maybe I should take money out of the house. So I ended up taking a ton of money out of the house at a ridiculously low interest rate because it was low enough that long-term I could not take the money out. I’m not using it to splurge. It’s all being invested. In certain circumstances the house is almost like a bank. Some people are really foolish and borrowing at 4% or 5% to invest. That is crazy. We’re taking money out of their house to buy a boat. Also crazy.
Did you have to pay closing fees again? I can’t ever seem to find a place that was willing to waive enough of them to make that worth it.
Zero fees. That what they said and I didn't find any hidden fees. It was a sweet deal! 2% 15 year fixed with a big chunk of cash taken out of the house! I'm very excited.
Congrats nice find. 👍
Thank you! I'm very excited! My mortgage broker (I know the family personally) was almost as excited as me. She said this is the first and so far only 2% loan she brokered, and she couldn't believe how I could get that rate, no points, AND about 100K out of the house!
Shalom Aleichem
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Re: Will Inflation pay off my home?

Post by Shalom Aleichem »

Inframan4712 wrote: Thu Apr 15, 2021 11:31 am
Shalom Aleichem wrote: Thu Apr 15, 2021 10:59 am
Somethingwitty92912 wrote: Thu Apr 15, 2021 8:10 am
Shalom Aleichem wrote: Wed Apr 14, 2021 10:59 pm
Somethingwitty92912 wrote: Wed Apr 14, 2021 10:49 pm

Sure, I think hyperbole was understood in my statement. What I am saying is assuming you purchase in the right neighborhood at the right price at the right time, you should match inflation on a home. That’s a crappy bet, which is why I treat it as a consumption item.
Got it. Sometimes it’s hard to recognize sarcasm or joking around on the Internet. In this forum there are plenty of people who think that buying a house is a poor investment. It can be a very good investment. I don’t mean necessarily because of capital gains but because a lot of people don’t have the discipline to save and it forces saving. For most people I think it is a great investment specifically for this reason to ensure they will have a roof over their heads in their old age. I would preface what I am about to say by saying this might be crazy but… Except it actually is not crazy. I recently refinanced my house. I had a pretty low interest rate mortgage but could refinance for even less. It was enough of a difference but it was worth it. It crossed my mind that the rate is so low that maybe I should take money out of the house. So I ended up taking a ton of money out of the house at a ridiculously low interest rate because it was low enough that long-term I could not take the money out. I’m not using it to splurge. It’s all being invested. In certain circumstances the house is almost like a bank. Some people are really foolish and borrowing at 4% or 5% to invest. That is crazy. We’re taking money out of their house to buy a boat. Also crazy.
Did you have to pay closing fees again? I can’t ever seem to find a place that was willing to waive enough of them to make that worth it.
Zero fees. That what they said and I didn't find any hidden fees. It was a sweet deal! 2% 15 year fixed with a big chunk of cash taken out of the house! I'm very excited.
Can you share the lender? I'm sitting at 2.5% and 15 years and would love to get your rate.
Hi. I'll PM you...
Shalom Aleichem
Posts: 217
Joined: Tue Mar 16, 2021 8:55 pm

Re: Will Inflation pay off my home?

Post by Shalom Aleichem »

Shalom Aleichem wrote: Thu Apr 15, 2021 1:25 pm
Inframan4712 wrote: Thu Apr 15, 2021 11:31 am
Shalom Aleichem wrote: Thu Apr 15, 2021 10:59 am
Somethingwitty92912 wrote: Thu Apr 15, 2021 8:10 am
Shalom Aleichem wrote: Wed Apr 14, 2021 10:59 pm

Got it. Sometimes it’s hard to recognize sarcasm or joking around on the Internet. In this forum there are plenty of people who think that buying a house is a poor investment. It can be a very good investment. I don’t mean necessarily because of capital gains but because a lot of people don’t have the discipline to save and it forces saving. For most people I think it is a great investment specifically for this reason to ensure they will have a roof over their heads in their old age. I would preface what I am about to say by saying this might be crazy but… Except it actually is not crazy. I recently refinanced my house. I had a pretty low interest rate mortgage but could refinance for even less. It was enough of a difference but it was worth it. It crossed my mind that the rate is so low that maybe I should take money out of the house. So I ended up taking a ton of money out of the house at a ridiculously low interest rate because it was low enough that long-term I could not take the money out. I’m not using it to splurge. It’s all being invested. In certain circumstances the house is almost like a bank. Some people are really foolish and borrowing at 4% or 5% to invest. That is crazy. We’re taking money out of their house to buy a boat. Also crazy.
Did you have to pay closing fees again? I can’t ever seem to find a place that was willing to waive enough of them to make that worth it.
Zero fees. That what they said and I didn't find any hidden fees. It was a sweet deal! 2% 15 year fixed with a big chunk of cash taken out of the house! I'm very excited.
Can you share the lender? I'm sitting at 2.5% and 15 years and would love to get your rate.
Hi. I'll PM you...
Just sent PM
Somethingwitty92912
Posts: 96
Joined: Mon Sep 14, 2020 9:43 pm

Re: Will Inflation pay off my home?

Post by Somethingwitty92912 »

Walkure wrote: Thu Apr 15, 2021 12:12 pm
Somethingwitty92912 wrote: Wed Apr 14, 2021 10:49 pm
Shalom Aleichem wrote: Wed Apr 14, 2021 8:13 pm
Somethingwitty92912 wrote: Wed Apr 14, 2021 6:16 pm I treat homes as a discretionary item. It’s far from an investment. Why not do crypto? What if beanie babies make a comeback!
I think the answer is because you have to live somewhere and you have to pay money for that. Either rent or a mortgage. The advantage of the mortgage I think is that it forces you to save money. Most of the people here have discipline to save otherwise but probably most people in general do not. I don’t think you can live in crypto but you can live in a house. There’s a certain amount of security that you get with a house that you do not get with those other things.
Sure, I think hyperbole was understood in my statement. What I am saying is assuming you purchase in the right neighborhood at the right price at the right time, you should match inflation on a home. That’s a crappy bet, which is why I treat it as a consumption item.
To be fair, defining an asset that matches inflation over time as a "consumption item" is a uniquely Bogleheadish attitude that borders on oxymoronic. The only thing that is being "consumed" simpliciter is the opportunity cost of the asset's price, which, this being an investing forum, is the only part of the asset most folks here consider real. It takes a lot more than that to be a "crappy bet," which is to say, negative expected return. In today's market, expected zero percent real with fully-deferred and partially-excluded capital gains treatment is a perfectly respectable bet. Throw in low, long-term, non-callable, nominal-rate leverage from the mortgage and the fact that you are receiving imputed rent on top of this and it beats the pants off any other asset class.
You’d be lucky to pace inflation. After repairs, the time invested, an the odds of you being successful in such a venture, it might be a bogleheadish attitude, but I think my perspective on the situation is well earn. I say all these things, for full disclosure I own my own fully paid off home. :)
Somethingwitty92912
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Re: Will Inflation pay off my home?

Post by Somethingwitty92912 »

Californiastate wrote: Thu Apr 15, 2021 12:15 pm
Somethingwitty92912 wrote: Thu Apr 15, 2021 11:20 am
Californiastate wrote: Thu Apr 15, 2021 8:50 am
Somethingwitty92912 wrote: Wed Apr 14, 2021 6:16 pm I treat homes as a discretionary item. It’s far from an investment. Why not do crypto? What if beanie babies make a comeback!
It depends on the area. SF Bay Area real estate has been going up, over time, my whole life. The tax advantages of real estate are hard if not impossible to duplicate. The $250,000 capital gains exclusion is one big example.
Past performance doesn’t equal future returns. Office space and business real estate are in the crapper, look at malls right now. I fully expect to see the SF an LA areas crash an burn in my life time due to a variety of reasons, Covid, work from home, delivery, pollution, a desire to return to rural living. I could go on, but I digress. Area as you said along with the right property combined with the right financing, sure that could be a great investment, but so could just about anything else with the right timing, investment, and financing.

I’d never account for more than 2% gain in real estate real return, an I’d be happy/surprised if I got that.
California has been scheduled to fall off the continent since the Gold Rush. News of it's demise has been exaggerated.
You can tell by the large homeless population, constant droughts, and how everything’s over priced. It’s dead, the die hards are the only one who it hasn’t clicked for yet. To each their own.
Somethingwitty92912
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Re: Will Inflation pay off my home?

Post by Somethingwitty92912 »

Shalom Aleichem wrote: Thu Apr 15, 2021 1:23 pm
Somethingwitty92912 wrote: Thu Apr 15, 2021 11:21 am
Shalom Aleichem wrote: Thu Apr 15, 2021 10:59 am
Somethingwitty92912 wrote: Thu Apr 15, 2021 8:10 am
Shalom Aleichem wrote: Wed Apr 14, 2021 10:59 pm

Got it. Sometimes it’s hard to recognize sarcasm or joking around on the Internet. In this forum there are plenty of people who think that buying a house is a poor investment. It can be a very good investment. I don’t mean necessarily because of capital gains but because a lot of people don’t have the discipline to save and it forces saving. For most people I think it is a great investment specifically for this reason to ensure they will have a roof over their heads in their old age. I would preface what I am about to say by saying this might be crazy but… Except it actually is not crazy. I recently refinanced my house. I had a pretty low interest rate mortgage but could refinance for even less. It was enough of a difference but it was worth it. It crossed my mind that the rate is so low that maybe I should take money out of the house. So I ended up taking a ton of money out of the house at a ridiculously low interest rate because it was low enough that long-term I could not take the money out. I’m not using it to splurge. It’s all being invested. In certain circumstances the house is almost like a bank. Some people are really foolish and borrowing at 4% or 5% to invest. That is crazy. We’re taking money out of their house to buy a boat. Also crazy.
Did you have to pay closing fees again? I can’t ever seem to find a place that was willing to waive enough of them to make that worth it.
Zero fees. That what they said and I didn't find any hidden fees. It was a sweet deal! 2% 15 year fixed with a big chunk of cash taken out of the house! I'm very excited.
Congrats nice find. 👍
Thank you! I'm very excited! My mortgage broker (I know the family personally) was almost as excited as me. She said this is the first and so far only 2% loan she brokered, and she couldn't believe how I could get that rate, no points, AND about 100K out of the house!
What will you do with your new found wealth?
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willthrill81
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Re: Will Inflation pay off my home?

Post by willthrill81 »

000 wrote: Wed Apr 14, 2021 11:26 pm
willthrill81 wrote: Tue Apr 13, 2021 11:40 pm Market appreciation in housing is a speculation (i.e., there is no income stream or future earnings being purchased), not an investment.
You're purchasing an income stream of imputed rent. For example:
willthrill81 wrote: Tue Apr 13, 2021 11:41 pm If we could sell right now, we would. But there's nowhere less costly that we would rather be. So we're staying put.
:wink:
I agree that a home is an investment, but that's different than banking on market appreciation above inflation.
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
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willthrill81
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Re: Will Inflation pay off my home?

Post by willthrill81 »

BabaWawa wrote: Thu Apr 15, 2021 6:40 am
willthrill81 wrote: Tue Apr 13, 2021 11:41 pm
Small Savanna wrote: Tue Apr 13, 2021 11:40 pm If home prices are peaking, that's a good time to either downsize or hold on to the house you've got. Obviously nobody knows exactly when the peak will occur, but there will be one.
If we could sell right now, we would. But there's nowhere less costly that we would rather be. So we're staying put.
Willthrill81, you've always got the RV. Put the the home proceeds in Bitcoin and hit the road for a year. :moneybag
Minus the BTC, that thought has already crossed my mind. If we didn't have a young child, we might consider something like that.
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
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