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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Tradelite who wrote (499)8/29/2001 3:35:07 PM
From: Robert DouglasRead Replies (1) of 306849
 
Trade,

You said:

<<<You need to consider the effects of inflation on home ownership costs, too.....mortgage
payments look smaller and smaller with each passing year....they are fixed, while usually
one's income increases and inflation renders such payments very small in comparison.>>>

Please be aware that when you take out a mortgage, the inflation rate for the duration of the loan is priced into the rate that you receive. If the actual rate is higher, then you will benefit. If the actual rate is lower, you will suffer. If you are counting on inflation bailing out an investment, you are taking a specific risk.

Part of the reason that many homeowners made out well in the high inflation periods of the 70s and 80s was that their homes appreciated faster than the rate of interest. In other words, they had a mortgage that was actually a negative "real rate of interest."

Those were unusual times and will not be repeated, IMO.
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