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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: GraceZ who wrote (11797)	7/27/2003 2:22:56 AM
From: Jim McMannis	Respond to of 306849

RE:"At any rate, the worst thing you can do is lock all of that money you saved into a house." It appears that is what's been happening.

To: GraceZ who wrote (11797)	7/27/2003 8:58:32 PM
From: Mr. Sunshine	Respond to of 306849

<<At any rate, the worst thing you can do is lock all of that money you saved into a house. A house is consumption,...>> <<It's a non productive asset...>> Grace, I agree with most of your post, but not this. Everyone needs to live somewhere, if you do not own a house then you are paying rent. For example, one of my clients bought a home in 1996, he is currently paying PITI (Principal, Interest, Taxes, Insurance) and maintenance of only $850 per month. If you remove the principal and consider tax beneifts, he is paying less than $600 per month. If he rented out an equivalent place, it would cost about $1600. The way I look at it, the wise investment in 1996 is now paying a $1000 ($1600 - $600) monthly dividend. This $1000 can be used to invest, live a little better, pay down the mortgage further, send a kid to college or whatever. Sure, he could take some cash out, but that would make sense only if he can invest it at a better rate of return than the loan interest rate. Not everyone can do that (hear the stories of people taking loans in the late 90's to buy net stocks?) Perhaps we are saying almost the same thing. Not ALL of a person's net worth should be in their home. I believe in diversification, so a person should have additional savings, retirement funds, and so on.