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

To: Moominoid who wrote (56236)	6/17/2006 4:27:46 PM
From: Metacomet	Read Replies (1) \| Respond to of 306849

If you live in a house that is depreciating, you need to move to another state.

To: Moominoid who wrote (56236)	6/18/2006 9:58:08 AM
From: GraceZ	Read Replies (2) \| Respond to of 306849

I don't really get that... who knows what property taxes might be or any other aspect of the cost of owning a house, or some disaster comes along that the insurance company won't pay for. Calculations are based on probability over a wide sample but you can always be the unlucky or lucky one who happens to own the outlier data. I find housing expense is very predictable even over long periods of time. When you first buy a house the costs that are subject to inflation are a small percentage of your total costs and those rise in proportion over say a thirty year period, but you can calculate that cost using several inflation scenarios. The one true given is that if you have a 30 year fixed your last principle and interest payment will be the exact same amount as your first but it will most likely be a much smaller percentage of your total housing cost and inflation will reduce the value of that figure. This isn't going to change any time soon unless the low probability event occurs, monetary deflation. Over the 12 years I've owned this house the percentage of the payment that was prepaid insurance and tax went from around 12% to 16% of the total payment and the amount I budget for repairs followed the official CPI inflation (from about $2500 to around $3500/yr). This means that the largest percentage of my housing cost, the principle/interest payment, remained 100% predictable and the part that was subject to inflation could be planned for using inflation scenarios. No one I know who rents could make this kind of prediction because rents are always subject to market factors. I always tell people to count on their home owner insurance/property tax/repairs portion to rise to what their total principle and interest payment is at the start by the time they pay that last payment. What isn't predictable is how much you are going to want to improve and upgrade the property over your holding period and as you pointed out, changes in the neighborhood. I find owning a house opens up a whole vista of wants and desires that renters aren't as subject to. The rising expense that people often attribute to inflation is simply them constantly upgrading their house to include the latest bells and whistles.