The conventional wisdom used to be: Buying a home and living in it is not an investment, but it sure beats renting and dumping money month after month with no return of any sort. Purchased property pays for itself by saving money that you don’t have to pay for rent. In 20-30 years time you own that home whereas you still need to pay rent if you are renting it.
Here in San Diego over the past five or years, I think it would be safe to say that anyone who had to make the purchase vs. rent decision would have been way ahead renting. Here is a scenario based on real sales prices: Let’s look at a San Diego town home that sold for $510,000 on 9-22-05. On 6-25-09, a similar model in the same community sold for $400,000. So, the approximate loss in value was $110,000. However, the real world loss, when selling costs are factored in, was $138,000. Naturally, this loss does not include any property tax, mortgage interest, repairs or required maintenance. Now, renting a similar townhouse in this community in 2005 would be approx. $1,700 a month. Lets’ assume the rent increased, each year by $100 per month. The total 45 months rent would have been $82,800. The conservative bottom line would be that the renter saved at least $55,200 by renting!
httpv://www.youtube.com/watch?v=GCiFjkgZM3k
In fact, for a fair number of people renting is a much better choice. A house can be an albatross that is hard to dispose of. It certainly limits your mobility. The government is making a mistake trying to maximize home ownership with it’s easy money policies.
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In the 70’s people had equity in their homes and credit card debt was not maxed out by as many as it is today it was a much different time, so much so it’s very scary today.
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Thanks for sharing this, really good.