7 Comments
Apr 9, 2021Liked by Bitcoin Urbanism

What I figured out recently is that the “price” of a house is NOT the sticker price but is better judged as the monthly “p&i,” which of course is the manipulated cost described in the article. The thing is that this cost is locked in level for the life of the loan. Inflation lowers your cost over time. Even if the sticker price of your house drops 50%, it is almost certain that all other houses have done the same or similar. Nevertheless, central banks will ensure the actual P&I stays the same. It is actually cheaper today on a p&i basis to own a home than it was in 1990 (us average), after adjusting for even simple CPI. While I doubt anyone in the future will get sticker price gains like they have for the last 30 years, a mortgage is still attractive as a means of payment, as it leverages inflation to the home owner’s advantage. Rents move up over time. Mortgages move down relatively. Even if your house rises 100% in value over 10 years, you still need to live somewhere and your new home will likely also have increased 100%. The net effect is a wash.

So yes, homes are not investments but are durable goods, with decreasing adjusted costs if using a mortgage. Sticker price is irrelevant.

A more important metric to look at is property tax and upkeep costs. Those always go up. Many people today have property taxes in excess of their original mortgage p&i. Now that is truly where they come to steal from you. Giveth in one hand and taketh away with the other.

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Apr 8, 2021Liked by Bitcoin Urbanism

“Castles made of sand....slip into the sea, eventually”.

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Great read! Something I was told young in my career a house is NOT an investment but a place to live.

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