Answer to Brad's Housing Question

[Don Erickson]

In article <086f01c239bf$8394f7b0$028210ac at ctspy> you write:

>The third problem is that we're led to believe from the time we're kids that
>our lives aren't complete unless we own a house.  "You're throwing away
>money." they say.  Well, my rent was $625 a month, my house payment is $759.
>So it's costing me more...  "But you're building equity!"
>
>"Huh?  All I see if $45 in equity a month for the first five years."

So, make double principle payments and you've got a fifteen year mortgage.
It's only $45 a month, slowly increasing.

>"But it's tax deductable."
>
>"But it's still out of pocket and It's only $900 more than the standard
>deduction I have now.  And what about the $300,000 the house will actually
>cost me over the next 30 years?"

Your principle and interest won't go up (given a fixed mortgage).  Want to
bet what your rent will do over the next thirty years?

>"But the house will appreciate over 30 years."
>
>"So you're telling me that in 30 years... IF by some mirriclemy house value
>has TRIPPLED...  I MIGHT break even on this whole deal?"

After thirty years, you own a house.  After thirty years of renting, you
own nothing.  How is that breaking even?  Take a look beyond your next
paycheck, you'll see that it is a no-brainer.  Not necessarily this year,
but in five to ten you're way ahead.

>It's at this point the mortgage broker starts looking like a rat trapped in
>a cage...  So why did I buy a house?  One reason:  A woman.

Well, I think that you should never finance anything that depreciates.  
Pay cash or do without.  That's why my cars are all ancient.  But I do
generally agree with you about Johnson county real estate values.

Regards,

-Don, Missourian