Originally Posted by rbarn
Ok, guys, like most people you have been mislead into the true definition of terms.
Investment: The purchase of an asset that returns cash flow
Asset: Something you own 100% outright of value.
Liability: Something you own that financially exposes you to risk
Since you do not own your house (the bank owns it) and it does not return cash flow then it is not an investment
If you own your house outright than its an asset at best that requires a yearly rental payment to the government in the form of property taxes. ( not a very good asset that cost you money every year)
Since most people are financially obligated to a lender for their house that they think they own, but actually dont, then it is in every since of the word - a liability.
Also like most people you guys miss the difference or complete ignore it, between REAL and NOMINAL gains. By the time you add up all the insurance, maintenance, taxes and interest from your "nominal" gain IF your house went up in value, you might be slightly ahead, but when you adjust for inflation and put your gains in "REAL" terms then I guarantee 90% of homeowner lose money on their homes over the course of a 20 year mortgage. INFLATION MEANS EVERYTHING !!!
There has been 2 generations of brain washing the American public by the mortgage lenders and realtor associations into believing what you guys just said that somehow enslaving yourself in decades of debt is "the American dream"
Not trying to burst anyone's bubble here, but this is a line of reasoning we have been purposely led away from by people that have a vested interest in us not understanding it fully (namely the banks and realtors)
Here's another line of reasoning: People say buy now because interest rates are so low. So if low interest spur demand for homes, what happens when interest rates rise again and demand falls - again - and prices drop - again ? Homes are only worth what people can pay for them. What people can pay for them is wholly dependent on whether they can borrow the money and at what rate. So your homes value is not based on the home itself, but on market demand which is driven by Federal Reserve central planning and interest rates. -- This again is more risk - more liability.
Nothing wrong with buying a home, but there is equally nothing wrong with renting forever either. The math is not as clear cut and it is not the "dream" most have been led to believe.
To say that I agree with this perspective is an understatement. The idea that buying a house is a 'great investment' is generally not true. It's an investment, sure, but usually not such a great one
Compared to renting, ownership can frequently be an expensive affair. Renting has a lot of advantages over buying, and buying has many advantages of it's own. But, saying that rent is money down the drain while buying a house is a good investment (as a general concept) is just not necessarily true.
Don't get me wrong, I love my main house and I am so glad I bought it. Probably, over the very long run, it will appreciate nicely and be worth much more than I paid. But, I am not considering the expenses of living in the house not to mention the things that you buy when you have a house like nicer furniture, etc. I am doubtful that I came out ahead financially vs. renting - but this is a home and I love being here so it's totally worth it.
I have another house that isn't a good investment at all. It's a vacation house and I own it outright, and it's managed and rented out for me. It's cash positive, but I could probably do better having the money in a tax-advantaged account with mutual funds. But, wow , I love that house more than anything so I don't care.
And yes, the whole industry is aligned to make home ownership into some grand prize, a great investment, something you must do, and there are mortgage brokers and realtors sucking money off the top every day.
Each time someone tells me something like, "Oh, realtors are free for the buyer. The seller pays their fee!" it makes me cringe!
So, don't get me wrong - home ownership is a wonderful thing! But, generally the satisfaction comes from things other than the financial realities involved in owing a home, in my view.