They definitely reacted. But yeah before markets even opened he started his walk back - no military option - and by end of day full blown TACO’ed - tariffs? Nevermind.
The markets aren’t sure TACO is 100% - but they are too greedy to bet too big against it.
Yes, although it’s sometimes a bad investment.
… And no.
Your 3rd house is clearly an investment. Your 1st (and only home) has aspects of it and being an investment and others not so much (eg safe harbor for kiddo).
My house - like most - has increased hugely in value over the past 10-15 years. So I am rich, right? Well if we sell it yes, but then again I need a house and find out that other houses have also increased in value the same.
So in a way it’s like moving jobs, making twice the money but in a city where everything costs also twice as much.
True! Although, in the area we’re looking at, a median home mortgage is comparable to if not cheaper than renting (especially if you compare square footage.) So that at least settles it for us.
Right now we live in a manufactured home and only pay lot rent. So we will never have living expenses this cheap ever again. We have been taking all that money and investing whenever possible. Setting aside probably 40% or more of our income for savings and investments. Those days will be over. But I think the added value will be worth it.
Agree with above. I have never viewed my house as an investment, because you can only tap its value when you don’t really need it. Imagine you have $500,000 in equity, lose your job and need that money to live on. Good luck getting a loan.
That said, there’s an intangible to owning a house, and that’s being master of your own domain. I can’t imagine having a landlord. And tangibly, if you stay long enough your monthly mortgage reduces due to inflation, and eventually goes away, so it will save you money over renting.
All that said, we will be retiring out of the inner Boston ring and back to NH, which will allow us to take some of that equity, since any house we buy up there will be at most 2/3 of what our current one is worth- and hopefully closer to 1/2.
This is a nice articulation of some of what has been bouncing around in side of my noggin. Thank you.
Of course, now I have a hankering to get a Maserati. I can drive it to go pick up some tacos. Maybe I’ll just listen to some Joe Walsh instead.
Yes it is a very illiquid investment and may or may not be a great one, like any investing choice, but it is still an investment of some return and diversification utility above and beyond the less tangible values it brings that you articulate.
Equity in an owned home is in fact the largest share of net assets for most Americans. It is their most important investment.
Home equity looms large in household wealth. In 2021, the median net worth of U.S. households overall stood at $166,900, counting all assets. But their median net worth without home equity included was only $57,900.
This is generally true – if home equity is excluded, median wealth decreases by about half or more for all racial and ethnic groups.
Given that, evaluating it as an investment choice is important.
For many of these families of course it is the key aspect of building net worth precisely because it is a forced process. Because of its illiquidity. If they didn’t have to make the mortgage payment they would spend the money on other things, not invest the same amount in an aggressive basket of index funds dollar averaging and never touching except to rebalance …
On an adjacent topic: this may be one of the few arguments in favor of CDs, for some people anyway. A small protection against impulse spending.
I’d view a house as an investment if you live in a state with a growing population density AND you plan to retire to some other “cheap cost of living” location (West Virginia, Mexico, Botswana, whatever). It’s a relatively safe investment that is relatively guaranteed to keep up with and maybe even outpace inflation a bit.
If you live in a state with a shrinking population density OR plan to retire where you live, then it’s really just a survival necessity like food. You need it, you can’t not have it, so it’s really just a question of how to gain survivability in the most affordable way.
It still has its investment pluses.
One, compared to renting - can get to where the mortgage is paid off, then expenses in retirement are decreased compared to renting (still property taxes, insurance, etc., but much less)
Two, some people want to have something to leave the kids and not spend all their net value to zero. An appreciated value house fully paid off can be part of that.
Three, the option of getting equity out if needed by way of a home equity loan or a so-called “reverse mortgage.”
It doesn’t have to be the “most affordable way.” Our residence certainly isn’t the most affordable option, but we love it.
I meant as opposed to say renting. It’s generally more affordable to buy a home (at some point) than to continue renting one.
And yes, if a reverse mortgage is in the cards, then that does sort of create magic money out of nowhere, at some point. Fair point.
oh, then I agree.
Everything I have heard about those is that they are a… well not quite scam, but a scheme to profit from property-rich but cash-poor seniors who have not educated themselves about finance.
Probably because of a culture of ‘advisors’ who wrap the whole thing in obscure terminology: it’s too much for your little mind to understand, and it’s too dangerous to try to do it yourself: here, we’ll take care of it for you.
This ain’t rocket science, folks. Read up on it a bit. You don’t need ‘financial advisors’… they are usually just in it to get a cut of your money.
Don’t want to tar everyone with the same brush: there are some honest financial advisors. But if you’re coming at it from a feeling of fear, you are probably not in the best position to judge…
Yes, they load them up with fees which substantially increases the costs to you, and on top of that they insert lots of ways they can foreclose.
I’ve only ever seen one case where one made sense. A woman lived in a paid-off condo and only had a few years left (Alzheimer’s) before she’d be going to a home. She had 5 kids, four of whom were utter losers, and were already starting to fight over the condo. The one who not only wasn’t a loser got her into one so she’d have some money for the time she had left, and the looming crisis among the siblings was taken off the table.
They were pissed at him, but they’d never liked him anyway, so he didn’t care.
You’re talking about taking one out before the home is paid off?
Yeah, you’re basically (from what I read) just forced to using the reverse mortgage to pay the mortgage mortgage until the house is paid off.
I’d expect that there’s some tiny edge case where, somehow, that works out well but it’s unlikely to be a benefit under most situations. Once the house is fully paid off, however, if you don’t have anyone you want to leave the house to, you’re really just selling the house to the bank, short and simple. That path should, under most situations, be free and clear unless I’ve missed something?
It’s nothing I have ever considered, but I don’t think it is ‘short and simple.’
The schemes I have seen appear to have a lot of upfront charges, the ‘reverse interest rate’ usually seems to be very unfavorable, and you lose title to the property.
Do your own due diligence. As I said: it’s not legally a scam. But it’s pretty close…
Interesting. Good to know.
At least in the USA, regulation of reverse mortgages is mostly at the state level. Some states make them fairly senior friendly. Others let the sharks eat the elderly.
Like every financial product, they’re oversold and mis-sold. But that does not mean there isn’t a scenario where they’re a) a decent deal, and b) the best option on offer. The trick is knowing which scenario you’re in.
I don’t think it matters, with regards to fees. There will be things like an initiation fee, recording fee, puffy pants fee, etc. which all get added to the amount borrowed, which means in addition to paying them, you’re paying interest on them.
And then, as I mentioned, many will have provisions like “If your roof is not maintained, we can foreclose” which some pursue quite aggressively.
I agree with @xtenkfarpl but I’ll go a step farther- they are a scam, albeit a legal one. That doesn’t mean they never make sense, but I suspect many thousands who take them regret it.