Gadianton wrote:Analytics wrote:It isn’t clear to me the advantages outweigh the disadvantages
Oh man, what you've admitted here. Market efficiency predicts that the advantages shouldn't outweigh the disadvantages of renting vs. buying.
LOL. My view is consistent with the market being efficient right now, but that doesn't mean it's always efficient, and it doesn't mean that a superior analyst couldn't figure out whether or not I paid too much for this house.
Gadianton wrote:And rational expectations/policy ineffectiveness predicts that government policy shouldn't be able to encourage home ownership by allowing one to deduct their interest or property taxes.
Could you explain what you mean here? I don't follow.
Gadianton wrote:BUT..congrats. I refinanced into a 15 year mortgage last year and I'm satisfied with the smaller deduction, but with the benefit of watching the principle shrink by a large amount every time I pay. What I learned in 2005, when my distrust in market efficiency reached its epic high and the disparity between rents and mortgage premiums left me shopping for a trailer to move into; whether the market is up or down, your advantage over the competition is decided by the amount of equity you have vs. everyone else.
I purchased my first house for about $140,000 with $7,000 down. Four years later the market was way up and I sold it for $250,000. Deduct about $20,000 in home improvements, and my $5,000 investment made $83,000 in four years. Going long in the housing market with leverage up to my eyeballs paid off that time (I won't tell you about my second house—I don't want to cry).
According to CAPM, the size of your mortgage should be determined by your personal level of risk aversion.
Gadianton wrote:The one really cool thing about owning your house is working on it. don't be afraid to buy power tools. you only live once. Seriously, once you tear appart a room or a kitchen with some hair-brained idea and you're forced to make it work, you'll find a whole new plane of being. You won't give a rat's ass about math or anything theoretical. Seriously, if I could get the family out of here more often, you guys would never see me posting.
You are a true manly man! I built this fabulous treehouse in Maine 10 years ago. It was basically a 10 x 10 deck with a railing hanging from some trees.
Have you read The Sea Wolf by Jack London? The book tells the tale of a theoretically oriented, spoiled, aristocratic, naïve, and utterly incapable man of learning being thrown into the real world where he actually had to do stuff in order to survive. Now that I own a house I might get a callus. the horror!