Saturday, May 10, 2014

To rent or own

My experience in Australia is quite different from the advice in this article "The fact that Americans still financially fetishize homeownership baffles me. Never mind that so many people lost their shirts (among other possessions) in the recent housing bust. Over an even longer horizon, owning a home has not proved to be a terribly lucrative investment either. " My experience:
I had two experiences of buying a house, both in Melbourne Australia. The first time was in 1988, when I was 47. The rents seemed high and I bought a house for 105,000 with a down payment of 10 percent. The rates went up to 14.5 percent, it was difficult. The neighbourhood schools were bad, we experienced some racism but it was difficult to get out. Finally in 1992, I saved some money on a foreign trip and rented a house for myself and rented our house. After a few months rents did not come and I sold the house for 80,000. It was a bit of disaster. Finally in 1995, I bought a house again since I felt that I should own a house by the time I retired. This time the price was 150,000 and rates around 6 percent. It was bearable and by 2004, it was mostly paid off and I retired. We kept a bit of the loan so that we could borrow money if we wanted. Off and on we borrowed money on the house, once to buy a small business and sometimes to help the children to buy houses or other things. I never borrowed to invest in stocks. Now the house (mostly for the land) is worth over a million and I am comfortable with the superannuation I get. Without a house, it would not have been enough. Even the first place I bought is now worth around 500,000. So I generally advice our children to buy a house. But I am not sure about it since it may affect their mobility.There were automatic savings since one had to pay mortgage. There are people who after paying some mortgage, used it to borrow and buy more houses. It depends on the area whether rents are safe and stable. There seem to be too many variables to give a uniform advice. I hope that the above article is not put up by rentiers.
Mote on the above article in Calculated Risk and by Matthew Yglesias

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