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Old 01-27-2012, 03:53 PM
palermo22 palermo22 is offline
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Location: California Central Coast
Join Date: Jan 2012
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Mein Auto: Lexus IS 250
Originally Posted by Majikthese42 View Post

Real estate has characteristics of both an asset and a liability. A house can provide shelter, but it also commits the owner to an infinite stream of maintenance costs and tax payments.

Once a speculative bubble bursts, it can take years if not decades for prices to recover.

Still, in 2010 about 30.3% of owner-occupied homes were owned free and clear, without a mortgage according to the Census Bureau. I think that number is probably fairly accurate. My neighborhood is more than 30 years old and about half are original owners so they shouldn't have mortgages. Not everyone went crazy borrowing during the credit bubble!

I'd prefer to pay cash and to drive a cheaper car and live in a smaller house than I can afford than to be a slave to debt. It would drive me crazy to wake up and need to go to a job I didn't love to make a car payment.
Like any financial chart - snapshots give misleading information. While it's true that home prices have been on the decline for the past five years - if you spread that picture out to the past ten or twenty years - then the negative 29% pales in comparison to the gains that were made. A mortgage - as long as you are not over your head - is a worthwhile liability because it's attached to an asset that will continue to appreciate (most likely with inflation) over the long term (just as the stock market will - again, long term).