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> Find an online interest calculator and see how much interest you pay over the life of a 30 year loan. Then go to a cost of living calculator to see how much

> Find an online interest calculator and see how much interest you pay over the life of a 30 year loan. Then go to a cost of living calculator to see how much the inflation trend of 30 years minimizes that. The dollars you pay at the start of your loan have much more value than the dollars at the end; it tends to take quite a bit out of the "sticker shock" of just looking at the "total interest paid" column of an amortization schedule.

alistproducer2 11y ago
Yeah but the interest is not paid upfront. You don't get the benefit of time value money. Interest laid in year 25 is paid in year 25 dollars. It makes the loss calculation more complex but it does not change the fact that you still paid double for the property (at least) and will,barring a housing bubble, will never come close to recouping that money.
- hansef 11y ago
  But the COST of the interest is in year 0 dollars. I may be buying Cokes in 2015 dollars, but if the price is set in 1900 dollars I'm getting a shitload more Cokes.
  - alistproducer2 11y ago
    I get what you're saying. If everything arou.d me has gotten more expensive and assuming my wages keep up with inflation, the interest cost is cheaper in later years relative to the earlier years. Makes sense but hasn't wage and inflation growth diverged in the last couple of decades making that assumption a questionable one?
malchow 11y ago
This. A smart buyer can leverage up $1m at 3.7% interest, 0.7% real interest after accounting for inflation, even less accounting for the tax efficiency. Cheap money to be able to realize the appreciation of an asset that you simultaneously get to enjoy every day, and that gives your family a feeling of serenity. Headline BLS inflation figures aren't very representative of reality. Bottom line is that if you pick the underlying asset smartly, owning a house is leverage, and leverage increases financial returns. The historical high quality of real property as an asset could change -- a lot of people in my generation think it has. But I suspect it has not.

alistproducer2 11y ago

Yeah but the interest is not paid upfront. You don't get the benefit of time value money. Interest laid in year 25 is paid in year 25 dollars. It makes the loss calculation more complex but it does not change the fact that you still paid double for the property (at least) and will,barring a housing bubble, will never come close to recouping that money.

hansef 11y ago
But the COST of the interest is in year 0 dollars. I may be buying Cokes in 2015 dollars, but if the price is set in 1900 dollars I'm getting a shitload more Cokes.
- alistproducer2 11y ago
  I get what you're saying. If everything arou.d me has gotten more expensive and assuming my wages keep up with inflation, the interest cost is cheaper in later years relative to the earlier years. Makes sense but hasn't wage and inflation growth diverged in the last couple of decades making that assumption a questionable one?

malchow 11y ago

This. A smart buyer can leverage up $1m at 3.7% interest, 0.7% real interest after accounting for inflation, even less accounting for the tax efficiency. Cheap money to be able to realize the appreciation of an asset that you simultaneously get to enjoy every day, and that gives your family a feeling of serenity. Headline BLS inflation figures aren't very representative of reality. Bottom line is that if you pick the underlying asset smartly, owning a house is leverage, and leverage increases financial returns. The historical high quality of real property as an asset could change -- a lot of people in my generation think it has. But I suspect it has not.