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>f you have a mortgage, you're hopefully building up equity that can be released when you retire to somewhere smaller or in a cheaper location In other words,
by forgetsusername 11y ago
>f you have a mortgage, you're hopefully building up equity that can be released when you retire to somewhere smaller or in a cheaper location
In other words, you're relying on the "Greater Fool Theory" of perpetually increasing house prices.
There is nothing special about real estate as an asset class.
- makomk 11y agoThis is true even without perpetually increasing house prices, so long as you're paying off the principal of the loan and not just the interest.
- vinceguidry 11y agoErr, no. Building up equity is not the same as appreciation. It's basically a savings plan. This assumes that the property values remain sane and rational, not that they will constantly grow. If the house appreciates then you get that money at sale no matter how long you've paid into it or how much equity you have.
- zanny 11y agoIf I want oil, I can go find some and drill for it anywhere that makes fiscal sense. If I want clay, I can go find a riverbed and start digging. If I want the corner of Fourth and Chester for commercial traffic, my options are a bit more limited. The problem with land is not about its scarcity, its about its situational utility. The value of land is often completely out of control of the property owner themself, and you cannot create new city centers or in-demand residential neighborhoods in private enterprise.