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I've seen this argument in many places yet I'm not sure the math holds up. For example a house that costs 1000$ goes up in value by 20% = 1200$. Over the same
by marto1 5y ago
I've seen this argument in many places yet I'm not sure the math holds up.
For example a house that costs 1000$ goes up in value by 20% = 1200$. Over the same period a 2000$ bigger house goes up by the same amount = 2400$. If you wanted to buy the bigger house before the increase you would have loaned 1000$, but now since the increase you'll have to pay 1200$.
Is there a catch I'm missing somewhere or what ?
- ghaff 5y agoNo. Assuming prices increase by the same percentage in all price bands, appreciation makes buying up more expensive.
- ProfessorLayton 5y agoPrices do not increase by the same amount in all price bands, for several reasons, but a major one being the cap on federally backed jumbo loans. Secondly, some states like CA tax properties on the purchase price, so the more expensive the property, the higher the tax bill will be, which again is factored into the financing along with interest rates etc. At least in CA, home prices for typical working class folks have risen much faster than homes that were already expensive. This makes it possible to jump into the next price band once enough equity has been built up on a "starter" home.