5 ms·

> Only 4%? An index fund will return higher than that. Just like homes will always go up?

by nilkn 12y ago

refurb 12y ago
That's what makes me laugh when I talk to people who are looking to buy a home. Despite the housing crash of 2007, when I ask them what would happen if housing prices go down, they get this disturbed look on their faces and say "nah! not in this city!!".
- dingaling 12y ago
  As someone who has nearly paid-off a mortgage I have absolutely no interest in whether house prices increase or decrease. I'm buying somewhere to hopefully live for the rest of my life. I have no idea what the current 'value' of my house is, nor will I be enquiring. If it turns-out that the house eventually achieves negative equity, who cares? I'm still living in it and that would actually mean my property taxes decrease... People still buy cars despite meteoric[0] devaluation. [0] meteors plummet to the ground, you see
  - refurb 12y ago
    Then it sounds like buying for the right reasons! Many people see buying a home as not only getting a place to live, but also as an investment. And for some reason many people see the investment as "low risk", which it often isn't.
  - nilkn 12y ago
    This is great, but it's not a realistic scenario for most folks who aren't approaching retirement and can't be 100% sure they're never going to move again. If you ever needed to move, you'd suddenly care quite a bit about the current value of your home because it will have a tremendous impact on the actual cost of buying a new home.
    - dllthomas 12y ago
      True, but (assuming prices are comparably "up" or "down" in both places and that you're moving into something of similar size or larger) it's better to move when prices are low (since a lot of the costs are pegged to the price of the house).
mrgordon 12y ago
No one said that index funds always go up but they do return more than 4% (nominal) as a long term average. I bet that the calculator uses 4% as the default because they assume a relatively conservative portfolio such as 50% bonds & 50% stocks. That portfolio may be appropriate for many people, but it is substantially less risky than tying up your entire net worth (plus more?) in a single house.

> Only 4%? An index fund will return higher than that. Just like homes will always go up?

by nilkn 12y ago

> Only 4%? An index fund will return higher than that. Just like homes will always go up?

That's what makes me laugh when I talk to people who are looking to buy a home. Despite the housing crash of 2007, when I ask them what would happen if housing prices go down, they get this disturbed look on their faces and say "nah! not in this city!!".

dingaling 12y ago
As someone who has nearly paid-off a mortgage I have absolutely no interest in whether house prices increase or decrease. I'm buying somewhere to hopefully live for the rest of my life. I have no idea what the current 'value' of my house is, nor will I be enquiring. If it turns-out that the house eventually achieves negative equity, who cares? I'm still living in it and that would actually mean my property taxes decrease... People still buy cars despite meteoric[0] devaluation. [0] meteors plummet to the ground, you see
- refurb 12y ago
  Then it sounds like buying for the right reasons! Many people see buying a home as not only getting a place to live, but also as an investment. And for some reason many people see the investment as "low risk", which it often isn't.
- nilkn 12y ago
  This is great, but it's not a realistic scenario for most folks who aren't approaching retirement and can't be 100% sure they're never going to move again. If you ever needed to move, you'd suddenly care quite a bit about the current value of your home because it will have a tremendous impact on the actual cost of buying a new home.
  - dllthomas 12y ago
    True, but (assuming prices are comparably "up" or "down" in both places and that you're moving into something of similar size or larger) it's better to move when prices are low (since a lot of the costs are pegged to the price of the house).

mrgordon 12y ago

No one said that index funds always go up but they do return more than 4% (nominal) as a long term average. I bet that the calculator uses 4% as the default because they assume a relatively conservative portfolio such as 50% bonds & 50% stocks. That portfolio may be appropriate for many people, but it is substantially less risky than tying up your entire net worth (plus more?) in a single house.