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30 years later...


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Dad wasn't amused, but the rest of us were  :roll1:

Dad was standing around the grill during a cookout and somehow the topic of the house we all grew up in came up.

Dad kinda started to boast, said something to the effect of "Best investment I ever made, bought it for $40k, sold it for $110k."

Without thinking, I said "You lost money."

He was like, "You didn't hear me, I bought it for $40k and sold it for $110k."

"I heard you, you lost money."

 

The cookout turned into an add-up-the-numbers reminiscing of the house we grew up in.

Dad had it built next door to the house we were in at the time then sold that first house.

So his 30yr mortgage from 1983 was only $40k after selling the first house and paying off a couple cars.

He retired in 2007 but the house did not sell until 2009 (a land-contract sale fell through and he had to relist it for sale).

Sold it in 2009 and he was under that 30yr mortgage that entire time, two second mortgage home equity lines of credit for home improvements throughout that duration.

He was still convinced he made a profit of $110k minus $40k of $70k.

I kept telling him he lost money but he still would not believe.

So we grabbed pen and paper...

25yrs into a 30yr mortgage at 8% = $62.5k in mortgage interest

vinyl siding home improvement = $8k

new roof = $6k

added central air and new furnace = $7k

added pool and deck = $4k

 

He would have had to sell for $127.5k just to "break even".

Us kids found it funnier than Dad did  :buehehe:

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Posted (edited)

True, but I also think inflation is irrelevant.

What I mean by that is that most people only think of money "linearly".

So an "investment" is only an "investment" if the sale-price exceeds the cost basis.

The cost basis is the price paid plus deposits added along the way (ie, the home improvement costs).

 

$40k in 1983 is $86k in 2009, so according to inflation he did "profit" even though his sale-price did not exceed his cost basis.

But I do think that most people think sale-price relative to price-paid.

That was, in reality, the only thing dad was thinking when he compared $110k sale-price to $40k price-paid (excluding deposits added along the way)  :whistle:

Edited by ArcticFoxie
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If I may, and if I get your story right :dubbio:, youmade fun of your dad, but what could you propose as an alternative?

Bitcoin wasn's invented yet at the time and investing in the market/stocks does not provide - last time I checked at least -a roof over a family.

jaclaz

 

 

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True dat.

The rest of the story was more about how dad has been bitten time and time again on rental properties and how "my generation" has done much better staying AWAY from real estate "as an investment".

A place to LIVE, of course, but not as an "investment".

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  • 2 weeks later...

@ArcticFoxie , @XPerceniol and other members from USA , mind giving your opinion on this and ,perhaps, tell us is this also true for your region ,

{but I'm not asking you to tell us where you live exactly, just the state , if it's ok} , thanks in advance. Would be interested to hear EU citizens too ( @Gansangriff , @Mr.Scienceman2000 and the others ), esp. from the West , since I've heard it about Ireland (EU member) too.

https://twitter.com/APhilosophae/status/1402434266970140676

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@Dixel: Unfortuneatly, 30 years earlier, I didn't even exist, so I'm not a primary source on that topic. But why not chatting about the financial situation here, in Germany...

It's not all down to inflation. Food is cheap. Computers too (especially used ones). But the houses and renting prices must have grown massively from what I can hear old people saying. Maybe the change to the Euro in 2001 has made a big difference compared with the US dollar. I don't think old grumpy people were rambling without reason, "how everything got expensive". They calculate it back to the former currency, Deutsche Mark (DM), and indeed, prices have gone up for most of things!

Germany has big gaps between the regions. A friend of mine has a house in the rural part of Hessen (middle of Germany) which he could sell for 150.000 Euros. Now he tries to get something similar in a rural part of Bavaria (Oktoberfest! South of Germany). Forget it! His nice house is standing at the wrong place and so pretty much useless for that task, as prices are 4 times higher there! And compared with the eastern part of Germany (former DDR), my friend could buy two equal houses for his current one.

It's definetly important to have some real stuff "for later years". The states pension system (is that the right word?) is broken. Since the 60s to be honest (because of medicine, reducing child birth and people not wanting to die). The number of old people that are getting decent amounts of money from the state is getting smaller and smaller. It's math. Less young people, more old people, who the heck is going to pay that?
Of all the people that are digging through deposit bottles in the cities where I've lived, I would estimate there was an equal high number of young hobos and of old people trying desperately to get some additional money. Dammit, what a great perspective for the retirement age! And a great "thank you" for working for 40 years. I've heard enough bitterness, really. Life is tough, being stupid never helps, money rules the world, so get on your own feet and don't rely on a poorly-planned state to help you when you're old.

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I am not aware of any corporations buying residential properties in my area, but that is one type of thing not mentioned in the local news nor something I pay much attention to. I do listen to the real estate shows on the radio at time and maybe they will say something on the next one since that tweet/story had gotten curated into twitter newsfeed. I do know that this area also has the same issue of people being outbid on house prices and the sale prices going way up. I can only speak for my own neighborhood in that regard, where the 2 houses I know have sold, one was purchased by a person. The other I do not know yet becauase the owner didn't move yet. On those radio shows they have been talking about the local market for awhile and what they have found is a lot of the purchases were made by people who had migrated from New York City, which seems to be a considerable amount. The only thing this housing situation over the past year has done is raise the value of my own house to a relatively insane level... I'd say the comparable value has at least doubled... good thing the monthly payment hasn't changed. :P

But for 30 years ago around here, that trend was not present. There were other things happening instead. The area was depressed because we had lot most of our major industry and values were very low. Corporations were buying property in large amounts but not for high prices. They were buying up the old industrial properties which a lot ended up on the waterfront as the reason why we had a boom town in the early-mid 1900s was due to waterway shipping. We had a large rail hub and giant rail station, and giant city hall... overly large considering the size of the then current population. So the corporations were buying up large portions of cheap land 30 years ago and since then most of it has been developed. The parts that haven't are those that were primarily used for steel industry where the cleanup is expensive or at times not even done.

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Posted (edited)

The Germany data I can find on home-ownership rate doesn't seem to be updated as frequently as the US data.

Germany home-ownership (ie, owned by the people that live in the home, not by corporations renting that property out) is definitly on a decline.

But so was the US and the US was on an increase until this "pandemic" caused a large drop.

But it should also be pointed out that the left scale (US) full-scale range is only 62 to 70 percent for as far back as 1965 for the above chart.

An 8% fluctuation doesn't seem too much of a concern to me.

The scale on the right (Germany) only has a full-scale range of 51 to 53.5.

So Germany home-ownership has only dropped LESS THAN 2.5% for the range shown above.

Edited by ArcticFoxie
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8 hours ago, Dixel said:

@Mr.Scienceman2000 and the others ), esp. from the West , since I've heard it about Ireland (EU member) too.

here house prices been inflating a lot in since joining euro and switching away from finnish mark. Before house costing 1 million was luxury level house, nowadays even "average sized" house can be 400 000+ depending area. Friend who built his house with back in early 2000 and sold it few years ago got 5x what he used to build and maintain it. Also price of food, living etc been going up due taxes and euro course, while most of salaries been going down. Atleast I am lucky to have decent income and wont live on most expensive areas on south Finland. Also rents have not affected too badly yet where I live

 

Likely I will never be able to afford to buy my own house since prices of houses unless find extremely highly paid job and even for those need more work experience that only times bring. I live in rented apartment which is not too bad despite peoples saying I should buy house since cheaper on long term. I do not want take loan to build house, I never took loans, I do not even have credit card. I pay all in cash or debit card. If cannot afford something I want I save for it even long time if needed.

 

And why I said rented apartment is not too bad Lets imagine it like this: Either you take load to pay 100 000€ or more to build a house (plus any additional) and in case damage occurs that is not your fault but insurance refuses fix you are on your own, also to move other city you need sell house that may take time and that is why not optimal to me, who knows what life brings. Let just say you wont go to centre of town where apartment can be 1000€ or more per month for single person block and rather go outside town where got decent connections to city trough bike, bus or other like I do. You pay 500-600 euros for three room house that may even have sauna (room filled with steam finnish use to relax :P). Also all non private apartments on my area offer cable tv which is same as OTA tv here but no distraction from weather. Then they offer free 10mb/s cable modem broadband connection for free and 100mb/s cable modem connection with 10 euros/month. Also good portition of electric and water is included on rent price and if did exceed it you will get that portition paid back. And if anything breaks, rent aparments services comes replace/fix it including shower, toilet, fridge, furnace. To get rid off house I just tell rent company I will sign off and withing next month my rent ends

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Wages in Germany have also increased more than wages in US, at least for 1991 through present.

Higher wages generally go hand-in-hand with higher home prices.

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@Mr.Scienceman2000: I feel the same on may things you wrote there. A whole house is just too expensive. It's not a realistic goal to achieve with a "normal" work when you have to start your finances from scratch. Except through making debts, which goes against my principles. But what you can do with little money (that you don't need otherwise) is put it on gold and silver. At least 100 years ago, people where able to buy houses "for an apple and an egg" then, when the money was worth nothing anymore and the desperation to get true values were big.

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Renting versus owning has pros and cons on both sides.

I'm not well-traveled so I can only speak based on "numbers".

Home-ownership in US is 65.3%.

Germany is 51.5%, Finland is 71.1%, Ireland is 70.3%.

EU average is 70%.

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