🚀 go-pugleaf

On Sat, 1 Feb 2003 06:21:41 +0000 (UTC), Don Klipstein 
<don@manx.misty.com> wrote:
>In article <p6bj3v88oujtjijcaqonpi283qg2v0963s@4ax.com>, Scott in Aztlan 
>wrote in part:
>>
>>You missed the point entirely. A house is an INVESTMENT - it will
>>APPRECIATE in value. In areas like Irvine, it willappreciate at 20% or
>>more per year.
><SNIP>
>>Bottom line: buy the house first, *then* buy the nice car. Doing the
>>reverse is just effing stupid.
>
>  Real estate will not spend decades on end giving double-digit annual 
>rate of return.  The stock market will do a little better, although bonds 

Not true about the stock market.  That rate of return is an accounting 
fiction which does _not_ include write-offs of companies that go belly-up.
A true rate of return would include that.  Remember, Polaroid was once a
solid stock.

The other usual mistake made comparing RE to stocks is that the RE rate
used is housing appreciation percentage, while the reality is most people
are leveraged with a low-risk position.

So if you put $40,000 down on a $200,000 house which appreciates at 5%
per year after expenses and sell it after 5 years, you are making a _lot_ 
more than 5% on the 40K.  And many large companies are way upside down
in the funding of their pension funds, because the accounting rules let
them assume, say, a 10% return, which is money they should have been 
earning but haven't, so will have to cover out of cash flow, taking a hit
on their dividends just as the market is focusing more on dividends.  So
that will make the bear market worse over the next several years.

While I agree with the buy-the-house-then-the-car strategy from a purely
economic point of view, practically speaking a young person could probably
do better socially getting the car first, having a bunch of fun, then selling
it if they must to get the house.  Hey, they'll have to get a breeder van
when they have kids anyways... :-)

jg
>and certificates of deposit probably wpn't.  If you don't need a lot of 
>space, rent an apartment.  If you need more space or have some need to be 
>free of landlords, then buy a house - a house will be more economical than 
>a 3-bedroom apartment unless you can't keep up a house.
>  As for the car - get a cheap car such as an early 90's Olds Cutlass 
>Ciera or Delta 88 or similar Buick and put your savings (vs. a more 
>expensive car) into a total stock market index mutual fund such as 
>Vanguard "Index Total".  An early-mid 90's Olds Delta 88 LSS is a car that
>few should be ashamed to drive and which costs CHEAP!  If I had to pay for 

Well, if you are dependent on a car for a big commute, you don't want a 
seven year old Ciera.

Two words:  "Bear Market."

>a house in Silicon Valley, I would buy no more expensive a car!  Even bike 
>2 hours each way in 40 degree rain before going into debt for a Mercedes!
>
> - Don Klipstein (don@misty.com)

jg
-- 
These opinions are my own. 
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