The NYT has a buy vs rent calculator that helps make some of these decisions:
https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...
Of course, you can't ever recognize the value of your house unless you sell it and move somewhere cheaper (or buy a 2nd house and rent out the first one, but that's just another side of the same coin).
Most people have negative savings every year. They have more debt. If one has bought a house, then it is very easy to go into more debt every year, when house prices are rising. Then they fall.
Since the beginning of written history (the first written records are records of debts) there are stories and parables about the evil of debt and the need for debt jubilees. Also the idea that lending with interest is immoral is found through out time. Having such easy access to debt/credit from strangers seems not to work well over the long term for human societies.
I mean, is it a good thing that one can get a "Rocket Mortgage" where you can "Get Approved Fast. Get an approval to buy a home or refinance your mortgage in minutes."? [1]
I suppose shrimp and pork and beef are also unquestionably evil... Debt didn't historically work because property rights were poorly recorded. This meant enforcing one's debt involved mafia tactics. Modern debt is cleaner and subject to bankruptcy, a process that occurs on a case-by-case basis when it's needed, a far better solution than randomly cancelling debt every so many years.
For example, businesses often need to borrow money in order to get started.
For another, "bridge" loans and "revolving lines of credit" allow a business to operate when the timing of receiving payments does not line up with the timing of when bills are due.
Forgiving debts means that interest rates must rise to cover those losses.
The figures mentioned use full salary, in reality you might get some 50% of that possible to allocate to paying off the debt. You still get to pay utilities, cost of life for the family, transportation, education and probably extras. Note I've even ignored any savings - and with high mortgage debt, you can be wiped out by any more expensive health problem.
Interest based credit is important for capitalism (use money to make more money), but certainly not for market economies (Use money as a tool to exchange goods you want/need). Both are distinct and can exist independently.
In the end it was basically just a workaround that was effectively the same as charging interest and that same Muslim family ended up taking a conventional loan when they moved instead of an "Islamic-compliant" mortgage because it was a lot easier.
[1] http://www.npr.org/sections/money/2016/05/13/477956675/episo...
Exactly. Interests rates are way too low at the moment.
Pensions are a Ponzi scheme, don't fall for it.
Pensions are mostly just highly tax advantaged wrappers for investments now. They are most definitely not ponzi schemes.
Your link is for a defined benefit pension, which is not typical anymore.
The problem is they bump up those benefits when their fund is doing well but when it isn't doing well there's little or no adjustment. It's so big it's fund is influential in the market and also in politics.
Large numbers of current retirees have been promised unaffordable pensions.
While public pensions like social security have certain features of a Ponzi scheme, they can be sustainable forever, unlike other Ponzi schemes. In fact, they can be more efficient than everyone saving and investing for retirement themselves: https://www.economist.com/news/economics-brief/21727877-fina...
Consider if you have a 5% chance to die at or before 65 who get's the money? Well what if you could get together with 10,000 people and split it with those who live. Now your investments are boosted by those who die and there is no downside as who cares what happens after you die.
Unfortunately, such schemes are illegal unless it's though a company. Because really the long tail is living to 120 which means you don't want to aim to be broke at say 95 then turn 95 and be in good health.
PS: Remember, returns after inflation can be <3% over 20 years. I want a hedge for that risk other than just having a massive amount of money I can't really spend.
However, social security and other government funded pensions are Ponzi schemes. The money you pay in is given to people who are retired at that time. The money you get out is paid by people who are working at that time.
So the real fight is what proportion of current output goes to old people. Private schemes try to ensure wealthy old people get the biggest slice. Public schemes are more vote driven. It doesn't make them Ponzi schemes.
It's also not just a pension fund as you can receive benefits well before 62. Death of spouse with under age children or permanent disability.
Now, this does not mean it's a great or even a good investment. But, the trade off of safety vs returns is not actually that bad assuming you live longer than average.
PS: Another way of looking at it is there are no 100% safe approaches to investing 10's of trillions of dollars. Your stuck leveraging GDP growth which is only slightly better than inflation and frankly that's what SS does.
Most pensions also will not be enough to cover long term care costs if you are unlucky enough to get some form of dementia.
Pensions as a concept were a great idea when life expectancy was shorter and most people could mostly look after themselves in old age.
I don't think they can survive large numbers of people living until 90 -100 with dementia and needing 24h care. Lets hope the Ai/robotics gamble pays out.
I read a great article at some point that advised people who wanted to be writers to just go do that while they were young and poor and not wait until they had saved up money to finance it. Because the reality is that once you have the fancy high paid job and the fancy house, car and clothes that not only go with it but are essentially required, the amount you thought you needed changes.
For certain jobs, expensive suits and other things you might think are frivolous luxuries are nearly impossible to do your job without. It can be nigh impossible to unhook your income from this treadmill where the faster you run, the further behind you fall in certain metrics.
Millionaires are sometimes like the guy who needed the cart to carry cart repair supplies: Once you are rich and famous, now you need that mansion, not for the space or prestige but for security purposes, and you may also need a bodyguard, a bullet proof limo, etc.
Does someone who makes bad choices deserve to be homeless and destitute later in life?
The rest of us don't deserve to pay for their bad choices.
It seems valuable to society to not have old, homeless people causing trouble. But that's just me.
Personally, I think people should pay the price for their stupidity. Subsidizing stupidity never works out in the end.
Ultimately, saying neither of these is worth spending communal government revenues on collapses down to "I'm okay with people dying on the street."
Which is not offered as a straw man, but because that's a very possible outcome. And given that, if we're not okay with that, then we're going to spend significant resources to keep that from happening (ER care, homeless programs).
Social security attempts to invest that earlier in a person's life, so that the money treating more dire circumstances can be saved.
... And also allows for some measure of human dignity for those who might not have been taught about compound interest at age 6.
Or just sell it to pay rent for the rest of your life. Either way it's a pretty big boon.
bare-ownership is a right of virtual ownership. For example, the bare owner of a property has no right to occupy it or rent it out. On the other hand, when the usufruct holder dies, full ownership of the property is carried over to the bare owner without any liability for inheritance tax. He can then dispose of it (by sale, gift, bequest, etc.) as he wishes.
The maximum duration of usufruct generally corresponds to the usufruct holder’s lifetime – in that case, it is called usufruit viager, or life usufruct. But it is possible to set a predefined term (10 years, for example), which is called temporary usufruct.
http://www.french-riviera-property.com/en/news-detail/4301-t...
http://bareownership.com/wp-content/uploads/2012/02/Property...
PARIS, Dec. 28— Andre-Francois Raffray thought he had a great deal 30 years ago: He would pay a 90-year-old woman 2,500 francs (about $500) a month until she died, then move into her grand apartment in a town Vincent van Gogh once roamed.
But this Christmas, Mr. Raffray died at age 77, having laid out the equivalent of more than $184,000 for an apartment he never got to live in.
(My actual goal with my current property is to sell it once I'm having trouble going up the 3 flight of stairs leading to my unit and using the money to live in a much smaller place as people mentionned already)
Consider Hong Kong as an (extreme) example, where leaving the city means emigrating to another country with another language etc. (yes, HK is technically a Special Administrative Region of China, but can be considered standalone in this respect).
The median apartment price/income ratio here is 18, compared to a US average of 3.9 (the highest cities in the linked article are 13) [1].
These ratios also don't consider what you actually get. The average size of new apartments sold this year in HK was 610 square feet at an average price of US$1.8m and one new development offers apartments the size of Tesla Model X for ~US$500,000 [0].
If you want to go larger, the per square foot cost goes up. At the extreme end, consider a 4000 square foot townhouse that costs US$21,190/square foot [2].
A more ridiculous example is perhaps the sale of a car park earlier this year for US$600,000.
For reference, the median household income is ~US$38k. [1]
Unfortunately those with the most housing affordability issues are those that are least capable of leaving.
[0] https://www.bloomberg.com/news/features/2017-06-14/you-can-b...
[1] http://www.demographia.com/dhi.pdf
[2]http://time.com/4752342/worlds-most-expensive-house-square-f...
What is worse, this cancer got exported to mainland China in the 1990s and it was systematically rolled out for all major cities there. $1.8m buys you an 80sqm new apartment in Shanghai in an below average location, when the median household income in Shanghai is definitely lower than US$20k.
It is lucky to be living in HK as there are still public housing options. In cities like Shanghai and Beijing, using the national household median income figure, a Chinese peasant needs to start saving the deposit from the Ming Dynasty (1368–1644) to be able to afford an average apartment there.
http://www.demographia.com/dhi.pdf
The top 10 least affordable with respect to median price/income ratios:
China Hong Kong 18.1
Australia Sydney, NSW, 12.2
Canada Vancouver, BC 11.8
N.Z. Auckland 10.0
U.S. San Jose, CA 9.6
Australia Melbourne, VIC 9.5
U.S. Honolulu, HI 9.4
U.S. Los Angeles, CA 9.3
U.S. San Francisco, CA 9.2
U.K. Bournemouth & Dorset 8.9For household who already own, their existing apartment also appreciated, so what matters is the cost of trading up. The hardest hit group are younger people between 20 and 35 who are stuck in their parents house for probably forever. 3 generations under 1 roof is pretty common.
I've lived in cheaper but boring places. The financial tradeoff is fair.
But lots of people are plenty happy in the "boonies". They just have different interests, like doing more outdoor-oriented activities like hunting, hiking, fishing, or building their own workshops from scratch. Or maybe they're more cerebral and like the peace and quiet so they can focus on writing.
It's worth pointing out that far more people live outside of San Fransisco and New York (sure, throw in LA and Chicago, too) than inside those metropolitan areas.
Each of those cities is unique in different things. So they are part of the fatter part of a long thin tail. But that's not the same as "everyone wants to live here!"
I don't disagree. Different people want different things. I'm just pointing out 1. why people like living in big metros and 2. the flaw of basing where you live entirely on the cost of living and real estate.
You can do all of those same things just living an hour east of SF.
I can't get a well-paying job, or access to any of the above without being close to the city.
No, an hour east of SF is deep in the Central Valley.
So the problem with living beyond Pleasanton is that you will spend most of your life sitting in traffic. Why do you need to sit in traffic? Because almost all the jobs are in the Bay Area. Maybe that won't be as big of a problem soon though once you have Level 4 autonomous driving. Personally I still wouldn't go for it with that.
For instance my girlfriend makes twice the money her parents ever did. She still couldn't have afforded the full down payment on her house without a 4% loan from her mother as they were entering retirement. This arrangement ends up being beneficial to all parties.
For reference, this is in southern New Jersey and I'm on the older end of the millennials.