Monday, March 06, 2006

Housing costs rising, not neccesarily a good thing.

Utah Centrist points out that rising housing costs are not neccesarily a good thing for the average Joe.

Indeed, the wife and I have figured that out for ourselves. We currently live in our first house. Let's say our current house is valued a X dollars and that someday we want to move into a nicer house with present value Y where Y > X. If housing prices go up 20% a year (uniformly across present house values) then the future value of Y minus the future value of X will be greater than the present value of Y minus the present value of X. What that means is that, everything else being the same, we will be even less likely to afford the nicer house than we are now if housing prices continue to rise.

So for a long time now we've been hoping that housing prices would fall or stay flat in Utah. Which it looks like the finally aren't :(


Anthony Barney said...

Yup. We have realized that when you sell your house, you only have enough money to buy your own house back (at a slight loss). Or you could move into the "Safe" areas of West Valley City (...bwa-ha-ha-ha...) and "trade-in" all of your other possessions.

Anonymous said...

Don't forget the 6% real estate broker cost on House X, so while house Y also went up 20%, you are only getting about 14% of X's increase (which was less than Y in the first place).

Anonymous said...

Yeah and the last realtor I used was a real sack of fertilizer. He collected his 3%, just as custom dictates, but he lead us to buy a real piece of crud, and he tampered with the appraisal to make it more than what the appraiser would have valued it at.