Quote:
Originally Posted by Crawford
This would be the calculation for a first-time buyer only. Existing homeowners (most people) would have greater equity for a more expensive property in a hotter market, meaning the down payment wouldn't be more burdensome.
And in a hot market, you can take the 30 yr (or longer) mortgage and let the equity work for you. In a stagnant market you're getting killed unless you keep the mortgage term short.
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But you can still invest the excess money you have in something that typically performs better than the housing market (albeit less tax-advantaged). You can even invest in the housing market in a city you don't live in that has higher appreciation potential.
Obviously any amount of appreciation is good financially, but it's less obvious that it's worth a significant premium. (In fact, in the illusory efficient market hypothesis, that would be perfectly priced in, wouldn't it?).