Re:The Terrifying Reality of Long-Term Unemployment
by dredmorbius on Tuesday April 16, 2013 @06:22PM
(#5561336)
Add to the "chance of moving" cost: your opportunity cost in lost income (or additional expenses) by being unable to sell your house in the course of a move. Either you lose out on the income opportunity (which is what this subthread started with), or you're left with the higher costs of renting out your home (likely not covering mortgage) while renting at the new location.
We saw this last situation for a new hire who last year was unable to sell his underwater midwest home while finding rents in a markedly hotter housing market much higher, especially when proximity to good schools and low crime rates were factored in.
There is also:
* Closing costs. 5k to 10k can easily go to that only. So just buying and selling constantly could end wasted eaten "transaction costs"
* Chance of moving. Are you likely to move? If so think twice about a house. This is offset in the software world by working from home.
* You effectively get a 4% loan and pay it off in 30 years. That could be hundreds of thousands of dollars over the cost of your house you end up paying to the bank in 30 years. That completely escapes many people. Now there is inflation and the opportunity cost to do something else with the money but:
* You have to figure is your salary going to keep up with the inflation? You hope so right...right?
* Opportunity cost. Could you make more by buying some stock, and sell it after 30 years?
* Do you think housing is going to go up again or is the stock market going to go up faster. Same compounding for interest rate goes for reinvesting stock dividends.