Quote:
Originally Posted by jyl
Quick numbers, just food for thought.
$500,000 mortgage, 30 years, interest rate 4%. Annual payment $28,644, total interest paid over life of loan $359,384. But mortgage interest is deductible, if marginal federal+state income tax rate is 40% (assumes a high earner in a state with high income tax rate) then after tax interest paid is $215,630. Which is equivalent to an after-tax interest rate of about 2.5%. Any time you can borrow money at 2.5% to buy an asset that is at least reasonably likely to appreciate, and also serves as shelter, you should. Okay, if your crystal ball shows a major real estate correction in the near future, then you shouldn't . . .
|
You're forgetting property taxes and fixing stuff. Not insignificant in CA with a house that is 50+ years old and likely has a bunch of deferred maintenance and crappy "remodels".
I think the tech bubble will burst at some point in the next few years and there will be a correction. But CA will never go to national norms - tech isn't the only reason housing prices are so high here. You can't fix location...