Scott Kaufmann’s letter (April 23) is too quick to compare the average homeowner with
Buying a home in an area where you plan to live long term keeps folks out of trouble. Houses can also be bought with 10% down. Or even 3%. After a few years, the mortgage is no more than a comparable rent, and then lower every year after that. And if you sell? Tax-free profits from the house.
My parents bought a house in 1984 for $325,000 with 10% down. It has more than quadrupled in value. Yes, the S&P 500 is up 2200% since then. But since the subsequent expenses were no more than rent, the profits on the small down payment are approximately 45 times, or double the S&P return. Perhaps dividends bring the relative profits closely into line.
The house I bought for $375,000 in 2000 is worth triple now, which already exceeds the S&P 500 return, and hugely exceeds it once the 10% down payment and comparable rent is taken into account. For most middle-class families living in a stable community and participating in the forced savings plan of buying a house, the availability of safe leverage, when combined with a timely sale to shelter $500,000 in profits from taxes, makes home ownership the American dream.
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