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- The Borrow Smart Chronicles - Has Your House Made You $200,000 Richer Since 2020?
The Borrow Smart Chronicles - Has Your House Made You $200,000 Richer Since 2020?
Episode 22
Todd Ballenger
April 05, 2024
The people I see living the best lives are central nodes in networks rather than at the top of a hierarchical pyramid."
Data Source: John Burns Real Estate
A house and a home are two aspects of a single decision to own versus rent. If you rent, you can build a lovely home experience, but your relationship to the house differs. It isn’t yours, so you pay rent (someone else’s mortgage) and care very little about the house's value going up or down. If you buy a house, you care about the house (appreciation) and the home (experience in the house).
housing has created positive net wealth since 2012, but remember all real estate is local so your results may vary quite a bit to either side
Those who have taken our course, know that the house creates wealth primarily through appreciation, and owning a house since 2020 has increased your net worth by over $200,000 if you bought a median-priced house.
For new readers - the 'house' is the physical property that has financial properties (like appreciation), while the 'home' is the experience you have living in the house.This is critical to consider, as a large part of keeping up with housing needs as you age is to own a house that can participate in that real estate appreciation. Example: you buy a house for $400,000 in 2020 and it’s now worth $600,000. You are starting a family and want to buy a new house for $800,000. That $200,000 equity gain helps you afford that $800,000 house. Said differently, it feels more like buying a $600,000 house than an $800,000 house.
wealth is increasing primarily from ownership of equities and housing
$1 is worth .06 cents because of inflation
This is harder to understand (it was for me). Inflation increases the value of real estate, yet it decreases the cost of borrowing. Each year that money is worth less, and you must grow your wealth to keep up with that loss in purchasing power. If I earn $1 today and in inflation is 5%, I’ll need $1.05 next year to buy the same stuff. If I borrow $1 today and pay it back next year you are really paying back .95, as your money is worth less in a year. If you are curious about how inflation works to reduce your cost of owning a house, read this article I wrote about it!
a BORROW SMART CONCEPT
Why Invest in Yourself?
In Search of Incompetence - Seth Godin
“Learning is about becoming incompetent on our way to getting better.
If you’re not open to the tension that is caused by knowing you could do better, it’s unlikely you’re willing to do the work to get better. As you’re doing that work, there’s the satisfaction it brings, but also the knowledge that just a moment ago, you weren’t any good.”
I like Seth's view of the world. The Peter Principle helped me a great deal back when I was building a mortgage empire (ha ha!). It said you should be rising to a level of incompetency or you simply aren’t growing, and I was doing that faster than anyone I knew. I always felt incompetent until I didn’t. What stairs are you climbing now? The stairs are there to teach you - they are the resistance that leads to your growth. At every level personally and professionally, if you are not feeling some burn, you are stagnating and maybe need a push to get out of your comfort zone. When is the last time you hit your head on a ceiling of incompetence, but also realize you are standing on the floor of a prior level that is now competency?
LIABILITIES
What’s Happening.
most people have house equity
and they are paying their mortgages
but they are also paying higher credit card balances
at record high rates
Source: A Wealth of Common Sense
not sure how much longer the US is going to be able to pay its debt
REAL ESTATE
What’s Happening?
we saw sentiment improve this past week
housing is expected to appreciate over the next two years
and values are going up faster than debt and inventory can keep up
and rent is also increases on a real cost basis
Gen X needs your love as they are now on top for new home buying!
and the peak group of buyers is getting larger
much of the inventory they are being trained on is new homes for sale
and the cost of new homes is about to be cheaper than existing homes for the first time ever…
we have moved from 3.5 to 6.5 times our average income to buy a median house in the US. Source: The Kobeissi Letter
and realtors are being blamed for that cost increase more and more as sentiment shifts to lower the cost of housing - Source: The Economist
ASSETS
What’s Happening?
where do you fit in?
last week in the major ETFs
and what a first quarter with 10% returns in the SPY
we are way ahead of normal gains for this time of year
and very concentrated in a few big names
start early and stay consistent
whether you are active or passive
wealth doesn’t make you happier after a certain point but it doesn’t hurt either
There is a lot of wealth coming your way, like Trillions… Source: New York Times
27% of that wealth is in Real Estate
“Tiny is the best friend of Transformation.”
I love listening to my old albums!
"Do something well, and that is quickly enough."
ON BEING HUMAN
What’s Worth Sharing?
Transformation happens by taking small, incremental steps in one general direction for a consistent period.
You can also just fake it till you make it!
“When people talk, listen completely. Don’t be thinking what you’re going to say. Most people never listen. Nor do they observe. You should be able to go into a room and when you come out, know everything that you saw there and not only that. If that room gave you any feeling you should know exactly what it was that gave you that feeling. Try that for practice.”
DOPAMEMES
And Other Happy Moments…
I Think We Just Figured Out Why Things In America Are The Way They Are
Encinitas, California people on are asked if they would like a Silver Bar or a Hersheys Chocolate Bar
— Wall Street Apes (@WallStreetApes)
4:29 AM • Mar 30, 2024
Hat Tip: Angela McCaffrey
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