I have never met a single one (I am not saying there isn’t one) who can explain the importance of discounted cash flow analysis and how to determine the proper discount for a given cash flow.
And I scratch my head at a recent article from Forbes, written by Liz Davidson.
In her article Ms. Davidson expresses concerns over the attitude of consumers over home investment. And in this regard she is right, because she correctly asseverates the possibility of America becoming a renter’s nation.
However, the causality and consequences she poses do not hold up under careful scrutiny.
I attribute this to the plight of the average financial planner who does little more than mold each individual into a financial template, crafted by other parties, in order to mollify the stratified risk aversions of a demographic class.
That being said, she does make a few good points. Among them is the most important, which is the break on taxes for a single investment afforded to a home owner upon sale of their primary residence.
This has tremendous advantages not found in any other kind of investment, including your 401K. This kind of tax credit can make a huge difference in the overall net worth of the average middle class employee.
But I have always asserted that it is better to own than to rent, unless of course the access to the credit necessary to buy is reasonable.
In today’s climate, it is not that the average person does not want to own, rather, the barriers to ownership are such that renting is the only alternative.
Unless of course one opts to move into the Occupy Wall Street neighborhoods currently under development. The only barrier to occupation there is your political proclivity.
I believe that we are actually just seeing a natural response to market conditions that will no doubt correct within a few years.
Then again I am no sage. But, I don’t use convenient templates to frame my analysis and opinion, either.
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Here’s the original article…The Next Mortgage Crisis