Renting vs. Buying

It is real estate day again. The S&P Case-Shiller for April came in at +1.3% from the previous month and –1.9% from a year previously. Since the great swoon in house prices ended three years ago, house prices have given Two-story_single-family_home up another -2.5%. I had predicted sideways motion from that bottom, and I consider –0.84% annual decline to be essentially sideways. So good for me.

I have also previously declared house prices to have become boring. And boring is good.

Keeping with the theme of the day, SmartMoney just ran an item on buying versus renting houses. It was based, loosely I am assuming, on a Deutsche Bank report from March that said that although as a nationwide average owning is a better deal, in some places including California and the Northeast, renting is cheaper.

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The iPhone Nanny

The WSJ ran an article entitled The New Money Apps over the weekend. I was iPhonehoping it would be about smartphone apps designed for the nouveaux riches. Something to help decorate McMansions or navigate country club admissions perhaps.

But it is even better than that. The article is about the burgeoning field of  personal finance in the form of bossy phone apps. No longer do those hapless consumers need to worry their little heads about how to spend and save. They can just do what their phone tells them.

Think of it as a really really sophisticated GPS system. Just enter “rich and happy” as the destination and follow the turn-by-turn directions.

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Inheriting Money in America

John D and Son Consumerism Commentary carried a post yesterday by its founder Flexo, who seems to be changing his nom-de-blog to Luke Landes, which is more alliterative and almost sounds like a real name. Should Rich Families Leave Their Wealth to Their Children? is a reflection on one of those topics that would be a recurring theme, if only we were comfortable discussing it.

It boils down to an important financial planning question. Are you saving so that you can have enough to live a long and happy retirement or so that you can have a long and happy retirement and then leave a little something to the kids? Or maybe even more than a little something?

If you poke around the mainstream personal finance literature, you will find that leaving money to the kids is rarely discussed or even mentioned as a possible savings goal. Indeed, there is a vein of personal finance literature that emphasizes how important it is to not give money to your grown children.

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How to Beat Inflation

Wise Bread just ran a post on How to Understand and Protect Yourself From Inflation. I often think pieces on inflation are obvious. But perhaps I am just showing my age.

Since 1984 (when I graduated high school) inflation has averaged about 2.9%. And it has been pretty stable, falling outside the 1.1% to 4.6% range onlyChicklet-currency twice. (0.1% in 2008 and 6.1% in 1990.) That is almost 30 years of smooth sailing, a period when inflation was an easily ignored background hum.

Indeed, inflation of 3% is not something you usually notice directly. Prices for things change all the time, some up, and even some down. Only when the government totals it all up do we find out prices were up 3% on average.

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The Mortgage Interest Deduction Does Not Subsidize Lenders

There are days when I think I could rename this blog Stupid Things In SmartMoney and concentrate my efforts solely on that ironically Victorian House named publication. Today’s inspirationally bad offering is Mortgage Deduction Pads Lender Profits, in which we learn that “A tax perk aimed at homeowners ends up raising mortgage rates, research shows.”

Apparently, the mortgage interest deduction has the unintended consequence of driving up interest rates, harming those poor American homeowners it was meant to help. How does this happen? Well, here is where the story gets a little fuzzy.

Standard economics theory holds that consumer subsidies raise demand for goods, thereby shifting prices higher. With mortgages, the "price" is the interest rate.

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