I think you answered your own question, and no, your calculations are not wrong.
First, we have seen a very rapid and outlandish increase in home prices in the last several years. All the prior booms and busts pale in comparison to the one we are in now. Do not let that fool you into believing that the housing market always rises at 6-8%. That’s like timing the acceleration of a car and saying “it’s gone from 0-60 in 7 seconds, it’ll be doing over 500 miles an hour in 53 more seconds!”
Second, the ‘tax break’ that everybody cites, but not everybody truly understands is about equal to what you will pay in property tax. The break is a deduction equal to the interest (not principal) from what you list as your income, not a tax credit. If you are in say the 30% tax bracket and you payed $30,000 in interest on that $600,000 loan, you will get a discount of $9,000 from what you pay in taxes. This is equal to the property tax you will have to forever pay on that $600,000 house. Eventually, if you keep the house, you will pay less and less interest, so even this benefit will decrease over time.
Third, you keep talking about appreciation. Houses can be counted on for only two things: Shelter for you, or rental income from somebody else. They are not an investment by themselves (waiting for appreciation to happen) . They are a great asset to own as your primary residence since they can usually be counted on to keep up with inflation or a growing economy, or you may even be able to argue that buying them and renting them out is good business (not now though). But to buy them to count on appreciation is a bad bad idea. Houses just sit there, they don’t produce anything.
Think about it houses have to keep pace somewhat with inflation and the size of the economy because they have to be affordable to the people who are working in that economy (you and me). Currently we are in a phase where house prices have outpaced the economy and aren’t really affordable to the people in the economy (without using exotic financing) Do you really think housing prices will contiune to rise faster than the economy? They can’t do that forever. If you want something that paces the economy, why use such a risky and troublesome ‘investment’?.
My advice is to look up tulip mania (if you haven’t already done so) and try to draw some comparisons to the housing market.
