I think your assumptions are excellent. The entire foreclosure “crisis” could have been completely avoided if buyers used conservative guidelines when making a purchase.
We should not assume the mortgage deduction will always be there, especially on investment properties. Same with Prop 13 protection. We have record levels of debt at all levels, and that includes the state and federal governments. They will need to increase revenues, and these protections would be the first things under consideration, if I were a politician.
Inflation was a given when we had the Baby Boomers pushing up prices for things over many decades. The buying power of the Boomers (with good incomes, more stable jobs, better healthcare & pension plans, etc.) is being replaced by the lower incomes of immigrants from poor countries. We also have lower wages & benefits for Americans due to globalization. It is no longer a given that housing prices will rise in perpetuity. We may well see declines for many years, perhaps decades.
Rents do not always go up, and rent increases should not be factored into the equation, IMO. As an investor, I’m looking at what the numbers tell me **right now** and try to consider what obstacles might lie ahead (higher vacancies, recessions, neighborhood deterioration, problem tenants, etc.). If things get better, lovely, but I would never presume they will do so, especially now.
