Yea, not a true sunk cost, but I couldn’t think of a better term. It’s a rock and a hard place. You have to live some place. If you’ve paid off your place, then your expenses are lower, probably about 1% a year of the house value. If you move, you introduce more expenses and unless you move someplace out of area, the entire value of what you have will largely be used to replace the living expenses.
Traditionally, housing has run about inflation plus one percent in our metro-areas. Essentially, live in it, maintain it and break even on exit (with maintenance running about 1% a year). That’s a much better deal than rent.
sp, it is an asset, but it’s like a poison pill you can tap it if you really need to, but any tapping introduces real expenses. If you tap you’re paid off $600K home for a $300K new loan, you just pulled $300K out to do something, you’ve also saddled yourself with a monthly cash flow hit of $1400, nothing major but that’s in today’s low rate environment. A few years ago that would be $1800 a month unless you’re doing the loan juggle or an IO but that all has transaction cost.
Not major but those little expenses add up and more importantly drive you to realize income which then adds an additional tax expense.
