Rent or Buy in Retirment?

Annegriet

Are you renting in retirement? What are the pros/cons of renting/buying in retirement. I know this may vary geographically but I plan on being in one of the two coasts.

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ravencajun Zone 8b TX

We bought after losing our house in the flood. We got very little for the house from investors. But we still felt owning was the best option for us. Fully paid for.

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Lindsey_CA

We bought our house in 1990 with a 30-year conventional mortgage, and after several years refinanced to a 15-year loan. I retired at the end of 2013, and my husband retired early in 2015. Our house is owned free and clear.

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Chi

I'm not retired, but it just really varies so much. The housing market is so different in each location. The pros of owning a home are that the price won't increase year over year like renting, and you'll earn equity. The cons are the property taxes and the upkeep. With renting, you have more flexibility and someone else takes care of all issues, but you might end up paying more than you would with a mortgage with no equity built up. Renting also introduces a variable cost each month that might be a problem with people on fixed incomes, as it almost always increases each year.

A compromise might be buying a condo where they will take on a lot of the maintenance but you still get equity and a steady monthly mortgage cost.

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eld6161

As someone who hasn’t rented in over 30 years, I would find it difficult to rent now.

For some, buying is not an option. If you in a position to buy, I agree that a condo would be a logical next step.

I thinking .renting is a good idea short term for exploring possible retirement areas.

As Ch mentions rent goes up and there could be a possibility of the landlord wanting you out.

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gardengal48 (PNW Z8/9)

I prefer to rent. After my divorce - I was awarded the house in the settlement - I just felt that upkeep and maintenance was too expensive and/or complicated for me to maintain on my own. Didn't help much that my ex was not into routine home maintenance in the first place and there were a lot of deferred projects/costs that needed attention. And it was just to large for me anyway. I also opted to relocate when I downsized so renting made the most sense for that as well.

I have been very fortunate that the properties I have rented have had rents well below my mortgage payment. And also rarely have increased. In fact, in the nearly 12 years since I sold and moved, my rent has only increased $100!! And is still less than what I paid at my first rental as ALL utilities are included at my current place (this is also the biggest of the rental properties as well).

In addition to cost savings - property values where I live now are much higher than my previous home's location and I probably could not even afford a garage now - there is the freedom of knowing that any issues that arise will be promptly and thoroughly attended to by my landlady. That is a huge plus in my book!!

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sushipup1

When we moved from CA to PA 4 years ago, age 68, we bought another home. Yes, taxes go up a little bit by bit, but the rest of the bill will remain stable. Rents go up. We do see that the maintenance for a house will be too much for us some day (sooner than later) but we would buy a condo rather than rent if we move again.

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Elmer J Fudd

In my opinion, whether to rent or buy is fundamentally a financial and lifestyle question. If empirical evidence is an indication of common assessment, you'd conclude that people who can afford to buy, buy. Meaning, when a person's financial means can support the purchase of a suitable home, that's what most people choose to do. People rent when they can't afford to buy. As said by others, people who can afford to buy but want to have fewer maintenance concerns can buy a condo or a home where common areas are maintained by an HOA. We bought a second home with that feature last year, a free standing home (no common walls) with good distances from neighbors, where the external common areas are commercially maintained as part of the HOA fee. For us, after so many decades of living in single family homes in conventional neighborhoods but with good privacy, the thought of living so near others and with common walls was not desired. Again, a lifestyle choice.

Two common fallacies I often hear

1) A house is really not an "investment" unless you plan to sell it and move, to realize the appreciation for another purposes (rather than on the purchase of another home). It may be an investment for your heirs but it isn't for you.

2) From strictly a personal financial management perspective, there's nothing inherently desirable about paying off a mortgage. In fact the opposite is true, because the liquidity realized from a refinancing can quite easily be invested to return a higher return than the cost of the loan, both on an after tax basis. Earning that spread is free but you need to have a mortgage to do it.

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nicole___

The idea that you can invest your money at a higher rate than the mortgage sounds good until you see people investing in the stock market, which is volatile....you can lose it....and still have a mortgage. Paying off your house secures a place to live regardless if Apple stock is up or down today....or Tesla...that's a bouncing ball/stock. I'd hate to be retired and lose my life's savings playing the stock market. Just my humble opinion.

My home is also paid for. Here, in my economy, rent is more than a mortgage.

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nickel_kg

Well, our plan is to live in our house until we're around age 75, then move to a continuous care retirement community apartment, which is essentially renting. I want to be well settled in to an easy, supportive lifestyle before (knock on wood) mental or physical issues come up.

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eld6161

Garden, you are lucky. We have rental properties and we are below marketas well. We just learned that one tenant has put off moving to senior housing because we are cheaper.

But, this is rarely the case.

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arcy_gw

eld6161 I can't imagine a rental that is more than "senior housing". We are in the Midwest, small town and to sell our home and the two acres it sits on to purchase a patio condo 1/3 the size would cost us half again as much plus the HOAs. My parents sold and moved into a 'senior high rise' type place and will burn through the money they made on the house in under 15 years. PTL they are at 85 completely healthy. I cannot imagine living in an apartment but the upkeep on a home gets to be more than one wants to deal with--which I get. But trooping down the halls where my adult offspring all live--gives me a sick feeling. ISH.

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jrb451

FWIW, in my state, your real estate property taxes are frozen once you reach 65.

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gardengal48 (PNW Z8/9)

A rental does not have to be an apartment. Where I live there are lots of 'carriage houses', granny flats, ADU's and even beach or vacation/weekend cabins available for rent that are the equivalent of a small single family residence. But this is not a very urban, in-city living environment so the selection - and costs - will not be the same elsewhere.

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Annie Deighnaugh

People rent when they can't afford to buy.

Actually, my old boss who still had the same dollar he came to this country with, sold his very expensive home just before the housing market crashed and moved into a rented apartment...made a mint on the house sale and avoided a huge loss by renting and investing his money outside of the real estate market. He also said that, at his age, he didn't want to need to know the numbers of plumbers and carpenters, and furnace men, etc. He only wanted to call the landlord and say, "Fix it."

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Elmer J Fudd

"My home is also paid for. Here, in my economy, rent is more than a mortgage."

C'mon, Nicole. you know it's not that simplistic. Home ownership includes far more than just a mortgage payment. Property taxes. Maintenance and repair. Sometimes assessments. AND, don't forget, a down payment to make the purchase.

If it were true that owning (with all factors considered) were financially cheaper than renting, there would be no demand for rental units. You've said you own rental properties - it can't be both ways.

Another factor to keep in mind is the need to have diversification of portfolio investments (of any kind, of any size). Anyone whose majority asset is a piece of real estate, or several in one area, has an extremely risky and volatile situation. Just ask the bright real estate bulbs who were wiped out when the market plummeted in 2007-2009. The same thing happened in the 1980s.

Having a mortgage to allow other investments is a prudent thing to do. Investing a portfolio in the stock market isn't "playing the stock market". A prudent investor buys a diversified range of mutual funds (professional management), checks the allocations periodically, and goes on with their life. I've had mutual fund investments for over 40 years and reallocation transactions get looked at maybe every 5 years. As Ron Popeil, the Ronco gadget telemarketer, used to say - Set it and forget it.


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nicole___

Elmer.... I haven't had a mortgage in 25 years! :0) Taking out loans is a risk. It can be a house of cards.


My life is simple. And I DO own Apple stock....at the moment. We can agree to disagree.

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Elmer J Fudd

I have Apple stock in funds (it's hard to avoid) but I would never own it directly myself.

Diversified portfolios are intended for long term investing and passive self-tending because few investment types go up or down at the same time as others so that risk is spread. Some even tend to consistently go in opposite directions when they move (like equity markets compared to debt).

High risk portfolios (a disproportionate amount of real estate is an example and that concentrated geographically is worse) isn't a problem until it's a problem. In my lifetime real estate has been a problem every few decades, exacerbated by the fact that those active in the real estate market - builders, developers, those with large portfolios - need to be leveraged to make it work and equity can get eaten up with small movements. Just like commodity trading on margin. Precisely what a diversified portfolio avoids.

Yes we can disagree. And we do.

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Olychick

I would always feel vulnerable as a renter, unless in a commercial (apt type) unit. There are not only rent increases to consider, but there are no guarantees that the landlords won't die or relocate or want their $ from the rental property and sell. As I get older, the prospect of having to find a new home, with likely higher rent than I was paying seems onerous to me.

I think owning a condo might be a good compromise, but I really don't want to share walls (at least not yet). And the prospect of living in close quarters someone with yappy dogs just about does me in. It's bad enough on acreage with barking dogs down the street. If they were next door in an apartment or condo, I would go bonkers.

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morz8

I haven't rented since 1972.

We bought this house outright - I did not want to be approaching retirement with a mortgage. Our forever house? Maybe, I'm not sure. Depends on health, other things. I wouldn't want this house alone, it would be a lot to keep up.

On the other hand, I was so thankful when my mother sold her house and moved into an independent living apartment. Had she kept her car, there was a garage. Housekeeping, landscape maintenance. Maintenance for all else but light bulb changing. A full kitchen or dining room meals if she chose (and she chose, she never has liked to cook). Walking distance to a Fred Meyer and her bank, a hair and nail salon on site but another within walking distance too. I wish she'd done it sooner....move-in minimum age was 62 and she was WELL past that. Cost wise, it was only a little more than maintaining a car, her 3 bedroom house, lawn service, some housekeeping from time to time, a handyman, plumber and all the rest that comes with home ownership.

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functionthenlook

I like dirt too much to rent. We are both retired (64 and 66) and I like growing flowers and veggies. For some reason my hubby likes mowing the lawn. Maybe he just like riding the lawn tractor. Now if the hubby would pass I probably buy a smaller home with a smaller yard. I'm not into mowing an acre and he would probably do the same. He isn't into gardening.

In 45 years we paid rent the first year of marriage, then had a mortgage for 14 . I really can't see going back to doing either.

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Ladydi Zone 7A NW BC Canada

If my paid off home was all on one level, smaller, closer to amenities and I could afford housekeepers & someone to care for the yard I would keep it as long as possible. Unfortunately, that is probably not in the cards and I think I would be very open to renting an apartment with elevators and outside decks & just be happy to let someone else shoulder the responsibilities of upkeep. Like Morz8, I wouldn't want to keep up my current home without my SO of 23 yrs and so health would certainly matter in any decision.

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wildchild2x2

DH retired last year. Our home is paid for. I considered keeping a mortgage for the reasons Elmer stated but at this time of my life I am happy with having enough. I don't need more and I want simplicity. I also own another home outright in which I currently have family living in and since I rent under market rate to them I don't get write offs. I don't care. We live with enough. That makes me happy. Good health, seeing my grands, riding horses and knowing I will always have a roof over my head. Works for me. Never was much one for keeping up with the Joneses.

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marilyn_c

We moved here recently from the coast to what is referred to as Deep East Texas. We bought a place where we knew no one...had never even heard of the town before...if you could call it a town....tiny place. Had only seen it once in a drive by...did talk to the owner but didn't walk over the place. Told her we would buy it, if ours sold. The next week, it sold, and we bought.

We flooded badly in the storm that followed Hurricane Harvey, and then it seemed like it didn't stop raining for 18 mo. My husband has a chronic lung condition. He is on oxygen all of the time. He can do very little. We bought this place for the land, barn and to give my horses a better home, and make it easier on me to take care of them. Yes, the horses are that important to us.

We have never had a mortgage. The first place we bought was a piece of land, owner financed, no house, but we paid it off very quickly. We bought a little house for $1200 and had it moved to our property. The $1200 included moving it...so you can imagine how tiny it was!

Thirty years later we sold that and bought the place on the bayou. Twenty two years later, we sold that and bought this.

We hire most of the work done here. We can mow and do the regular things, but like building fences...we hire done. My

husband no longer works, but we have enough to live on.

I hope we can live our lives out here. I cannot see us living anywhere but in the country. My friends were all upset....us living so far from a city, but lots of old people live here. There is a large hospital and medical complex 20 miles away....actually closer than the ones when we lived on the coast.

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sjerin

Cost wise, it was only a little more than maintaining a car, her 3
bedroom house, lawn service, some housekeeping from time to time, a
handyman, plumber and all the rest that comes with home ownership.

I'm really surprised to read this, as everyone I know of who has had to move into any kind of assisted living situation pays far, far more than it would cost to independently live in a single home. The numbers here are scary since profit is key.


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morz8

Sjerin, it wasn't assisted living, there was no assistance or medical staff there. When she was recovering from a fall, we hired a nurses aid to come in daily and supervise meds, showers, dressing. That was expensive, but temporary. After 5 years when it became clear she needed daily help on a more regular basis, she moved to a residence that had independent living, assisted living, memory care - all of it on one property. A dining room in each wing and three restaurants, a pool, chapel. RNs there 24 hours a day. The wing she is in now is enhanced assisted. It's a little more help than regular assisted but still allows her more activities and privacy in her own apartment. A kitchenette, not full kitchen. And it does cost more than maintaining her own home had cost but its doable.

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Lucille

It has been a long day. A water pipe inside a wall leaked. I went over to the apt. complex office, and a short time later there were a swarm of efficient experienced people in my apt, opened the wall, repaired the leak, used one of those pro rug clean vacs on the wet carpet after removing the pad in that area, and left a blower, and will return Monday to do more. (And they complimented my houseplants, lol.)

Some people may welcome renting and not having to deal with stuff as they get older. I am lucky enough to live in a very well run complex and I am relieved that I don't have to deal with plumbing or mowing or A/C etc.

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Elmer J Fudd

It's very nice that it has worked out well for you, Lucille, and that they responded so quickly and comprehensively.

People who have spent years living in detached houses aren't always accepting of moving into housing units that have common walls with neighbors and perhaps people above, below, and/or down the hall. I wouldn't and my wife feels the same way.

I've lived in my current house for over 30 years. We've remodeled it 3 times and all leak-prone galvanized steel pipe has been replaced with longer lasting copper. Under the floor of the living space is a crawl space so all pipe is visible and accessible. I've never had a leak, not a drip and not even when I had only the lousy steel pipe. So I'd say you had bad luck, that can happen anywhere and anytime but not frequently.

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murraysmom Zone 6a OH

I rented all the years I lived in San Francisco. As a single person, there is no way I could have ever afforded to buy anything there. That was '73-'84. I had to move a number of times and every time I moved, I had to pay more and get less.

Once I moved to Baltimore, after 1 year of renting, I was able to afford a small house and lived there for 13 years. Then I sold my house for a bit more than I paid and moved back to Cincinnati to help with my aging parents. Again I was able to buy a small house in a nice area of town. I was working then. My mom eventually came to live with me after my dad died and after two years with me, my mom passed away too. She left me a small amount of money. I talked with my brother about investing it or paying off the mortgage. My mortgage rate was 6% and he said I probably couldn't get that much return on my money and paying off the mortgage was a better use of the money. So I haven't had a mortgage for almost 20 years! Where does the time go? I see no advantage to having a mortgage. While I do have property taxes and insurance, they are manageable. And I can do much of my own maintenance or have family to help as needed.

The point being that everyone's situation is different. To move into a condo seems attractive but you would still have property taxes, insurance and an HOA payment. You just wouldn't have the maintenance upkeep which if you are not able, is an attractive choice. Not everyone is intolerant of having other people live close to them. Everyone is different.

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amylou321

I could only see renting if for some reason I could no longer maintain my own home. Either by myself or paying someone to do the bigger things. I cannot see myself ever living in a subdivision ever again if I can help it. And I will never ever EVER live anywhere with a homeowner's association. I can NOT fathom paying a fee for some busybodies to tell me what color my mailbox or shudders or roof or bricks can be or what flowers I can plant and where I can plant them or whatever other such nonsense the neighborhood overlords decide to impose. I think it's ridiculous that people who don't pay your mortgage or property taxes have a say in what you do on your property,as far as appearance anyway. I know for condos the homeowners association fee is more for maintenance and amenities,which is more reasonable than just paying for someone to impose their taste on me. But I would find it hard living in a condo too. I think that it why I would resist renting for as long as possible. A landlord would certainly have a say in what you can and cannot do on their property. How many or what type of pets you can have,what color the walls are, and ultimately you would have to depend on them fixing whatever breaks and they would do that on their timetable not yours,so you would have to have a good landlord or property manager. I am very happy to be a homeowner and to be responsible for its upkeep at this time in my life. I think I will enjoy it when I retire as well. I enjoy the privacy and freedom living in my own home on acreage allows me. If I want to rip out an acre of grass and plant cabbage instead, I can without consequence.(other than having an acres worth of cabbage to get rid of) If I wanna rip out all the grass on the hill behind the house and turn it into a rose garden, I can,and I am for that matter. If I want a German shepherd and 3 pit bulls/pit mixes (I do have them!) No one can tell me no. If I want to paint the bricks hot pink whose gonna try and stop me? (SO doesn't count for this argument) You get my point. It's not for me and I also think that rent is basically throwing money away. Ultimately you are just paying for someone else to call a repair person when something breaks. That's it. When your lease is up what do you have to show for it? That's my view. I think if you can, owning is better than renting if you are settled in an area and can afford it. I feel that renting is better for people living somewhere temporarily and it would not make sense to commit to buying a home or for people who are unwilling or incapable of maintaining a home,either physically or financially. Nothing wrong with that,that is just not me.

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sheilajoyce_gw

We bought our 5 bedroom house 42 years ago. When our kids headed out on their own and were renting apartments, their rents for one bedroom apartments were greater amounts than our mortgage. They lived in large cities, and location was certainly part of their costs, but I couldn't get over the difference between what their rents provided and what our mortgage provided.

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Elmer J Fudd

"They lived in large cities, and location was certainly part of their costs"

More likely that was all of the story, not part of it.

At that point, compared to purchase price, how much had your house gone up by that time? How about now? 3X, 4X, 5X?! More? Selling prices of homes directly affects rent prices. Price appreciation in the thriving parts of the US has been unprecedented in past decades. Rents are up accordingly. There's no conclusion to reach, it is what it is. Supply and demand.

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Rudebekia

I'll stay in my paid off house in retirement. Rents around here are crazy high for what you get and rising. Most everyone I know who owns a house and once thought they'd be renting in retirement have had sticker shock and are staying put. I'm in a great location and housing prices will certainly go up: they've increased substantially in the last 4 years.

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drewsmaga

I haven't read the comments, so this may be a repeat. Rent is going to increase maybe every year. The mortgage will stay the same every year for your fixed-income retirement budget. Paying off the mortgage releases a LOT of money for monthly/yearly savings. We're 70 and a few years from paying off the mortgage, and we could have paid all cash for this house 8 years ago. . . .We took out a mortgage for 1/2 of it because we have been making WAY more money with that money in the stock market than what the mortgage interest is.

Oh, and in these 8 years, our house value has increased about 70-80% (we have made upgrades)

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Annie Deighnaugh

In our area, we have seen massive price depreciation on homes since the housing crisis and they are still dropping. Up the street is a home that went for $1.2 mil, is on the market now for $675,000 and still hasn't sold in a few years. The house is well appointed and well maintained, on a cul-de-sac backing up to an open space. Unless you plan on being in your home until death, the outlook for the price of housing should be part of the rent/buy equation.

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Elmer J Fudd

If that house has a mortgage, they're essentially paying interest on phantom equity that's not there. Especially if it's a state where purchase money mortgages are non-recourse, they should walk away if the house is under water. Their initial equity is lost anyhow, and any gap between the mortgage value and fair value needn't be repaid.

Is this an area where jobs and normal economic activity have declined or don't otherwise support real estate values? Or were values simply driven up irrationally because of loose lending practices and the real values have now reappeared?

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Debby

I'm not retired, but my house is 100% mine. If given the chance and I had to do it all over again, buying would be the only option. Renting a house puts the money in someone elses pocket. Buying puts it back in yours with interest. If things go sideways, I can always sell my house and buy something smaller.

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chisue

We both grew up in SFHs in suburbs of Chicago and have never lived where we couldn't 'step outside' onto terra firma.

We lived in rentals for five years after marriage. No hassles.

We've known condo living, thanks to owning our Maui vacation condo, and it's not for us full time.

We've toured buy-in Senior Living of the assisted-to-grave variety, and it's not for us. I also see the costs for this concept escalating tremendously, with no guarantee it can provide what's promised or ensure stable management.

We sold our 'starter' home after 30 years residence -- with the only mortgage we've ever held paid up. We had 'a nice place to live' and earned *at best* 4% per year profit, selling in a fair (not hot) "seller's market".

We built a one-story 'forever' home and have now lived in it for nearly 20 years. We plan to stay as long as we can get cleaning help -- and eventually health aides. Hospital is 7 minutes away; same for groceries, library, CVS. DS and family are 25 minutes south.

Zillow tells me we'd lose 40% if we had to sell our home today. Yes, Zillow is only a guess -- especially about specific locations -- but our RE market is awful.

There are 10 houses for sale along our .8 mile long street. Some have been for sale for five years. Granted, most are MUCH larger than ours and MUCH more expensive, but it isn't encouraging to see beautiful homes that would have brought $6M in 2000 unsold at half that. A handsome 6K sq ft home sold in December after three years. They got only double the $1M they paid for just the 1-acre lot in 2002.

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functionthenlook

Our area buying a home in suburbia and some parts of the city is always a good investment. Thankfully we don't go through the booms and busts like some areas of the country. Slow and steady it increases. Real estate usually will level itself to where it should be.

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