Marys 1000, Around here, when employees buy a car, interest on the loan is not deductible ... if they operate a business, in most cases it is. If they borrow to invest in a tax-deferred retirement account, the interest is not deductible, either. However, if they borrow to invest in an asset that is expected to produce taxable income, the interest is deductible. A while ago some people, mainly seniors, rather chortled over their apparent good fortune as they told me how they earned 19% on their Canada Savings Bonds about 1981. I suggested that if they were in 20% income tax bracket, that would reduce the pre-tax 19% to after-tax income of about 15%. And did they know what the rate of inflation was that year? About 12%. As the number of dollars of their underlying asset can't shrink, it can't grow, either ... and the value of each dollar was eroded by more or less the value of inflation (or more) each year, going back to about 1935 during that Great Depression. So the investor in guaranteed-number-of-dollars must put a good portion of the annual after-tax earnings with the principal in order to maintain purchasing power, since the value of each of those dollars of asset shrank every year of the last 70. Ordinary folks put their money into the bank. Rich folks buy the bank. Because they know that, in most cases, owning is better than loaning (your money to the bank). Good wishes for increasing knowledge of how money - and taxes - work. ole joyful

In the mid-20th century, most middle class people retired on a company pension plus soc sec and lived happily ever after without much of a worry about the stock market because the managers of their pension fund assumed all the risk. They just collected their pensions. Sure, they were on fixed income which loses purchasing power after a while, but the retirees typically died before inflation eroded their pensions to the point they could not live off them, or their families would step in to help. THEN, starting around the latter half of the 20th century, there was a gradual shift toward making the retiree assume more and more of the risk in the stock market. Defined benefit pension plans are being phased out in favor of 401K plans - so YOU have to manage the thing, and if you get it wrong, YOU suffer the consequences. These gradual but sweeping changes took place for several reasons -- (1) we're living longer, which is mostly good but can be bad; (2) the baby boomer generation -- a lot more retirees; (3) a shift in political-economic philosophy in the past 25-30 years toward the Right, which emphasizes low, low taxes and individual responsibility, and plays down the responsibility of employers for its employees. Witness Labor's loss of political clout in recent decades, the tremendous wave of Outsourcing, and related trends. Fewer and fewer people work for the same company all or most of their working lives. It is quite possible that the trends of the past few decades have reached their maximum and we may be on the cusp of a shift back to placing priority on the public interest first, instead of the public interest benefiting only from the corporate trickle down. We shall see.

There are different tax rates for homeowners, vacation rental properties and timeshares. (Probably more traditional commercial properties, too.) We own in Kihei, Maui. Sales there are down 11%; prices are down 2%. That's from the Maui Realtors webpage and includes all SFH, not just condos or vacation rentals. I'd say the price drop is more like 5% at our particular complex, Maui Kamaole. Sales are slowly eating away at a glut of listings there. I think 8% of the place was on the market recently. The appreciation has been very good and will resume going up after this adjustment, I think. There's only so much 'island' available. As you mention, I'm counting on people still wanting some of it by the time we're ready to sell. Hawaii as a whole tends to lag the west coast by a year. The condo is mainly an investment, but we do save $5000 per year we'd pay to rent an unknown every February. We have the tax write-off for travel and the depreciation. I'd like to boost occupancy, at 86% for 2007, but don't want to beat the place to death. Can't raise rates beyond the competition. Wanna come out and look around? LOL Where do your friends own?

Berniek is right: Much of the blame here falls upon the shoulders of the politicians (led by then-President Clinton), who forced banks to begin some rather foolish lending practices. Alan Greenspan certainly did his share to push this concept of "everyone can borrow" during his time as Fed chairman. Between creative financing, no money down offers, and other such options, the government has given people plenty of rope with which to hang themselves. We Americans haven't proven ourselves to be particularly strong in the moderation and self-discipline categories over the last 30-40 years. Also, remember the climate that existed in the 90s, when I bought my first house: Spurred on by the soaring housing prices, people were convinced that buying "as much house as you can afford" was a good move. Housing was considered an investment that couldn't fail. Yes, the experts began preaching about "the housing bubble" long before it hit, but the masses couldn't grasp how this sure-thing could ever fall. And there's always been a (faulty) basic belief that "If I couldn't afford it, the bank wouldn't lend it to me." I fully agree with those who say that Real Estate agents will push buyers to their upper limits and beyond, and banks will lend what they can -- it's all about profits for them. Yet, the home owner DOES also bear the brunt of personal responsibility. After all, who cares most about whether I can afford my mortgage -- and still buy groceries and other things I need? Clearly, it's ME! I reap the rewards or punishments of my decisions, so I should do the math and know whether I can comfortably afford a house (or anything else) before I buy it. However, we've sort of left that thinking behind in today's buy-now-pay-later society. We're constantly told that "we deserve" this or that thing. That if we're going to finance it, we deserve to have exactly what we want. That "everyone" has debt. We've got to get past that.