Posted on 03/19/2011 1:03:32 PM PDT by SeekAndFind
Many people have said to me in the past month, “I’m going to buy a home.” Or, “What do you think of the idea of me buying a home?” I like the second batch of people. They are my friends and it seems like they are sincerely asking for my advice. And I’m going to give it to them. Whether they meant it or not.
I have some stories about owning a home. One of them is here: “What It Feels Like to be Rich” where I describe my complete path into utter depravity and insanity. The other one is still too personal. Its filled with about as much pain as I can fit onto a page. Oh, I have a third one also from when I was growing up. But I don’t want to upset anyone in my family so I’ll leave it out. Oh, I have a fourth story that I just forgot about until this very second. But enough about me. Lets get right to it.
There are many reasons to not buy a home: [By the way, I also put this in the category of Advice I want to tell my daughters, including my other article: 10 reasons not to send your kids to college.]
Financial:
A) Cash Gone. You have to write a big fat check for a downpayment. “But its an investment,” you might say to me. Historically this isn’t true. Housing returned 0.4% per year from from 1890 to 2004. And that’s just housing prices. It forgets all the other stuff I’m going to mention below. Suffice to say, when you write that check, you’re never going to see that money again. Because even when you sell the house later you’re just going to take that money and put it into another downpayment. So if you buy a $400,000 home, just say goodbye to $100,000 that you worked hard for. You can put a little sign on the front lawn: “$100,000 R.I.P.”
B) Closing costs. I forget what they were the last two times I bought a house. But it was about another 2-3% out the window. Lawyers, title insurance, moving costs, antidepressant medicine. It adds up. 2-3%.
C) Maintenance. No matter what, you’re going to fix things. Lots of things. In the lifespan of your house, everything is going to break. Thrice. Get down on your hands and knees and fix it! And then open up your checkbook again. Spend some more money. I rent. My dishwasher doesn’t work. I call the landlord and he fixes it. Or I buy a new one and deduct it from my rent. And some guy from Sears comes and installs it. I do nothing. The Sears repairman and my landlord work for me.
D) Taxes. There’s this myth that you can deduct mortgage payment interest from your taxes. Whatever. That’s a microscopic dot on your tax returns. Whats worse is the taxes you pay. So your kids can get a great education. Whatever.
E) You’re trapped. Lets spell out very clearly why the myth of homeownership became religion in the United States. Its because corporations didn’t want their employees to have many job choices. So they encouraged them to own homes. So they can’t move away and get new jobs. Job salaries is a function of supply and demand. If you can’t move, then your supply of jobs is low. You can’t argue the reverse, since new adults are always competing with you.
F) Ugly. Saying “my house is an investment” forgets the fact that a house has all the qualities of the ugliest type of investment:
Illiquidity. You can’t cash out whenever you want. High leverage. You have to borrow a lot of money in most cases.
No diversification. For most people, a house is by far the largest part of their portfolio and greatly exceeds the 10% of net worth that any other investment should be. Personal reasons to not own a house.
A) Trapped, part 2. Some people like to have roots. But I like things to change every once in awhile. Starting March, 2009 I was renting an apartment directly across the street from the New York Stock Exchange. It was fun. I’d look out the window and see Wall Street. How exciting! Before that I lived in The Chelsea Hotel with Chubb Rock. Last year we decided to relax and move a little north. Now I look out the window and see the Hudson River. And its quiet and I can walk along the river in the morning with no noise. It took us two weeks to pick a place and move. No hassles. I like to live a hassle-free life.
B) Walls. You can’t change the walls when you rent. A lot of people seem to want to tear down walls. Or paint them. Sometimes when you rent you can’t do these things. Well, make sure you have a landlord that lets you tear down walls. There must be some ancient evolutionary tic that makes us want to tear down walls or put nails in them or paint them. I don’t get it. I like the walls to stay right where they are.
C) Rent. People will argue that the price of the mortgage, maintenance taxes, etc is all baked into the price of rent. Sometimes this is true. But usually not.
D) Psychology. Look at your personal reasons for wanting to own. Do you feel like you can’t accomplish something in life until you own a house? Do you feel like its part of getting married and “Settling down”, i.e. creating a nest for your future children? For you, is it a part of becoming an adult. Is this what your parents taught you? Examine the real reasons you want to own and make sure they are coming from a good spot in your heart.
E) Your time. Do you really want to spend all that time working on your house? Is this where your time is best spent towards creating a happy and fulfilled life for yourself?
F) Choices. I feel when I rent I always have the choice to leave. To live wherever in the world I want whenever I want. Adventure becomes a possibility even if I never take advantage of it.
G) Stress. For me (not for everyone) owning a home equals stress. I saw what my parents went through at their worst moments owning a home. I saw what I and others went through in the Internet bust when I first owned a home. I saw what people went through in 2008. People were killing themselves. I don’t like that sort of stress. This is how I deal with stress.
H) Cash is king. I like cash in the bank. I like having access to it. I don’t like it all tied up in one illiquid investment. I want to fill a bathtub with all the dollar bills I would’ve used as a downpayment on a house. I want to bathe in that bathtub. I’m going to do that later today in fact.
By the way, this is going to sound like a contradiction: but I think housing is a great investment right now. I think housing prices have gone down far enough and I can list the reasons why housing as an abstract investment concept is going to go higher from here. But I don’t like to write about investing on this blog. Suffice to say there are many stocks you can buy, with leverage if you want to take advantage of the rise in housing. But I’m never going to buy a home again. And sit there in the middle of the night thinking, “why the hell did I do this to myself again.”
Renting is actually a good option for people whose jobs are not stable. There are very few jobs left that last a life time.
What, you've got a free place to live if you don't buy? Subtract rent for an equivalent property to arrive at that number after 30 years. In a sane market, an equivalent property rents for more than a mortgage. It's true here. Same or similar house is $150 - $200 more per month.
Whats worse is the taxes you pay.
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Everyone pays government Temple of Secular Humanism taxes. ( Oops! “school” taxes).
The government religion of Secular Humanist School taxes are buried in the rent. They increase the price of every item or service you buy since businesses pass on their Religion of Secular Humanist School taxes on to the consumer.
We are supposed to be protected from these government establishment of religion taxes...but...In the upside down Alice in Wonderland world in which we live, teaching children to think and reason godlessly, destroying their family religious traditions, indoctrinating children in the wonders of earth worship and Secular Humanism is not considered religiously neutral. ( Go figure!)
Uh, no. Where I live, mortgages generally run 2100 to 2500 per month. Mine is 2190. Four houses down the block, a guy is renting the identical house (different garage configuration) for 1050 per month.
of course i would not do that... i bought my first house as a single gal when i was 24... so i guess i wasn't very smart for buying into the whole ownership thing...
btw--i can't say that the renters i've known have blown their money in that way... some perhaps, but not all of them... they probably eat out a lot... drive new cars... spend money on clothing... music cds... even furniture... stuff like that i suppose...
He’s an idiot.
Let’s see. We paid $60k for our house. That was 16 years ago. Paid it off within 5 years so living “rent” free except for taxes (but don’t get me started on that soap box). So, $60,000 divided by 16 years = $300 month. That’s not even counting that it would sell for 5-6 times that much today.
What’s he paying in rent, huh?
Gonna live in my paid for home til I die or it burns down first, barring a tornado, forest fire etc. which ever comes first. If it don’t burn down etc. it passes on to my offspring.
I was paying 850 a month for a nice 1 bd apt. I now pay 910 a month for a 1400 sq ft against a ACOE lot line on the Stones River in TN. No Comparison
Really? My house is still standing after 60 years.
What a great post. My sister echoes most of what was written. She’s been renting for almost two years now and loves the freedom and the cash she got from selling her previous home. As for traveling, she’s heading to Florida for a long weekend and then heading off to Ireland for a few weeks. She works but setting herself up for early retirement and will maybe choose Ireland or Italy.
As for myself, I’m selling my 2 BR coop and moving to a smaller one nearby - paying cash, will have much lower maintenance fees, and money worries will be greatly eased. A stress free life is looming ahead - please God. Sad to be leaving my current apt because I love, love, love it as well as my neighbors but one can’t have everything. My decision was based on priorities.
I have myself insured out the yang. Me dead, family gets home and property. Yes, I read.
...E) You’re trapped...
You can always rent out your house if you want to move somewhere else.
Dude, just because it worked out for you, doesn’t mean he’s an idiot, and that buying a home is always a good buy for everybody at all times. I know people who have scored with home ownership, and people who have been burned by it. Don’t you?
I’m looking at houses around here. They were built in the late 70’s early 80’s. Roofs are sagging, siding is warped. It’s not like one or two owners let their houses go it’s pretty pervasive. But then, I live in the PNW and all the moisture. Maybe there was still some good wood around sixty years ago. How large a house?
Did you consider the property taxes and other maintenance cost in the calculation?
In the real world, renting is not cheaper than a mortgage on a comparable house. It costs more.
In a distorted, bubble market, people got the insane idea that they could just rent an empty “investment” house out for whatever they could get, and it would be gravy on top of the bizarre appreciation that occurred in some states between 2003 and 2007. They were wrong.
The only way what you describe could hold water as far as a house renting for half the price of an equivalent monthly mortgage would be, one, it’s foreclosed, a bank owns it and they’re trying to cover their carrying costs, or b, it’s paid off and owned by someone who is very inattentive and not good at managing their money. They’re leaving over $1000 a month lying on the table.
TAXES - paraphrasing Sustein -> We should have annual Tax Day Celebration...
Now in his own words -
“In what sense in the money in our pockets and bank accounts fully ‘ours’?
Did we earn it by our own autonomous efforts?
Could we have inherited it without the assistance of probate courts?
Do we save it without the support of bank regulators?
Could we spend it if there were no public officials to coordinate the efforts and pool the resources of the community in which we live?…
Without taxes there would be no liberty.
Without taxes there would be no property.
Without taxes, few of us would have any assets worth defending.
[It is] a dim fiction that some people enjoy and exercise their rights without placing any burden whatsoever on the public fisc. … There is no liberty without dependency. That is why we should celebrate tax day …”
– Cass R. Sunstein, “Why We Should Celebrate Paying Taxes,” The Chicago
Tribune, April 14, 1999
New Directions. (Oxford University Press, USA, 2004). P. 12
http://www.capitalresearch.org/blog/2009/04/30/stopping-sunstein/
If you didn’t laugh - you’d cry...
One mans headache is another mans retirement gold.
I am fortunate enough to live in a LANDLORD state, we can get them evicted in 5 days.
Trashed, well yes, but the principle base house is still there, and with the amount they paid, I can more than fix it up.
Beats punching the clock.
Mine are all paid for, and believe me, the tenant "is" PURCHASING that property as well as paying for all the damages through their rents.
At the end of that mans 30 years all he has is his 100K invested in THIS market? hahahahaha. I have all my houses, and the 100K plus in the bank from the rents.
So, I am really happy for what this man said.
Military should not purchase a home, until they are out of service, I am sure there are other professions that should also do the same, especially if one has a job that is very mobile.
But, that is not what this man meant. He simply made a blanket advisement statement for all.
I made my 3 daughters PURCHASE a home, ASAP after marriage, they are not sorry.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.