Home Ownership: American Dream or American Headache?
I read Megan McArdle's post about how much house one should buy and some commenters were congratulating her on buying "the American Dream." I guess I just don't see a house that way. After a while, it feels more like the American headache.
Don't get me wrong. I love having a house. I just don't like all the maintenance, bills, and the worry about how to sell it when the time comes. Realtors and others in the housing market will tell you what a great deal a house is and it has always left me shaking my head. Add in the down payment, monthly payment, Home owner's association fees, updates, taxes and insurance, and all the other expenses of the house and subtract it from what you get for it spread across the years lived there and sometimes it might be a better deal to rent. I suppose if you get a kick out of "owning" something, it might be worth it, but try not paying your taxes or HOA fees and see how long you "own" the house that you worked so hard to pay for.
I realize there have been many people (especially those who bought many years ago) that do very well with their houses, but like a stock, you must buy low and sell high and thus far, I have not had that luck.
What do you think? Is home ownership a dream, a headache, or maybe both?
Don't get me wrong. I love having a house. I just don't like all the maintenance, bills, and the worry about how to sell it when the time comes. Realtors and others in the housing market will tell you what a great deal a house is and it has always left me shaking my head. Add in the down payment, monthly payment, Home owner's association fees, updates, taxes and insurance, and all the other expenses of the house and subtract it from what you get for it spread across the years lived there and sometimes it might be a better deal to rent. I suppose if you get a kick out of "owning" something, it might be worth it, but try not paying your taxes or HOA fees and see how long you "own" the house that you worked so hard to pay for.
I realize there have been many people (especially those who bought many years ago) that do very well with their houses, but like a stock, you must buy low and sell high and thus far, I have not had that luck.
What do you think? Is home ownership a dream, a headache, or maybe both?
posted by Helen at 6:27 AM
61 Comments:
My wife and I have owned homes for 24 years. With homes, it's always something. Neglecting maintenance is a fool's economy, so you have to catch problems early or the repairs will become much more expensive. Then there are the things beyond your control, such as the storm that struck our neighborhood on July 20th. It had 84 MPH winds and the rain rate was reported as 25 inches per hour. Yeah, that caused some damage. Now, we're fighting with our insurance company (USAA sucks) and we've already started the repairs on our own nickle because some things just can't wait.
As for the average person making a lot of money on home ownership, for most people, that's just an illusion. Sure, if you live in a hot market and can sell before the bubble pops (such as San Diego a few years back when housing prices were going up 25% per year), you can make out. For most people, when you factor in inflation plus all of the interest they paid on their mortgage over the years, they're really doing good to break even.
Don't even get me started on the costly effects of "home improvement porn." Fashion is for suckers but now my wife is looking at granite countertops ($$$). The perfect is the enemy of the good enough.
My advice is to look at your home as a place to live rather than an investment or fashion statement. Buy what you really need and pay it off early. Trust me, it feels great having no house payment each month.
It depends on your life.
I've had mine for 17 years, and pay $325 a month, plus taxes/Insurance ($1400 annually)
But if you buy more house than you can afford, then it can be a major headache, when I bought mine, I went for a fixed rate, I caught a lot of grief for not going with a varible, but I knew what the payment would be every month. A couple of years ago when interest rates jumped I had no surprises (Who is laughing now?)
The main killer is the interest. I made a largish down payment. I only had a 15 year mortgage and paid it off early. When I got a better-paying job 10 years ago I could have traded up but resisted that temptation. In times like this, nothing works for you like being debt free. Whatever my house has appreciated in the 20 years I owned it may actually turn into a profit.
If you don't buy more home than you'd rent, it can be a dream. If you buy more home than you'd rent, you're investing in a real estate, and you're probably putting far more of your net worth into one asset than you really should.
Remember that a home is a place to live in, and not an investment, and you'll generally be fine.
Home ownership has seriously worked for me, but with caveats. I bought a house that needed serious work. When I did the work I used quality materials and now, 22 years later I have no maintenance costs. I smartly took an ARM based on T-bills, my interest rate runs 4.25% and has been in that arena for years. I'm not complaining.
However, for those that think homeownership is a panacea..... There is nothing I want more than to reinstall the wall between my kitchen and dining room. I want to tear out the second bedroom and install a dressing room, closet and bigger bathroom. I want to slap some solar panels on the roof. But I dare not do these things, because if I sell the house all these moves will decrease the value. So I have a room in my house I don't use, and I am still paying for electricity.
I don't have another 22 years to sink into waiting for a neighborhood to improve and the housing market to boom. At this point I really hate paying taxes. I'm waiting for my parents to die so I can live my dream.....a permanent full-time hobo minivan lifestyle. My aged parents abhor the idea of my joining the homeless masses. I want to go where the wind takes me, with as few possessions as possible.
We love our home, it is being repaired from the flood as I type this. We can't wait to get back in our home.
But owning a home is not the American dream. Freedom to work and play and worship is the American dream. Being left alone by the government is the American dream. Being able to open you own business, not being stuck in your father's SES, the freedom to move, these are part of the American dream.
The American dream is, was, and God help us will be about freedom.
Trey
Yes, home ownership is a headache in countless ways. But speaking as someone who has been both a tenant and a homeowner, I think that living in someone else's property is a worse headache, even though it is a headache of a different variety. Sure, you don't have to worry about maintenance, taxes, insurance, but you are always at the tender mercy of someone else -- and no matter how nice that someone else is, he can always sell to anyone else at the drop of a hat. The vagaries and pressures of the market combined with the peculiarities of the landlord can make life very unnerving. The last straw for me was an investor landlord who never cared about my Charles Addams-style of decorating until it was time to sell, and then he came in and demanded I put this away, put that away, get rid of this, get rid of that -- all so he could sell to people who might very well want to move in! (And some people I knew who moved into a dilapidated house as tenants did such a good job of fixing it up that the landlord "rewarded" them by selling it at quite a profit!)
So while there are pressures which come from owning a home, with home-ownership there is more control over the situation, and more personal autonomy.
I rent. Like Helen said, you don't really own property in the US. You just rent it from the state. The rent is just re-named "property taxes."
I pay $595/mo for a loft. I live in an area where I can walk to get groceries, get coffee, imbibe adult beverages, get to an Angelika theater, visit some of the best restaurants in Dallas, and pick up the best looking women in town. I'm in the middle of things.
When things break, I call someone else. When I want a change, I move.
Until Texas repeals the property tax as Debra Medina proposed in the GOP gubernatorial primary - I'll not buy expensive real property.
American dream? No, but it can support personal dreams. We bought a home and three acres in the country in 1987, paid it off in 1995, refinanced for a major remodel in 1997 (after adding twins to our family) and paid that off in 1999. We lost a high paying job in 2001. With no mortgage or rent and with savings, my husband went back to school to become a teacher and I semi-retired.
Now suburbia is encroaching and we are talking of building a retirement home on our tree farm in the next county. Perhaps this will help our resale value but we have a unique property that would require just the right buyer.
But we bought a home, not a house. We bought a lifestyle, not a status symbol. That's why Megan's reasons made sense to me.
It all depends on the cost of owning vs renting. If the costs of owning are the same or less, then buying probably makes sense.
What happened several years ago in the bubble states was that the cost of owning was sometimes 50%-100% higher than the rental cost. Yet people still purchased, betting on appreciation.
To me, home ownership is a form of enforced obedience. It's an implied threat; mess up, you could become homeless. Fight too hard against a millage increase, the code inspectors start showing up (with their hands out).
Homeowners learn to avoid risk, become timid, obedient. Certainly not all, but most. Then, along came KELO.
Meanwhile, home ownership has put the country in a virtual economic lock-down. The unemployed are stuck in houses they can't sell, their best job prospects a thousand miles away. As a result, our once mobile, flexible economy has all but disappeared. Caught in a vicious circle.
Oh, God, I hate being a homeowner. Bought my first house in 1998, and I've regretted it ever since. The lawn maintenance. The plumbing. The roof. The electrical wiring. The sagging gutters. The window frames that need replacing. The warped framing around the back door that needs to be ripped out and redone. The drainage problems. The heating/AC unit that we had to replace in '06. The water heater that we'll have to replace this year. The goddamn HOA membership fees.
I cannot WAIT to get rid of this place and go back to being a renter.
"I just don't like all the maintenance, bills, and the worry about how to sell it when the time comes."
That sounds strangely like the whining of various constituencies who don't want the headaches of maintaining their own health insurance, feeding their own kids, deciding what to eat, and all the other justifications for the nanny/welfare state. Gee, personal responsibilitie's a pain, I sure wish I could abdicate this responsibility to someone else, like, maybe, Obama?
Amazing how some people's devotion to the principles of liberty and personal responsibility are a function of whose ox is being gored.
dweeb,
Since when is renting, and paying a minor premium to a landlord/management company to take care of maintenance details, anything like asking for socialized medicine?
Since when is paying somebody else in a free enterprise system to do some detail work for you an usurpation of liberty?
A house is one thing, but what is really stupid is buying an apartment..neighbors still too close, it's hard to resell, you're still responsible for maintenance, plus usually there are fat condo fees and other liabilities, and if others default YOU are on the hook for them. That part alone would scare the hell outta me.
After decades of renting, I do like owning but the mortgage is paid off too. We made the mistake of buying more house than we would rent, due to low inventory at the time which almost immediately bubbled into a surplus.
If the costs and liabilities placed on owning property outweigh the benefits, then it's rational to reject ownership.
Even in an environment of increased liabilities and decreased benefits, I question whether that threshold is truly reached.
For one dollar paid in mortgage, you attain a dollar of equity, X dollars of risk, plus a place to live. For one dollar paid in rent, you attain a place to live, no dollars of equity, and a different figure Y of risk. Rejecting ownership only makes sense when equity-X > Y, an equation that is presumably true for a landlord to whom rent would be paid.
If it makes little sense for you to accept the conditions of property ownership of the house you live in, then how would it make any sense for the person to whom you would pay rent? What makes it more beneficial or less risky for that person?
Dweed, you bring up an interesting point. American society has subconsciously loosely equated home ownership with personal responsibility, law-abiding citizens and being a good all-round pillar of the community. We call it the American Dream.
The government, ever thirsting for income, has helped create this idea that good responsible Americans own homes. The government can derive lots of income from individual owner-occupied homes, much more than landlord-owned apartments. So the government has done everything it can to help move as many people into homeownership through cultural pressure. Then our state and local governments levied and ever-increasing property tax that has no boundaries. Property taxes are viewed as an ever-flowing constant and growing income stream.
Now people find themselves in over their heads financially because they have bought too much home on too little income. People are rethinking owning a house, they have consolidated housing with extended family. They are leaving the exurbs and finding smaller affordable houses nearer their employment.
State and local governments are feeling the pinch, laying off workers and reducing services. New taxes are being proposed: Bottle taxes, beer taxes, occupation taxes, water fees. Slots parlors are springing up like mushrooms. Frankly, I think the situation is absolutely lovely, I hope we see more of this. Maybe your basic law-abiding citizen is just getting tired of being soaked and is reacting accordingly. It's about time.
This is one of those topics that produces a lot of silly "well MY experience isn't like that so YOU are WRONG!!!"
I think the analysis of maintenance cost is sort of missing the point. The real question is do you want to take on maintaining a property as a hobby in exchange for whatever benefits the property gives you?
A buddy just bought a house. Is doing lots of fixup and maintenance. Loves getting his hands dirty, and is proud of the product that comes from it.
Like a marriage - you have to actually enjoy some of the sacrifice and work and the non-monetary benefits that come from it, or you're not going to be a very good homeowner/spouse.
Or for that matter, like owning a hot-rod car. It takes a lot of work and money, but they're not doing it to save money, they are doing it because they like the product it creates.
At my stage in life, I prize freedom of movement and low hassle. So renting is awesome; I don't have to fool with property tax minutiae, maintenance or financing. I'm at average six months from being able to go somewhere else. The equity argument is null for me since equity doesn't give me freedom to move elsewhere.
The equity arguments blow my mind - a house is somehow the only product on the market that is supposed to go UP in value as you use it. But equity has a hidden macro-financial impact - I've come to the conclusion that the reason the feds are so gung-ho to extend home ownership is that it provides a backdoor savings plan. Since Americans aren't putting their cash away like they should, at least the gov't is enabling them to put some money in the form of return on their mortgage payment.
The value of the home comes down to the cost of taxes at which the home would be seized and auctioned off. Disagree with a town, withhold your taxes and watch what happens.
A home you live-in is not an asset - it doesn't throw off cash, and in some cases it may make more sense to rent out your home to someone else and rent another less expensive place. Real estate is like a shell game with average consumers being the mark. I put all the additional expenditures and overhead down to the cost of raising a family.
On another note - why aren't intellectual properties taxed like real estate? They can be completely tangible, (old movie reels etc), and may generate future revenue, but too many corporations would object. Disney's real "Magic Kingdom" is having a huge intellectual property stash, which throws off money year after year, and yet they refuse to ever release the copyright to the public. (Free Mickey!)
That sounds strangely like the whining...
You need to get your ears checked.
More malcontents than contentshere. Moi? I do what I do and like and care not one bit for what you like, do, choose.
I purchased a house back on October of last year. It has been a mixed blessing. The first part is I have more room, and the ability to do what I want with the place, downside is that I have a lot of work.
I have spent thousands on repairs, appliances, ect. That would be near impossible to recoup. A lot of time I think how much it would have been to rent and realize I would have 12,000 or so in the bank right now if I never bought the house.
So most people would do better renting then buying, specially if you don't have kids.
Of course without 30 year loans, tax incentives, and other junk, the price of a house would fall like a rock since people wouldn't be able to afford them anymore.
I live in a small house in a good area in Silicon Valley where pretty much every place I'd ever work at is within ten minutes drive, and my current job is a longish walk from home (I walk there about twice per week). The fact that it's small is actually a very good thing: I hire a yard guy to deal with the yard for $40/month, and we have a cleaning lady who comes every two weeks for $60/visit.
Rental stock in my area is generally old and relatively expensive ($1250/month and up for a two-bedroom apartment). My mortgage is more than that, but well over half of it is going to principal and the house will be paid off in three years as we're making accelerated payments.
So, in my case, I think it's worked out well, but I don't expect to leave the area until I retire as I'm a lifelong startup techie. If people move more, they should rent as xact costs will eat them up if they move more than every ten years or so.
The best reason for owning a home and property around it, is for the simple fact that if you don't like what I'm doing, the only way you'd know is because you are trespassing. Now get off my land.
TO: Dr. Helen
RE: Maybe....
Don't get me wrong. I love having a house. I just don't like all the maintenance, bills, and the worry about how to sell it when the time comes. -- Dr. Helen
....It's a Matter of Perspective.
Try living in a rat-infested, abandoned railroad boxcar. Or, better still, sleeping in the mud and/or bugs of a triple-canopy jungle.
As I've told a number of people who whine about various matters of civilized living....
You won't TRULY appreciate it until you have to do without.
I've got a four-level, three-wyth brick, 6500 sq ft, 1901. Yeah....it's a 'hobby' that will keep me busy until the end of my days. The current issue is the roof-mounted swamp-cooler which is beginning to rust from the inside-out. This fall is going to see me tearing out its guts and refurbishing them or arranging for someone to lift a NEW one up there.
So what....
You buy a house to make a 'home'. Along with making a home, you make a community. You get to know and care for your neighbors and your neighborhood.
This shiftless lifestyle is a bane on civilization.
Until you decide to actually spend the rest of your life in a single place, go ahead and rent an apartment. Let those who are serious about their neighborhood buy the houses.
Then again, maybe we should go back to the way it used to be....where only property owners could vote. Or, as Glenn was commenting yesterday, those who've served their country in the Armed Forces.
Regards,
Chuck(le)
[You haven't lived, until you've almost died.]
I'm on my fifth house, each larger than the last. Had some claims in the past, and found USAA great to deal with, as they have been with my auto claims. After 10 years of living here, still couldn't sell this home for more than the 90K I paid for it. Rural area with a declining population. 3,000 sq ft house on 8 acres. Location, location, location. I bought this house with the intention of never moving again. The previous 4 were bought in areas with high market turnover, and I made a little bit on them. Yeah, there are headaches. Replaced the well pump last week. But, it's mine, to do with as I please. Oh, well water beats city water for taste any day of the week.
Buying a house is a bit of a crapshoot, but if you plan to stay for a LONG time, it's generally worth while. I bought mine in 1983, and my next move will be to the cemetery.
If you're young and mobile, buying is crazy; owning a home is the ultimate anchor purchase. Renters can move to another city with the job market, or on a whim, or "just because"; owning nails you down. Buying a house and planning to "flip" it in three years is insane. Yes, some people did, during the last 18 months of the bubble, but insane strategies often work during the last 18 months of a bubble. The trick is, knowing when to bail out.
I've been lucky; I've been able to find good jobs here (although a medium-large city like Sacramento, CA helps!) and have never NEEDED to move.
And I won't.
A decade of renting and was glad to get out of it. Noise always. People keying your cars, throwing trash everywhere. Don't want any part of it. I don't mow my yard. Its all native/natural. Yes there is maintenance but I enjoy doing that.
Costs can be similar it depends on the area. But we are free and clear and the only folks I have to appease are the tax man.
I bought my first house (condo actually) in 1997, then sold it in 1999 and put 35 K in my pocket that I used to finance a years travel in Mexico, where I met my wife. We bought our first house together in March, 2007. A modest 2 bedroom, one bath pre-foreclosure "handy-man special" in a hot Denver zip code that we picked up with a stated income, no money down, interest only loan (a loan deal that we couldn't have gotten had we waited a month, when the bottom dropped out of the mortgage business, talk about timing) with a monthly payment that we could afford. Last November, after some time and sweat equity, we did a no cost re-finance into a 30 year fixed at 5.325 percent. The appraisal came in at 60K more than we originally paid, and our neighborhood is appreciating. I could price this place to sell in a month and walk away with 50k in my pocket. So yea, owning a house has been a sweet experience for me...though in my situation, it helps to have tools and home repair skills, and a wife willing to live in a work in process.
If you only pay rent, you will always pay rent. Once you have finished paying the mortgage, however, then your only costs are taxes and maintenance.
I've read the comments about the complaints about maintenance and some are very fair points. However, maintenance is simply a part of life. I've found that it's certainly significantly cheaper than the rent you'd pay after the house is owned outright.
In our case, we paid off our house after seven years (of working very hard to do so). Not having to pay rent or a mortgage enabled my wife to stay home with our daughter for several years after the birth.
I used to work in the multihousing industry for a developer/owner/operator and the NMHC (National Multihousing Council) had an advocacy pdf on their site listing all the advantages of renting over buying. I suspected it was biassed but it was still very compelling. Their view that homeownership was skyrocketing way "too high" five years ago sure was prescient. Still, I think a general rule is if you plan on staying in the same home for more than five years (and can afford it), then buying a home might start being more attractive than renting.
I had two rules when it came time to go house hunting:
1. I had to own the land the house sat on; and
2. No Home Owner Association.
I don't think I've ever read a good story that involved an HOA.
I've been owning homes for 20 years. I love the autonomy and tax savings, hate the maintenance and exposure to interest rate risk.
Some random thoughts:
- In a lot of cities it is very difficult to rent in a fashionable neighborhood, or a good school district.
- It is hard to rent if you own animals.
- If you're renting and want to improve the property you'll need a flexible landlord.
- Certain uses of your home such as running a business are a lot easier if you own.
- It's nice to be able to call a landlord when something breaks. Getting them to fix it is another matter entirely.
I'm interested in hearing from renters about the perks of renting since I don't want to be in the game when the next round of foreclosures hits..
some people I knew who moved into a dilapidated house as tenants did such a good job of fixing it up that the landlord "rewarded" them by selling it at quite a profit
I bought a house at the ripe old age of 33 in 1997 at the urging of my family who told me I would never find a man to commit to if I didn't look like I was willing to commit.
After I bought, I got a dog...and then I sunk into the depths of depression because I was single, strapped to a house and a dog, and had no money to do the things I used to love to do as a single and free woman.
Yes, Pat, the sagging gutters...what a great metaphor.
I'm out of that now and really happy and free to not look out the back window at the "responsibility" every day.
A dream and a headache. My sister lives in Tulsa and has bad credit (screwed it up, had kids, et cetera). But she would love to get into a house as she needs more room.
And Tulsa (2009 hottest housing market up 3%) has very high rents relatively. I think she's paying about $600/month for a two bedroom apartment in a (now) bad neighborhood while she has found four bedroom houses for $50k. My math says she would come out ahead.
Myself I am in Southern California, hating every minute, and one of the main reasons is the pride people have hear about how expensive rent is. Rent a room in someone's house: $500; studio: $750; 1 bedroom: $1000. And don't ask about mortgages.
So a dream when you can work yourself into one, when you're in that place you want to stay for a good while (lifetime when I get there, 10+ years for my sister), otherwise a nightmare.
I have to point out that having a mortgage does NOT mean you actually own a house yet.
You own it AFTER you have completed the payments (typically 30 years).
How can someone own something while still making payments, the cessation of which leads to foreclosure?
The word 'foreclosure' itself proves that a person with a mortgage does not own a house.
In America, just 10% of people - the elderly or the wealthy, own homes. Period.
The biggest marketing scam of all is the notion that you 'own' the house just because the recipient of your rent payments is the bank rather than a landlord.
No, you do not own the house if you are still making payments on it.
Tax write-off : Yeah, right. Give me $100, I'll give you back $40, and you can be thrilled that you got the $40 back.
The right to make modifications to your house? Hahahahah!!! The property tax you pay ($3 to $10K/yr) is merely the fee for the RIGHT to make those changes. A good deal, eh? I bet if you rent a house from a person, and foot the bill to make modifications that increase the value of his property, he will let you anyway.
80% of men and 99.9% of women are too dumb to see that there are virtually no differences between having a person or a bank as your landlord. They have duped by the word 'own'.
Also, they are dumb enough to think the house will rise in value, despite baby boomers about to retire en masse.
What fools.....90% of Americans deserve the zero net worth they currently have.
Baby boomers are about to retire en masse for the next 15 years. This is the first time ever that more people are turning 65 than turning 22.
Houses are going to fall for the next 15 years, just like has happened in Japan since 1990.
The only way out is the following :
The US has to offer immediate greencards to any well-educated, skilled immigrant from anywhere in the world. Most will be from China and India. They must be HIGH-skilled (high income), or otherwise the problem will not be solved.
This will bring in 20M new young people (if the US is lucky).
This is the only thing that can save home prices (AND SoSec AND Medicare).
If you don't like the thought of 20M new Indians and Chinese coming here, than brace for a long decline in home prices, the end of SS, and the end of Medicare.
Once you have finished paying the mortgage, however, then your only costs are taxes and maintenance.
Yeah. You are over the age of 60 by then. Whoopee!!
kmg: The fact America is graying and the repercussions of that (which you have stated above) are the real reason illegal immigration - or any immigration for that matter - and amnesty are looked at favorably by the government. One of the unspoken things, eh?
Today's American youth are already indoctrinated into the socialist deal, and basically accept it. It is the older ones, like me, who will never buy it. But I'll be dead in 20 years or less, so how much of a problem can I truly be in the big picture? Government employees will create, and administer, the rules and regulations everyone else will live by. Much more so than now. A few, like Reid, are even basically bragging about it. And they will have handsome paychecks and bennies, as long as they are loyal.
I got married in 2008. A three year old daughter was part of the package. We wanted to get her into a good school system. I hate the suburbs. My wife didn't want to live on a compound in the middle of nowhere. We "compromised" which means I did what she wanted. ;)
Its a nice house which we can easily afford. However, it has depreciated since we bought it. We bought it new so there hasn't been any repairs, etc., but I'm getting ready to pay my "summer taxes" of $3200.
I don't really like being tied down to a house that I probably couldn't unload without losing about 20k. However, renting with a family and moving all the time doesn't sound all that great, either.
We recently refinanced to a 15 year fixed at 3.875%. We had a 30 year fixed at 5.9%. We'll save over 100k with the new financing. That makes me feel much better.
Houses are not investments. They are a place to live and raise your family. I like our neighbors and we're close to shopping, etc. Could be worse. We could be out on the street....
This is essentially a 'buy or rent?' article and as such it and the comments have overlooked the currently really huge issue. That is that the housing market crunch is not close to being over, there is a worsening recession and possibly depression on its way, and worse, very likely a deflationary period to boot. And that will be the case for a number of years.
The last thing one should be doing right now is laying out a big chunk of money to buy a house, and even worse, taking on a large mortgage debt. These folks will be slaughtered. If you own your house outright, you're in it and there's not much you can do now. But if you are contemplating the question above, there is at this time only one answer for the prudent - rent!
In my area, rent has gone up an average of 44.5% over the last nine years. Even taxes haven't been that bad - yet. Actually, you can't win, no matter what.
I have had some really awful neighbors (in apts and duplexes) and some horrible landlords as a renter, so I much prefer being in my own house. My first house cost about 1/4 of what the bank said I could afford. I had it within $300 of being paid off when I sold it 8 years later - even though I was unemployed for three of those years.
I got married and we had a 50% down payment from the sale of my house. The new house is also about 1/4 of what the bank says we can afford, but I am not interested in making money for the bank.
Our goal is to pay off the mortgage as soon as possible so we quit wasting money on interest. I have never understood the point of paying $1 in interest to save 30 cents on income taxes.
keebs,
" I bought a house at the ripe old age of 33 in 1997 at the urging of my family who told me I would never find a man to commit to if I didn't look like I was willing to commit.
After I bought, I got a dog...and then I sunk into the depths of depression because I was single, strapped to a house and a dog, and had no money to do the things I used to love to do as a single and free woman. "
Sorry to hear your story. Sounds like you got some bad advice, exposed to the shaming tactics ("do this or no one will love you!") that men hear constantly from their pre-teen years to death.
This topic was discussed in a Dr Helen thread about a New York Times article that claimed single women owning homes was a rising trend, which when you looked at the numbers stretched statistical credulity. One of the topics in the thread was that some men are scared off by women showing off their houses, because it screams "Iwantnagetmarriedandhaveabunchofkids RIGHT NOWWWWW!!!!"
It's interesting how someone tried to sell you on a "shibboleth of commitment," where you show it through symbolism instead of actually, you know, being committed to somebody. Men get this crap when it comes to engagement rings, we're culturally expected to blow a huge wad (three months' salary? WTF?) on a piece of jewelry or we're not "committed" enough.
Unfortunately for everybody except DeBeer's, buying a pricey item just shows that you spent all your money in one place. If a man is committed, a trinket is redundant; if he's not committed, buying a trinket just shows he thinks of his lady as a high-priced whore.
(Marriage is so bad for men these days it flat-out insults me when women tell me a man is supposed to PAY for the privilege of getting into the contract.) In reality, I've come to the conclusion it's just one big shaming tactic to inure a man to the process of funding a future consumer lifestyle.
At least you got a dog and not a bunch of cats! :P
"And Tulsa (2009 hottest housing market up 3%) has very high rents relatively. I think she's paying about $600/month for a two bedroom apartment in a (now) bad neighborhood while she has found four bedroom houses for $50k. My math says she would come out ahead.
Myself I am in Southern California, hating every minute, and one of the main reasons is the pride people have hear about how expensive rent is. Rent a room in someone's house: $500; studio: $750; 1 bedroom: $1000. And don't ask about mortgages."
You must be kidding. One bedrooms are going for upwards of $2k in Metro-accessible neighborhoods in and around DC. However, rent a house with bros and you can get down to $500 per person per month.
One of the benefits of having lived in four of the most expensive places in the country is I got over my sticker shock a long time ago.
"We "compromised" which means I did what she wanted. ;)"
With all due respect, sounds like you're in an American marriage.
"Houses are not investments. They are a place to live and raise your family. I like our neighbors and we're close to shopping, etc"
This I agree with. Good to hear the neighborhood is a positive.
KMG, I welcome legal skilled immigrants from anywhere. They have been and will continue to be a blessing to our country.
Trey
I would say it is both a dream and a headache. I bought my house a little over six years ago when prices in my area were on the way up, but not yet at the peak. Since then they have dropped considerably and are now lower than I paid. I've spent a lot on home improvements: new roof, new windows, new siding, new heater and air conditioner, new patio in the back yard. Before the market crash many of those improvements seemed like a good investment which would make my home more marketable. I've also undertaken big landscaping projects in the front and the back yards. Had I been renting during those years, I would have saved significantly more than I have.
So what's the positive side of owning a home rather than renting? Well, one of the top items on my list is that I have two fairly large dogs who I would have been less likely to adopt had I been a tenant (as many landlords don't like to rent to tenants with large dogs, much less more than one such dogs). My dogs are two of my greatest joys and blessings in life. I've also learned a lot from various home improvement and landscaping projects, and I like the privacy and independence of having my own place. I'd like it all a lot more, though, if it came without a mortgage payment, but in this market I think it is probably wiser for me to save as much as I can than to pay down the mortgage on a house that is not going to be increasing in value significantly anytime soon.
All things being equal, the lifetime cost of renting is much higher than owning. My solution to the problem of interest (and risk in the event of job loss) was to buy a home significantly below what real estate agents said I could afford, and paid off the loan in less than 10 years.
Class factorum,
I have never understood the point of paying $1 in interest to save 30 cents on income taxes.
That is because you are a man, not a woman. Women think that 'getting a tax writeoff' is a great reason to buy a house.
Topfer,
Read this.
It is the quality and legality of immigrants that is the problem today, not the quantity.
However, the current absurd state of affairs is the fault of the government and public both. Most people have no concept of the vast difference between a drug dealer from El Salvador vs. a PhD scientist from China.
pst314,
All things being equal, the lifetime cost of renting is much higher than owning.
Dead wrong.
You are assuming that the house will rise in value.
You are also not counting the return on the free cash saved by not buying.
So your equation, while true in the 1970s and 80s, is not true anymore.
Sharkjumper said...
I've been owning homes for 20 years. I love the autonomy and tax savings, hate the maintenance and exposure to interest rate risk.
Some random thoughts:
- In a lot of cities it is very difficult to rent in a fashionable neighborhood, or a good school district."
Rent control does that in major cities. First, zoning regs make it difficult to impossible to build new housing units. Then, rent control makes it well nigh impossible for landlords to make money on existing housing stock, so they abandon it. Double whammy. And if rent control is applied to new buildings, there are no new buildings.
And then, you get the rent control abusers, like congresscritter Rangel. Five rent controlled apartments, and he disn't know he was doing anything wrong. Yeah, right. Just think about, he could have helped four NYC families by giving up 4 of the 5 units he wasn't eligible under the law to have. Of course, when all is said and done, it will be his friends and relatives in those apartments.
"Dead wrong.
You are assuming that the house will rise in value.
You are also not counting the return on the free cash saved by not buying."
Usually a wash. Rent payments, mortgages, are pretty near equal at the lower end. Remember, you are paying SOMEBODYS mortgage.
"So your equation, while true in the 1970s and 80s, is not true anymore."
Depends on a lot of assumptions.
At the sale of the house, the homeowner gets a big payoff, if they have managed it right. The renter gets a rent increase.
I saved the money and bought my first house with cash. It wasn't hard to do since I started saving at 14 and lived over a relative's basement for about 4 years when I was starting out.
Houses aren't hard to maintain and don't require a lot of work. Even if they did it is kind of silly to complain when so many people pay money for exercise classes or equipment. Take that same money and amount of sweat and put it to productive use. You will kill two birds with one stone... and you might even develop some skills to fall back on.
Oh, and there is no way in hell I would buy a property subject to HOA rules. What kind of person wants to control his neighbors? What kind of person wants to be controlled? What someone else does on their property is none of my business. If they do something to cause me harm then there are laws and civil suits. The last thing I need are the paint chip Nazis coming around with their color swatches.
I think the widespread acceptance of HOA's was a turning point where the country decided to give up on the most important American ideals and head down the path that lead to Obama. We used to be a proud and independent people. Now we are a bunch of whiners who can't even tolerate someone parking their car on their own lawn.
Anywhere I see anything about housing and real estate, I see all kinds of kvetching about HOA's.
I lived in SC in a 10 year old subdivision without an HOA. Falling down fences, cars on blocks in the yard, grass higher then the 4 ft fence it was in, all withing 3 blocks of my yard. The subdivision was slowly turning into a neighborhood of renters as homeowners moved out and sold to investors.
When I moved to VA Beach, I sought out a new neighborhood with an HOA. Neighborhood pool, community room available to all, and rules on upkeep to keep things neat and tidy. Shortly before I moved in the HOA had standardized mailboxes after an avid golfer had erected a gianat golf ball on a tee, and someone else had an airplane with a cargo door. Along with a half dozen or so others. All those were grandfathered in, and could be replaced even if vandalized and destroyed. (There are always midnight enforcers of the rules...) I had to get permision for my fence- I wanted cedar instead of the salted wood approved in the HOA rules. No problem. And, when I planted trees, I informed the HOA ahead of time where they were going and what they were. Again, no problem.
There were a few flagpoles around; each one was an approved variance on the rules. Asked for in advance, not after the fact. Every time I see a contraversy about flagpoles, it always seems it was erected first, then the rules against them enforced.
If you knowingly move into a place with rules, you should follow them. It's the way it is.
I live in a rural area now. I see old, decrepit trailers on acreage being lived in, with the next house over having had to cost over $250K to build. If you spend a fortune building a house in an area like this, count on living in it. You're not going to get back what you put into it when or if you sell. There are no rules that say real estate or any other investment will actually make money.
Helen,
"What do you think? Is home ownership a dream, a headache, or maybe both?"
You think you can own a home in the USA? Why do you think that? Really. It's an honest question. I used to think I 'owned' my home until a magistrate sold it against my written non-consent. It was a hard lesson to learn that I never 'owned' my home. And nor does anyone else. Isn't that something it is important to know? That 'citizens' can not own their own home?
If you 'buy' your home in your 'name' in the US then the USG owns it. That's how they can force you to pay taxes on what you 'own'. How can one be forced to pay taxes on something one owns? One can't. One can only be lawfully taxed on something someone else owns. ie. The USG.
It never ceases to amaze me how people refuse to educate themselves and understand the 'legal system' in the US and other places. An 'american citizen' can not OWN anything. Nada. Zilch. Not a thing. That should concern people, in my opinion, but it seems they are blissfully happy being blissfully ignorant.
I bought a small condo, simply because I was sick of paying off someone else's real estate loan.
It doesn't matter if it's your loan, or someone else's, you'll be paying it off if you're renting or owning.
Ownership has historically been a better choice then renting in the sense that it creates equity which is the basis of inter-generational wealth.
That said, you need the right-sized home. As I tell folks, never buy a house you don't want to clean.
Peter
OurBroker.com
I would say "I am amazed that no-one has actually asked what I mean by it's impossible to own a home as a US citizen" but I am not.
The sheep graze on blissfully unaware that the mortgage contract is fraudulent and that their guvment owns their home and not them.
Even in a place like this no-one will ask the question. What do you mean the guvment owns my home? The later post on the education system demonstrates just how dumned down people are and how resistant they are to educating themselves.
I was on the spearhead for 8 months pounding the drum that common law is in force in the US and is superior to legislation. Guess how many men actually checked that out and then acted? Three. Men deserve their slavery. They are willfully ignorant. And they have been enslaved by men who created the control grid that enslaves them.
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