Works out great if you buy a house early enough in life to pay it off by the time retirement comes and living there makes better sense than living elsewhere. Like closer to your adult children.
An older house is also more likely to need expensive repairs. And if the neighborhood has degraded over time, you have to worry about granny not getting robbed. Lots of variables here that can potentially undercut this advantage, even though generally it tends to work that way. I would never tell someone to buy a house based on the idea that it’ll help them when they retire, without knowing their individual circumstances.
This is really the only thing about homeowning that appeals to me. I like the idea that when I’m old, I will only have to pay taxes/insurance/maintenance.
But I’m also not really worried about retirement. I’m building a nest egg right now and I’ve got a full pension to look forward to (crosses fingers, knocks on wood,says a little prayer). I don’t need a house to make my retirement comfortable. But I do think I’d love being able to work in my own backyard greenhouse when I don’t have to stare at anyone’s spreadsheets anymore.
I think people fixate on buying homes because homes are fuckin’ awesome. On my long walks, I love looking at all the beautiful homes I pass by. I like imagining what the rooms look like inside, or how I’d paint the exterior if I lived there. People also associate homes with success, since from the day we’re born, everyone and their momma tells us that we’ve got to buy a house the first chance we get or else we will “lose out”. And houses are a big social thing. All the homeowners I know love to host parties and BBQ’s. At the water cooler, homeowners talk about their renovations. They brag about the DIY projects they’ve got going on. Every time I mention where I live in conversation, people ask when I’m going to buy. I feel awkward when I tell them I’m not even looking, because I know they’re probably making negative assumptions about my finances.
I think if most people were honest with themselves, they’d say they bought primarily because feels it weird not to. I’m the only person in my immediate family who does not own and I feel weird about it, even though I’m fine with renting for the next three years (when I’ll be done with my car loan and I’ll have a bigger down payment saved up). Social pressure is a big factor for why people make the financial decisions they do. I’m more resistant to it than most, but I’ll probably cave in too before it’s all said and done.
People who are picking up education degrees at small private liberal arts colleges to be elementary school teachers are not getting ROI out of it. Same with people going to the same schools to be social workers. Private arts colleges. Those were the sorts of places I was talking about that you can’t count on ROI. In generally, I think wisely choosing secondary education and a major that will lead to employment where the salary is commensurate with the tuition is a good investment - both in yourself AND financially. Deciding to spend almost $200,000 majoring in Theatre at Oberlin probably isn’t a good financial investment - although it may be an absolutely wonderful investment in yourself with your discretionary income in a non-financial sense.
You also have, if you bought early enough and worked on paying it off (by not refinancing and treating it like a cash machine) and maintained it - and asset that over the LONG TERM has probably appreciated and can be sold - so they you can move into Senior rental housing. Or a townhome or condo where an association fee covers maintenance.
My house has been paid off since before I was 40. But I’m not planning on living here more than another ten years - once the kids move on, we will move to a condo or townhome. I’ll sell this and move - probably into a place that costs less and doesn’t need bedrooms for two teenagers and a basement for them to hang in and be able to pocket some money.
But it still isn’t for everyone - possibly homeownership might not even be a great option for a very significant minority of the population. It doesn’t give you flexibility. It does come with maintenance headaches. It does mean you are responsible for upkeep. It does come with some risk. There are too many ways for the non-disciplined or those with bad luck to come out behind. But for those who have the discipline for homeownership - and the income and location stability - and the desire to own a home - and can do it early enough to have it paid off as they enter retirement - its a pretty good bet financially.
Monstro, you say there is social pressure to buy a home, but consider this:
People prone to financial disacuity can be impulsive. They buy a house they can’t afford, then get over their head. I think some rationalize it by feeling they were pressured into it, thus the idea there is this social pressure to be a homeowner.
You have implied you are single, which brings up another thing- it is harder to afford a house on just one income. Two incomes gives redundancy and makes a mortgage both easier to get and less risky. I wouldn’t fault a single person for wanting to continue to rent, particularly if getting a down payment and mortgage were prohibitive.
Trying to get back on topic with other examples, I’m going to go ahead and say it: Stay at Home Parents.
It is another hot topic, but here’s how I see it: If you have no friends/relatives nearby and daycare is prohibitively expensive, then having one parent be a SAHP save more money than a low paying job might provide.
For all the couples that choose to have one parent provide all the income, I think the minority really benefit from it. Having only one parent work puts enormous pressure on that spouse to maintain employment, standard of living and place of employment. The working and SAHP have responsibilities that don’t compare well, and it’s easy for one parent to resent having to do ‘more’ work. The SAHP has a gap in employment which makes it harder to go back to work and resume a career. Divorce is more difficult for the SAHP since they may have invested many years taking care of kids vs building their career.
Public school, retired parents paid a fair sum, and strategic career choices can let parents have the best of both worlds. Some parents do the SAHP thing and it works great, but for each success story I see ugly divorces, the stress of poverty when the working spouse gets laid off/injured, and challenges of trying to transition back into a career or school work against most couples in my opinion.
You make it sound like these people are imagining things. Do you agree that there is a ton of pressure for people to buy houses? Every time I hear “American Dream”, I think of owning a home in a tree-lined suburb with an American flag in the front yard. That’s a powerful image to ignore, and so are the emotions.
If I had a different kind of personality, I could easily see myself buying a house. Not because I really want one. But because marriage, child-raising, and homeowning are the top 3 things most people in my social class and age demographic are talking about right now. I can’t do the first two things, but I can afford to check off that third box and then bask in the positive attention I would receive by finally joining the fold. Perhaps it’s because I am used to being on the outside that I am resistant to this pressure somewhat (I also have other status symbols that I can be proud of). But I still feel the pressure, and it sometimes works my nerves.
I can only imagine how it must feel to someone who is desperate to join the middle class and really wants to have their own “symbolic representation of fiscal responsibility” to mask past mistakes. Unfortunately, from what I’ve learned on the subject, these are the people who would probably do best NOT to swallow the “owning a home is best!” hook line and sinker. These people would be better off increasing their flexibility, investing in education (especially their children’s), and minimizing risks. Instead, in not so subtle ways these people are told they are losers for not playing the real estate game. So that when they play and actually do lose, their wealthier relatives and neighbors can roll their eyes at them for getting in over their heads and demonstrating “financial disacuity”.
I’d probably feel a lot differently about a lot of things if I had a SO and children. A lot of conventional financial wisdom is targeted to couples, not singletons. This means that individuals need to make decisions based on their own individual situations rather than statistical averages.
The last phrase kind of tends to work the other way round: people’s children are the ones who stay where they grew up or move away. It’s one of those things where a person has to make choices based on the variables they can control, and set aside those they cannot, such as what their children will end up doing 10, 20, 30 years in the future. Buying a house in a town with a good college even though the commute is a bit longer can save the family a lot of money, so long as the children go to that college. But if they don’t go to college, go to another one, or move into the dorms anyway, then the commute is still a bit longer.
Going back to where ever the post was about “What you grew up eating is the best” I read about a newlywed who made biscuits one morning (US biscuits) and asked her new husband how they tasted… “They’re good,but not like Mom made”. Wife set on a quest and every morning she tried a new recipe and waited for the verdict… which was always the same. After a few months she was at her wits end,but they went to his parents for a visit. She made sure to be in the kitchen in the morning,prepared to take notes on how these wonderful biscuits were made. All was reveled when Mom reached in the refrigerator,pulled out a tube and “whapped” it on the counter.
There is a story, in Halberstam’s The Reckoning, IIRC (about the development of the auto industry after the war, mostly), in which a top GM executive asked his mother to make the bread fried in onions and bacon grease that he’d had for breakfast every day of his childhood, and loved, and had lusted after ever since.
The article is correct but, as always, one’s own situation depends. In my own case I am not affected by this because even during the bottom of the housing bust my home’s value never fell as low as the Proposition 13’s assessed value. That is, the 2% annual increase in my home’s assessed value since I bought it was still lower than it’s actual value at the bottom. (I bought it just before the big runup in prices.)
The disadvantage is that I never got to cut my property tax, since my assessed value never went down, but the advantage is that I’m not seeing the 20% increases the article is talking about either.
Your taste buds change as you get older… After chemo I found some of my favorite foods were not just inedible,the very smell would have me throwing up for hours… Cumin,which is an every day staple in Texas,was the worst,and it’s hidden under “spices”.
In addition to losing your job, you also left out earthquake, breakdown of society, zombie invasion and millions of other things one could obsess about. Resulting in never making a long term commitment of any sort.
Every day, tens of thousands of people get laid off or fired from their jobs.
There is zero risk of a zombie invasion. There is an extremely slim chance of “breakdown of society”. But for folks who suffer from “financial disacuity”, job losses are actually quite common. Even for responsible folks, they happen frequently enough for it to be an important consideration. See the Great Recession (I guess I’m the only person who remembers this.)
I don’t think what I said deserves such a batshit-insane response.
No, but in your scenario, not buying the house is only the right play if you can see the future and know that you’re going to lose your job. And if you can see the future, why not buy a lottery ticket?
It’s about risk tolerance, probability, and cost. Do you buy insurance beyond what the law requires? That “is only the right play if you can see the future and know that you’re going to” crash your car, burn your house down, etc. Or are you and ftg some of the people this thread is about?
There are also the legal protections (homestead exemptions) that prevent you from getting pitched to the curb in certain circumstances, that renters do not enjoy.
IMO, the main reasons to own a house are basically twofold.
One, you pay a similar amount per month as renting, but at the end of it, you’ve built some equity, and have a good chance of being able to sell your house for much more than you paid. It’s a sort of lazy investment plan.
Second, it’s YOUR house. You can do what you like- take down walls, paint it day-glo purple, etc… (unless you live somewhere with a HOA). You get to decide on the contractors that you use or DIY, and you get to choose the materials and equipment/machinery that you install/have installed. You don’t have to have the same old contractor-grade cheap shit that most rental properties have.
Granted, for these two benefits, there are some downsides. Having to maintain it, with all the PITA that can become, is probably the biggest downside I can think of. If you’re renting an apartment and your sink starts to leak, you just clear the shit out of the cabinet, and call the office, and the fix-it guy shows up and fixes it. When you own a house, you have the DIY/hire out decision, and then have to implement either one yourself, with all the costs in time and money that they require. Your neighbors have their opinions about how you should keep your house- because they’re all interested in maintaining their property values as well- so if you neglect your house, they’ll probably start annoying you about it, especially if they’re retired old geezers with nothing else to do.
If you’re not financially acute enough to know whether your job is stable, then you’re not financially acute enough to make smart decisions about owning a house. No one knows for certain if the neighborhood they’re buying into is on the upswing or downswing either. But it doesn’t take a rocket scientist to make a good guess about short-term and long-term trends, using available market information. You must take the same approach to assessing whether you’re a good candidate for buying a home. If you have a temporary job, your workplace has seen major layoffs in the last few years, you’ve already been put on double-secret probation at work, or you know your industry is being outsourced at a steady clip, they you are probably not in the best position to purchase a home at this time.
I spend way too much time on Reddit and on this message board listening to tales of woe from people who are unemployed/underemployed and stuck with houses that are falling apart around them for me to be so cavalier about this very basic, noncontroversial concern. I don’t know where you live where people never lose their jobs when they’re up to their eyeballs in debt, and the job market in their town is horrible. But shit like this happens even to people who don’t think they are suffering from “financially disacuity”. It takes a whole lot of foolishness to believe this is anything like winning the lottery.
Bolding mine.
When people buy a home, they need to realize they are taking a major risk. Perhaps it’s not a risk for you, but it is a risk for people who have problems managing money in an unstable economy. Which would be a huge percentage of Americans right now.
It bothers me that folks who are financially disacuituous will listen to ftg and Justin_Bailey before they will listen to someone like me.
As for the argument “hey, if you lose your job, you can always rent out the house!”, there are two houses on my block that have had “For Rent” signs in their yards for the past three months. Perhaps a well-heeled investor has enough savings to cover three months of mortgage payments. But someone who is “typical” probably doesn’t. I don’t think asking yourself whether you want to be caught in this situation is anything like fretting over a zombie invasion. But hey, maybe that’s just me (and you :)).
I worked at a consumer credit counseling agency during the housing market collapse. It was really sad, because we couldn’t ‘‘save the homes’’ of the vast majority of people coming through our door. Our role was in a way just to help them accept and deal with the loss. Most of those people never should have purchased the homes in the first place. That experience has, I think, forever biased me against owning a home. Not saying it won’t happen someday, but it hardly seems like the sure investment many suppose it to be. If the market collapsed once it stands to reason it could collapse again. And depending on when that collapsing happens, it could be all the difference between riding out a rough patch or financial ruin. And that’s leaving aside the vast amount of time and effort that must go into a house’s upkeep. It looks exhausting. I would only take on a commitment like that if I had a large amount of financial security.