Thursday, February 04, 2016

Home-Buying

It's always good to throw a little heterodoxy out there. From the "everyone knows buying your own home is the best way to financial security" department, we have this collection of arguments against it.

I remember seeing a television ad for realtors that noted the children of home-buyers have better school outcomes, but there was no mention in the ad that this could be the result of rental housing being redlined into service areas for terrible schools. When I worked for a city planning commission, a proposal to build apartments was met with severe community opposition because "I don't want my kids going to school with kids who live in apartments." (That's an actual quote from a citizen at the planning commission meeting. When staff noted that market-rate apartments rent for more than the average neighborhood mortgage payment, the citizen commenter did not apologize for making kids who live in apartments go to school with his poor-ass kids.)

I think the main way the advise of the "buy your home" crowd works out is with an expected political climate. As long as housing has barriers to supply, such as bureaucracy and NIMBYs, housing will continue to look like an appreciating asset. And as long as home-buyers can rely on the formation of property bubbles, there'll be an element of a Las Vegas casino's appeal to purchasing a home.

2 comments:

Alanna said...

We were incredibly lucky with how things worked out with us buying a home in Manassas. We moved there right as the bubble was growing, and I remember EVERYONE telling us that we needed to hurry up and buy a house because investing in real estate was a "sure thing." I talked to my dad (an investments guy) who assured me that nothing was a sure thing in the short term. We couldn't afford anything anyway, so in the end it wasn't even a choice to not jump into the market right away-- we just couldn't.

Enter the housing crash, and we were able to buy a home! It appreciated nicely for us while we were there, which was weird. My in-laws kept telling us our house was too small for us, as if they coulnd't understand why we didn't jst pack up and just buy a bigger house. I wanted to scream that just because our house had appreciated didn't mean we could upgrade-- all the other houses had appreciated, too! Unless Craig suddenly started making a lot more money (which wasn't going to happen as long as he was a teacher), we had all the house we could afford, regardless of how many people we had crammed in it.

When we did move, we were fortunate for three reasons: our house's value had gone up, Craig was making more money, AND we were moving to a (slightly) cheaper place. Selling our house provided the down payment on our current home. It sounds like we lived the dream perfectly, but it didn't feel like that during it all. Our timing was truly fortuitous throughout the whole thing. I wish we could claim to have been smart about it, but we aren't that smart. (And if I certainly don't think we're smarter than the many people who got burned by the market crash!)

Selling the house with all the hassle we had there (it took 6 months to sell, about 5 months longer than it took EVERYONE else who moved at the same time that we did!), we had to remind ourselves that we were selling a home, not an investment. We wanted to get greedy and hold out for the absolute best price, but eventually we realized that would mean waiting until the spring and hoping the market didn't crash again and perhaps we were just being pig-headed to not be happy with what we could get right now (which, as I said, was still the downpayment for home #2). The whole thing really messed with my head.

Now, I love our current home, but I worry that if we wind up needing to move again, it might be very difficult to sell and we could lose a lot of money on it. Perhaps renting would have been smarter, but it's awfully hard to find something to rent for a family our size, and here (I think especially in a college town?) you pay such a huge mark-up for renting... I'm not sure anyone could possibly know what the best choice is for them without a very reliable crystal ball!

I guess what I'm saying here is that it's not necessarily a bad idea to buy a home, but I think people need to do it with their eyes open that things can and do go wrong, and that nothing is a guarantee. Not even real estate! Buy a home because you need a house to live in, but not because you think you can make money doing so.

The Man Your Husband Is Worried About said...

I think we're in agreement here. I agree with your point that things are different in a college town.

I'm not saying I wouldn't buy a home if I could; I just don't know that it's ALWAYS the "financially smart" thing to do.