I’m pretty sure I read in one of your articles or comments that you didn’t plan on being a homeowner one day. I was wondering about why that might be. My parents try to be pretty practical when it comes to money and I’ve heard them say things about how rent is basically throwing away money and its better to have that money go towards a mortgage. Obviously it makes sense to rent while we’re young, but I was just curious why someone who is really into spending wisely wouldn’t want to own a home. Maybe I’m missing something? — S.S.
A few years ago, my friend Matt declared the following: “I don’t believe in residential property as an investment.”
Yesterday, while Skyping from across the pond, Matt announced that he was saving up to buy his own one-bedroom flat. I laughed and quoted his words back to him, and he smiled and said that he had changed his mind.
Changing our minds is something we do over the course of our lives. We decide we don’t want to be lawyers anymore and launch a food truck business. We say we want children, and then decide not to have them, or vice versa. We don’t want to be homeowners, and then, one day, out of the blue, we come across a house, and we think, “why haven’t I lived in you all my life?”
My short answer to why I don’t want to be a homeowner one day is that it’s simply not something I want right now. Will I change my mind one day? Quite possibly!
Here’s the thing about Matt declaring that he didn’t believe in residential property as an investment: When he made that statement, he had been a homeowner, and when the housing bubble burst, he lost a lot of money on his home. A recent report by online real estate database Zillow shows that about a third of homeowners in the U.S. are underwater on their homes, or owe more on their mortgages than their homes are worth.
Here’s something personal: My parents are part of those homeowners who owe more on their home than their home is worth. Here’s another thing that’s personal: They believe that they will not be able to pay off their home without my help, and if you’ve been following along, you know that they are depending on my financial help when they retire in a few years. In a way, I already have a mortgage, except the house isn’t mine. Ask me again why I don’t plan on being a homeowner.
Conventional wisdom says that renting is just throwing away money, so a mortgage is a way to go. I’m sure Matt and my parents believed in this same conventional wisdom before the market made them do some rethinking. Unfortunately, the American economy does not operate by conventional wisdom—it’s unpredictable, and we are constantly arguing about what direction we need to head in (should it be austerity, or stimulus?).
But life does go on. Despite losing money on his previous home, Matt now wants to buy again. It’s something he wants to do because it makes sense for his life right now. He understands the risks—he’s lived through them. I pull out this card quite often, but only because it’s true: You do what makes sense for you, when it makes sense for you.
A few days ago, I was reading the Home and Garden section of the Times when I came across an article about two young men who rent an apartment in Brooklyn, and how they had bought a home in the Catskills with a view of the mountains for $117,000. Their down payment was $3,000, and their mortgage is $850 a month, with annual property taxes of $3,500.
I thought, I could do that too. I could have a house like that. I could have my name on a deed one day. If only.
Photo: Flickr/Mike Babcock