I might never buy a house again
By Stew
Last week, Mrs. Stew started a sentence with the words, “next time we buy a house . . . ” and then finished the sentence with her idea for our home at some point in the future. I responded that I did not think we were going to buy a house anytime soon, if ever. Of course, Mrs. Stew has heard the statement from me on many occasions over the past two years. I think she had been mostly dreaming out loud while making her buy-a-house plans.
Our troubles with selling our home are well documented on this site. Fortunately, home ownership did not destroy us financially, however, I do not plan to take that chance ever again even if my financial situation improves a great deal. Here are my thoughts:
- There is no indication that we will be moving in the near future, but nowadays, you never know. My profession is one that typically involves relocation about every three to five years, even though I have had the blessing of only having to move once in fifteen years. Until I am in a job with really steady prospects for the future, I am going to keep on renting.
- I generally like mowing the lawn and sometimes even shoveling snow, but if I do not have to do it, why change a good thing?
- If it was a question of mortgage payments, owning a home would make a lot of sense for us. But as those of you who own a home know, home ownership comes with all kinds of hidden costs.
- The down payment is the big issue when it comes to home ownership for us right now and even if I had the kind of cash that a down payment requires, I would be much more likely to save it. We have a ton of other financial issues that need attention.
- I am not even sure that I would enter into a mortgage for fifty or even sixty percent of the home’s value right now. If I could build my own home and truly own it without a mortgage, I might move toward true home ownership.
For most of my lifetime, home ownership has been sold to Americans as the ideal purchase, a financial priority, the thing that every responsible person does at the earliest possible time. I certainly believed that idea. My wife and I purchased a home withing a year of getting married and thought that we were in great shape since we had bought a home about 10 years earlier than either of our parents had been able to afford one. What we failed to understand was that while we could afford a ten percent down payment and the monthly mortgage, we could not afford to own a home.
I have come to understand the real cost of home ownership quite clearly and I plan to be a contented renter for a long, long time.
Article by Stew
Photo by ugraland
March 15th, 2010 at 10:22 am
amen, mr. stew! those “hidden costs” of home ownership are what kills us. and of course those things are never emphasized to anxious, newbie homeowners.
March 15th, 2010 at 11:32 am
I too am questioning EVERYTHING we have been ‘taught’ about finances for the past 20 yrs. And like you, I am not looking too far into the future until my debts are paid off.
We did get lucky w/our current home in that we bought small and at a price where we could afford it on one income (my husband doesn’t get a regular paycheck) until our family expands.
March 15th, 2010 at 12:44 pm
Gina, we did the same thing, but we did not plan for all the hidden costs . . . and we kept rolling those costs into more and more debt . . . until we could not handle the burden anymore.
I was advise to buy a house by almost everyone, especially people who were really good at handling money. I just think the paradigm has changed.
March 15th, 2010 at 2:35 pm
How will this affect your retirement? Most people have lower expenses in retirement because their homes are paid off by then (or at least expenses at the same dollar level, as health care expenses tend to go up as housing expenses down). I believe you’ve said in other posts that you are not saving very much for retirement right now; how do you plan to compensate for this additional expense down the road?
March 15th, 2010 at 3:37 pm
I can see renting in retirement instead of owning just because of the PITA factor of fixing all those little things that go wrong and replacing whatever breaks. I’m under the illusion that until that time comes I’m better off owning to get the asset appreciation, which if history holds should at least match inflation.
March 15th, 2010 at 4:28 pm
Stew,
There are some tremendous advantages to both renting and buying depending on ones situation. I’m thankful that you recognize that for some renting is a good idea. I’ve always been turned off by the kind of thinking that says home ownership is for EVERYONE.
March 15th, 2010 at 4:43 pm
This is the debate of the millennium. It is covered well in the Wealthy Barber by Chilton.
I feel like I am house poor myself. Tons of bills. My advice to prospective home buyers- which is worth nothing – is to have a large down payment, an extra 10k for closing expenses and if the house is 10 years old or more have an additional 5-10k in hand for repairs/upgrades.
March 15th, 2010 at 10:05 pm
Courtney, on the whole, I think that owning a home has done more to damage our retirement savings than anything else. In the 8 years that we owned the home, I think we put close to $26K into it – not counting mortgage payments and property taxes . . . yikes! I hadn’t even considered that until this moment.
March 15th, 2010 at 11:10 pm
I think there are pros and cons to both owning and renting, and you’re right – there’s a boatload of indirect/hidden costs that come with buying a home.
Another factor that really comes into play in terms of being able to offload a house if need be is the real estate market conditions in one’s area where they reside. We all know what happened in the U.S. and the housing crisis, but some areas have fared better than others to say the least.
Nice post.
March 15th, 2010 at 11:24 pm
You didn’t answer the question, Stew :-) Will you plan to own a (however modest) home by the time you retire, will you save enough over the next X years to continue renting through retirement, will you hope to inherit property, will you…?
A home is only a good “investment” when it’s paid off. For most people who don’t otherwise have a lot of retirement savings, cutting out (estimating) 60-80% of their biggest expense allows them to stretch their retirement dollars a lot further. Mortgages eventually get paid off but rents only go up. So, my question was how will you take that into account in the future, not what would you change if you could go back in time to eight years ago.
March 16th, 2010 at 12:34 am
I think that renting will allow us to eventually save for retirement.
BTW, my parents have little retirement, but an almost paid off house, however they are probably going to sell it and rent because they can’t afford maintenance costs and property insurance.
March 19th, 2010 at 2:13 pm
Your parents can really rent for less than property tax and maintenance costs on a house? It seems hard to believe.