"I did find a spot for the couch that made me happy. I was proud of myself. But where the couch is — that’s how I’m going to measure my happiness from now on?"
Suburban angst for today's thirtysomethings.
Why do people fall for the dream of a house? It's a house. You have to live somewhere. Don't let it make you crazy. There are always trade-offs when you decide where to live. Make a decision and man up (or woman up). Ah, but people continue to meld their psyche with the building, and then when the building doesn't make everything beautiful, they have a mental as well as a physical problem.
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A real playwright would find a place on the mantel for a rifle, first of all.
Spare me okay. This guy is just upset his investment went upside down. I sympathize. And I also get the whole get rid of possessions, be free to live your life thing too...
But.
Homeownership is generally about having a family. Planting some trees and watching them grow. Building some memories. It is not just a speculative investiment. What is good about owning a home is it becomes a savings account over time. You eventually pay it off and have that equity.
It is not for everyone. You should not allow it to make you a slave. You deal with that with common sense and balancing priorities.
And ultimately this guy is upset because he broke even? Okay. So he sold it and went to Honduras. Good for him. Maybe he and his wife will be very happy in urban Minneapolis. If so great.
Buying a home as an investment is a bad idea. They last too long, and the market fluctuates too much, and they are too hard to sell.
Find something else to gamble on.
But if you are going to live somewhere for a long time, why not? If you are still moving around, rent.
We're programmed from childhood to believe in certain myths. Home-ownership is one of them. But myths are myths. That's why they're called myths.
Kind of like the myth that Texas has warm weather in wintertime, wouldn't you say?
Right now renting is easy and probably will be for some period of years (though eventually that will change) Typically renting a large place is expensive. The economics of it have changed.
But getting the tax write off and building equity generally does make sense if you do not have to sell every couple of years. Perhaps a smart move for the mobile is to buy a decent vacation home that you know you will enjoy for years and then use that as your central point.
"Homeownership is generally about having a family. Planting some trees and watching them grow. Building some memories. It is not just a speculative investiment."
I second this sentiment, and wrote about it a while back:
http://defsi.typepad.com/deafening_silence/2008/09/good-housekeeping.html
(Hope it's not rude to put that link in.)
Some of these people need to move back into mommy and daddy's house.
"Kind of like the myth that Texas has warm weather in wintertime, wouldn't you say?"
Warm weather is SO over-rated. We came to Texas for sunlight (and for Texans) and, Tex, we've been delighted!
wv: nonsnesh: Badgers will beat Boilermakers? Nonsnesh!
Home ownership is also about not having neighbors who live above you who do laundry every single morning at 8 a.m., even when you ask them nicely - with a plate of hot out of the oven chocolate chocolate chip cookies - to wait until later, at least on weekends. They will snap, "The rules say quiet hours are from 10 p.m. to 8 a.m.," take the cookies, and close the door.
That's the main reason to own a house: so you don't have cookie-taking, laundry-doing people who live on top of you.
If you buy a house, you're in the house market.
Your house's value may decline, but so will the price of the house you want to buy next.
So your wealth is so-and-so many dollars plus one house.
If you need to sell, the house you buy will cost one house, is the way to think of it.
Since you need a house, it's not all that risky.
Except that there's paperwork that may make the transaction difficult.
What you want is just to trade mortgages and houses with the other guy.
That is why winters in Colorado, Tahoe, and Montana, while cold and snowy, are generally far more bearable than Chicago, or even ironoically New York or Seattle. There is sun. And lots of it.
So how long until NYT subscriptions drop down to the level where every subscriber gets an article about them like this? Althouse already had hers.
These people are buying houses for all the wrong reasons, so it's no wonder they are unhappy with them.
They remind me of people who get a dog because it's fashionable, then suddenly find out the dog eats and poops.
Lynne's post.
Home ownership is also about not having neighbors who live above you who do laundry every single morning at 8 a.m., even when you ask them nicely - with a plate of hot out of the oven chocolate chocolate chip cookies - to wait until later, at least on weekends. They will snap, "The rules say quiet hours are from 10 p.m. to 8 a.m.," take the cookies, and close the door.
That's the main reason to own a house: so you don't have cookie-taking, laundry-doing people who live on top of you.
Aint that the truth. I found moving from apartments, to small homes close to gether, to larger homes on an acre or more prove that. People not on top of one another are so much nicer.
Funny I also have plenty of friends locked down with rent controlled apartments in NYC. They can never move because it is such a good deal.
None of these people seemed very self aware. Either they thought they were "smart" to invest and were mistaken, or they did because everyone said they should. They all sound lame.
None of them seemed to take into consideration their needs, house maintainence, do I have time for yard work (do I enjoy or hate yard work), or hired a good building inspector. Really, you buy the condo and there are walls caving and water everywhere soon after moving in and a good inspector didn't see the structural issues?
Whine whine whine.
Perhaps I am reading too much into this too, but I am sick of the whole "Sam Mendes" hackneyed themes that the suburbs are baaaaaad places. People are DESPERATE to leave. They are TRAPPED. STIFLED. No they are not, but perhaps they are not for everyone. I live in the city now because it fits my current lifestyle. However, I grew up in the suburbs and loved the freedom it provided me. I just have a different needs now and I know it.
Agree with you gold digger, which is why I try to find apartments with people with similar lifestyles, but they move and a-holes sometimes replace them.
Still, not having a-holes above, below or beside you is not the only reason to buy a home either. :)
Gold Digger, the Thanksgiving story you tell on your blog is interesting to me. Your story reminded me of a close and important relative I had that would predictably initiate an easily avoidable dispute so he could storm off and have whiskeys. Apparently whiskeys were not to be had at home.
Would you care to read another Thanksgiving story that isinteresting but very different? It's probably the most interesting Holiday story I've ever read.
I'm somewhat sympathetic towards Mr. Berks. The first few years I owned a house I felt incredibly stressed by it. However, my stress was the inverse of his. I know how to do all the maintenance -- painting, plumbing, electrical, gardening -- and was always aware of what I wasn't getting to.
Eventually I got to enough of it to relax. Or just learned to live with things. For example, the lawn has been abandoned to its own devices. That's just the way it is.
I think this is one of those articles, like the ones about "funemployment" designed to make you think, yeah, I like being unemployed! I can't afford to own a house but I like renting better! I love Obama!
Yet another bogus "trend" uncovered by the Times.
Oh boo hoo again. Life is so hard when everything does not work out perfectly.
Once again: Nearly everything about the New York Times can be understood with reference to its insufferably yuppie staff and readership.
There are some sufferable yuppies but they seem to have little connection to the NYT>
Two Davids at work here. An army of Davids.
So if you rent, you don't have to arrange the furniture?
"Ah, but people continue to meld their psyche with the building, and then when the building doesn't make everything beautiful, they have a mental as well as a physical problem."
They do this with marriage too.
Probably the same people.
"What is good about owning a home is it becomes a savings account over time. You eventually pay it off and have that equity."
I've heard this all my life, but I've never yet actually known anyone who did anything with all that "equity." They have it, all right, and I suppose it's comforting to know it's there in case you need it. Is that the great appeal of "equity" in a house? Just knowing it's there?
“Is There Anything Good About Men?” (Short answer: probably.)
Probably? Probably? I am sick to death of this attitude. I LOVE men. All the people who don't are, of course, entitled to their opinions, but they're not entitled to force it on everyone else.
Of course, reading this article, it's easy to conclude that these particular men aren't good for much, but to generalize that to include the entire gender? Sheesh.
I don't know, but those two in the article sound like a really insufferable duo.
"Home ownership is also about not having neighbors who live above you who do laundry every single morning at 8 a.m., even when you ask them nicely - with a plate of hot out of the oven chocolate chocolate chip cookies - to wait until later, at least on weekends. They will snap, "The rules say quiet hours are from 10 p.m. to 8 a.m.," take the cookies, and close the door.
That's the main reason to own a house: so you don't have cookie-taking, laundry-doing people who live on top of you."
* * *
Well, perhaps. But a house is also like a child that never grows up and becomes self-supporting.
- The lawn needs constant cutting and tending.
- The paint, the roof, the gutters, the windows, the carpet ... all eventually need redoing and repairing and replacing. Ditto the major appliances: refrigerator, stove, dishwasher, heat pump, etc.
I've never owned a house and never want to own one. When the refrigerator dies, I call the lady. Two days later I have a new refrigerator. The thousands of hours I would have spent mowing grass or painting or cursing under the kitchen sink have been spent doing things I find more productive and more satisfying.
Instead of paying a bank $2,000 a month on a mortgage (about half of which ultimately goes to interest), I put $2,000 a month into a mutual fund. The fees are considerably less than interest on a mortgage, and the growth is probably more reliable.
Either way -- own or rent -- there are trade-offs.
wv: "troff" See?
"You eventually pay it off and have that equity."
Maybe yes, maybe no. If you buy a house or apartment, you may end up having to spend a lot of money to cover major repair or remodeling costs, which you would probably not have if you rented. By renting and avoiding such costs, you can invest the money in the stock market, say, and by the time you retire also end up with "equity," not in a home of course but in a large savings account or investment portfolio.
The main difference is in the taxation of the gain in the value of your home when you go to sell it versus the taxation of the appreciation in your financial investments and savings. For federal income tax purposes, a large part of the capital gain on your house is forgiven. It escapes taxation. If the housing market has treated you kindly, this could be a huge windfall when you get ready to retire. A similar tax benefit is not directly available to most other financial investments like stocks and savings accounts, and so your equity in such investments gets taxed more heavily (even if at lower capital gains rates rather than at higher ordinary rates).
I am sure many people rent their whole lives and do well. To them I say great. Good for you. But generally I do not see that. The natural tendency toward ownership tends to be a positive thing on many levels.
Peano said:
"I've heard this all my life, but I've never yet actually known anyone who did anything with all that "equity." They have it, all right, and I suppose it's comforting to know it's there in case you need it. Is that the great appeal of "equity" in a house? Just knowing it's there?"
I've rolled all that equity over into another house sometimes; the tax code encourages it. I've also sometimes converted a house to a rental. But almost everyone dies where they lived; the story about "selling the place and moving to something smaller and more convenient" turns out to be false way more often than it's true. And the idea that your house is an investment is definitionally false. That is, if you use the classic definition of an investment - an operation which upon mathematical analysis promises safety of principal and a monthly/quarterly/annual payout. Unless you are willing to sell it within 5 days, your house isn't yours; it belongs to your heirs. Seen with that perspective, it can be a part of their inheritance. Better than nothing. Not better than real financial planning.
I've heard this all my life, but I've never yet actually known anyone who did anything with all that "equity." They have it, all right, and I suppose it's comforting to know it's there in case you need it. Is that the great appeal of "equity" in a house? Just knowing it's there?
My parents sold their house in Silicon Valley near the peak of the market (totally unintentional; they just needed to sell at that time), bought themselves a house and three rental properties in the Seattle area, retired on the income, and lived happily ever after (so far, anyway).
Well, you *ought* to end up with a house to live in that doesn't cost you a monthly payment so that you can live better on your retirement and have more money in the years before you retire.
But that doesn't work all that well, since you never own property in any case, you just rent it from the State.
Not that property taxes run old people out of their homes, they just cause financial hardship, so that's okay then.
One other point about income taxes that homeowners need to be aware of. A lot of retirees are surprised to find out when they go to sell their homes that the added income from the sale may subject them to the alternative minimum tax. This may come as a shock to them because AMT tax rates are effectively much higher than ordinary rates, especially when you take into account various disallowances on itemized deductions. If this is a one-time event, which is likely to be the case at retirement, then some of the added alternative minimum tax will be recovered over the following years through income averaging. Nonetheless, the sale of a home whose value has greatly appreciated over time can trigger the AMT if the gain is large enough and can subject you to a much higher marginal tax rate than you are used to.
Synova-
I might not live long enough to enjoy owning a home. My dad died at 64 for no good reason. So, for me a 30 year mortgage isn't much different from renting. Yes, there's the tax deduction and so on, but at my income level it's not that much.
Not to be grim or anything, but people often invest as if they are going to live forever. We have a finite amount of time, and we should look at our entire life instead of just the few years at the end. Now is just as important as 20 years from now, with the added bonus of definitely being alive now.
I wouldn't mind leaving a home to my children, but there's other ways to help them out without leaving them with the hassle of selling real estate.
You eventually pay it off and have that equity."
No you don't.
Come on. You guys are supposed to be lawyers?
Once you pay it off, you don't simply have equity -- you have legality. You have complete ownership, both equitable and legal title.
As for what to do with it? Of course, the up and down market value does not increase or decrease your wealth one tiny bit if you continue to hold on to it -- the "market value" only matters if and when you sell it. At least, that is how it should be. Instead, it also matters when the damned government sticks its grubby hands into your pocket to take property taxes from you.
**************
A lot of retirees are surprised to find out when they go to sell their homes that the added income from the sale may subject them to the alternative minimum tax.
Again -- no.
The profit from the sale of a capital asset, such as a house, is not income, rather it is a capital gain, subject to the capital gains tax, which is often exempt for a residence, not income tax.
Althouse: Ah, but people continue to meld their psyche with the building, and then when the building doesn't make everything beautiful, they have a mental as well as a physical problem.
Talking Heads
Don't Worry About the Government
I see the clouds that move across the sky
I see the wind that moves the clouds away
It moves the clouds over by the building
I pick the building that I want to live in
I smell the pine trees and the peaches in the woods
I see the pinecones that fall by the highway
That's the highway that goes to the building
I pick the building that I want to live in
It's over there, it's over there
My building has every convenience
It's gonna make life easy for me
It's gonna be easy to get things done
I will relax alone with my loved ones
Loved ones, loved ones visit the building,
take the highway, park and come up and see me
I'll be working, working but if you come visit
I'll put down what I'm doing, my friends are important
Don't you worry 'bout me
I wouldn't worry about me
Don't you worry 'bout me
Don't you worry 'bout me
I see the states, across this big nation
I see the laws made in Washington, D.C.
I think of the ones I consider my favorites
I think of the people that are working for me
Some civil servants are just like my loved ones
They work so hard and they try to be strong
I'm a lucky guy to live in my building
They all need buildings to help them along
It's over there, it's over there
My building has every convenience
It's gonna make life easy for me
It's gonna be easy to get things done
I will relax along with my loved ones
Loved ones, loved ones visit the building
Take the highway, park and come up and see me
I'll be working, working but if you come visit
I'll put down what I'm doing, my friends are important
I wouldn't worry 'bout
I wouldn't worry about me
Don't you worry 'bout me
Don't you worry 'bout ME..........
My mortgage payment is far, far less than the rent on my house would be. Even with every house expense thrown in, it's much less.
Freeman--
In the strange market that is Durango, the opposite is true.
A little advice on home values. First the homes are in demand when and where there are new jobs, and homes are not in demand when the jobs leave. To hedge against the job migrations elsewhere, always try to locate near a huge capital investment that cannot be replaced 20 miles down the road. Golf courses can be replaced, but being near a large private lake or an urban business/medical complex usually does not end up running down into dumps as they age. near those, the owners will raise and rebuild instead of let go to seed as rentals. The emotional need to have anchor base in the community is strong. But today's youth seems trapped in the idea of only enjoying living where others their age are living as singles. The day after their first child is born, all of that will change.
That's the main reason to own a house: so you don't have cookie-taking, laundry-doing people who live on top of you.
I too thought as you. But after years of peace and quiet, right now our back fence neighbor is jackhammering up his patio. And two neighbors ago to the north turned his house into a construction site so hectic that he and his family moved out for 18 months. They were not nice enough to take us with them. However schadenfreude comforts me -- they overextended themselves and defaulted on their mortgage (before the bubble burst). The people who live there now are not feeling flush enough to add on any more.
For a while some drug dealers set up shop in the house behind ours. The house was at the end of a cul-de-sac and well-hidden. Apparently drug dealers doing this sort of thing in a decent neighborhood to avoid detection is relatively common.
Anyway...
We finally got the police to drive by that house several times everyday, so the drug dealers were unable to do business and left. They had been renting the house from a guy who didn't live in the country. According to the new owners who have completely remodeled the place, the drug dealers did a lot of creative "redecorating."
The most creative bit was on the fireplace brickwork, a gigantic spray paint portrait of Bart Simpson with the caption, "EL BARTO".
Moral of this story: Do not rent out your house if you don't live near enough to check on it.
And then there was my Dad's friend who hadn't heard from one of his renters in a long time, stopped by the house, and peeked in the window after getting no answer at the door.
Empty except for the extensive burn and melt marks of a meth lab explosion in the living room.
John Lynch said, "Not to be grim or anything, but people often invest as if they are going to live forever. We have a finite amount of time, and we should look at our entire life instead of just the few years at the end. Now is just as important as 20 years from now, with the added bonus of definitely being alive now."
* * *
Well-said. If people enjoy the work required to maintain a house, that's fine. I salute them.
But add up the thousands of hours people spend over three or four decades doing what is essentially manual labor on their houses. Is that a fully considered choice for most people? My impression is, no.
Over the past 30 years and more, I have turned those thousands of hours to such things as learning Photoshop and improving my skills at retouching images, something that I love to do. And since I am not a slave to my shelter, I've been able to turn my Photoshop work into a paying hobby.
If I die tomorrow, I can spend my last moments being thankful that I chose, years ago, not to waste tens of thousands of unrecoverable hours pushing a lawn mower, scraping paint, repairing leaky toilets, and so on. I spent those hours in what is, for me, productive and rewarding work.
Complaints about home ownership ring false for us because we have had years of hassle-free living between maintenance events, by the way. We had to put on a new roof and put in a new back yard fence. The furnace gave out and was replaced. We're on our second water heater, dryer, and fridge. The washing machine needed a new inlet valve, which I installed myself.
Gardening grounds one, by the way. The physical chores allow the mind to run free. Then you take a modest satisfaction with the results of planting, mowing, trimming, and chopping, realizing that, like a bad haircut, everything you botch will be replaced with new growth, giving you another chance to get it right.
My mortgage payment is far, far less than the rent on my house would be.
Twelve years after we bought our house, the house next door was renting for three times our mortgage payment.
I have lots of equity, and I have dipped into it several times. Home improvement, vacation, education. With falling interest rates, it was a deal!
And my house payment is now 25% of a rental payment.
Did you know that over 90% of Germans do not own their own house/apartment/living quarters?
Guys, owning a home is a miracle. Most people around the world do not have that privilege, and instead rent their whole lives.
Owning your own home is the very RAISON D'ETRE of living in America. You gotta do it at least once.
Our property taxes and homeowners insurance are cheap enough that we can pay for a year's worth in one month without scrimping on anything else that month.
For the rest of the year, we spend a little here and there for maintenance. There are occasions, such as last year when our 25 year old A/C and 15 year old hot water heater crapped out at the same time.
The hot water heater? Not a big deal. $350 bucks, plus a 1/2 day's labor.
The A/C. Big deal - $5000. BUT, we noticed an immediate reduction in electricity usage. The new heater is coming in real handy, as the old one had crapped out a few years before the A/C did.
We are lucky that during this very cold winter we are not dealing with an inefficient heater that had to be lit manually. A few years ago, this wasn't a problem since we only needed it 3 or 4 times during the winter.
I'm happy that we can pay for the new appliances in much less than a year's worth of mortgage payments.
However, if we were in a situation where we needed (or wanted) to move frequently, this house would be a burden.
One of my offspring is saddled with a house in California that they cannot sell, but are fortunate to have rented (so far). They are renting now because they learned that the job market is not stable and they might have to move again.
Another offspring purposely bought houses in areas they knew they'd be leaving in 2-3 years but figured would always be good rental markets. And they gained financially by selling them just before the bubble burst... but they'd held them for years before that.
Yes, that daughter was lucky, but she also was well-educated about the market, the value of the houses, and even sold the house they were living in well before they were ready to move because her "sense" told her the market was about to collapse. She priced it well below its then "current" market value to get rid of it... yet, still well above what they'd paid for it.
A third daughter bought a house at a most inopportune time as far as price, yet the mortgage payment is still several hundred dollars under what they were renting a lesser house for. They will be fine because they will not be moving or changing jobs in the foreseeable future. And the house they bought is large enough, and in a stable and diverse enough neighborhood to carry them through through 3 children (I should be so lucky... still waiting on the first grandchild there!)
The point of these examples is that no one piece of advice works in every situation.
Plus, there's an advice "cycle". Even my most real estate savvy daughter was wrong in her advice to her parents to sell at the "top" of the bubble.
That was bad advice for us because we'd then be buying another home at the top of the bubble also. Or renting and paying much more per month for housing than we do now.
Were we mobile, as she and her family most definitely are, it would have been great advice.
We're not, and have no plans (or reason) to be mobile.
The equity in this house pays us every month the amount we DON'T write a rent or mortgage check for.
My advice is never buy a house you can't pay for with a 15 year mortgage. Ten years would be even better.
You have to appreciate the sense of claustrophobia they must have felt since their response was to take a six month adventure to one of the most dangerous countries in the world (and 2008 winner of the murders per capita game).
Just in response to the quip about awful neighbors. The worse neighbors I ever had were when I owned a house. Half were wonderful people, the other half were terrible; among the worse people I've ever had the misfortune to know. (To give you a picture; if they didn't like someone, they would call child protective services.) Were we renting, moving would have been easy. As it is, we had to sell in a static market against newer homes being sold at a loss by people who had relocated elsewhere for employment. I shudder every time I think about that nightmare.
Chip Ahoy, that is an amazing and wonderful story. Thank you!
Alas, there is plenty of booze available chez my husband's parents. That is part of the problem.
I don't see why people freak out about having to do maintenance to your house.
When the yard has to be worked on, I put on my noise-canceling headphones and listen to music. It's incredibly relaxing, and forces me to get outside for some fresh air. When something breaks, I appreciate the opportunity to learn a new skill needed to fix it.
Specialization, after all, is for insects.
It seems that people who would never buy a house are the same ones that would never have a child, because doing so would require tens of thousands of hours of non-fun labor, and the kid might get hit by a bus at age 10, so why bother with the hassle?
@Flexo: "The profit from the sale of a capital asset, such as a house, is not income, rather it is a capital gain, subject to the capital gains tax, which is often exempt for a residence, not income tax."
This is not the best forum for a discussion of federal income taxes. However, I believe I am correct. For your edification, please see the following discussion of the AMT and capital gains:
http://www.fairmark.com/amt/ltcg.htm
Currently the exemption on the capital gain on the sale of a home is $500K for a married couple. It's not hard in some parts of the country to go well over that amount and end up with a substantial capital gain. Hence, my warning that homeowners should look out for a possibly large and unexpected tax bill. Renting avoids the issue.
Thanks for all the tips. One more tax saving tips is owning a home gives not only a place to put up the family but the person can save some money also.
I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.
Alena
http://mortgagecalculato-r.com
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