Ramit Sethi pointed me towards a brilliant little essay entitled The Real Reason We Aren’t Homeowners. It’s surprisingly refreshing, honest, and well worth discussing a bit (in fact, their whole section on homebuying essays, The American McDream, is well worth reading).
The article gives six distinct reasons for why the writer doesn’t want to be a homeowner, each of which are worth some commentary.
We’re too poor to buy a house. Our total household income is only around $55,000 a year. We hold stringently to idea that we should never have a mortgage which is more than double our annual income. We do that because we feel being house-poor is not a good idea, and could unnecessarily tie us down.
Liquidity This is a pretty sound economic reason, and also part of the reason why we elected to purchase a more modestly priced home that was about 1.8 times our combined annual salary (at the time). Note that this does not preclude them saving for a very large down payment – if you can save up $90,000, they could then get a $110,000 mortgage and buy a $200,000 home.
There are no safe, “nice” neighborhoods in our side of town which have 3 bedroom or larger homes available for $110,000. We’re not interested in moving to outlying areas because we have a business in this neighborhood, and value our time too much to waste it commuting.
Environment They prefer to live in the general area that they currently live in, but housing prices have made home ownership in their area quite expensive – far over $110K for the home that they wish to purchase. It’s worth noting that this article was originally written in 2001 – they likely saw far higher prices by 2005 or so.
We can’t earn more than around $50-70K a year because I lack the drive to spend too much of my time and energy earning money. I have too many other interests. I’m happy with making enough to get by.
Diverse interests The author understands clearly who he is and knows that his passions don’t lie in chasing the brass ring. Instead, he follows his diversity of interests and doesn’t worry about earning more and more money. Whether that’s a good choice or a bad choice will depend on your own beliefs – my feeling is that there are different paths that are right for each person and it takes a strong person to know which path is right for him or her.
My wife doesn’t work for money by choice. She educates our children, reads lots of books, gardens, does genealogical research, cooks from scratch everyday, and gives many hours of service to a women’s organization.
Stay-at-home parenting / personal choice The stay-at-home parenting choice is one that my wife and I struggled with for a long time – and we’re somewhat doing it now, with my writing career. Again, this is a choice that has no easy answer, regardless of what either side might say about it, and it takes some fortitude to simply put your foot down and do what you truly believe is right, regardless of the other consequences.
Which brings up another point: we don’t have any spare time in our schedule for home repair, maintenance, or upgrade projects.
Time management Actually, more than time management, it’s a confession that the person has no real interest in taking care of their property. While I find that somewhat disheartening (often, someone unwilling to maintain their living quarters is often unwilling to maintain other parts of their life, too), it’s again honest and straightforward.
And finally, we lack the discipline to save for a downpayment. Every time we get $5,000 to $10,000 together, we go and blow it on another family vacation.
Lack of discipline / other desirables This isn’t so much a lack of discipline – they are able to save up to five figures – it’s a matter of finding the gratification of a family vacation to Disney World followed by a year of renting higher than a family vacation camping followed by home ownership.
The Real Reason
On paper, this individual seems suited for home ownership. There’s a steady income, a tendency to save and spend less than they earn as a normal course of events, and a family situation where housing stability might be at a premium. Yet, through some self-evaluation, the family determined that home ownership wasn’t right for them. Why?
They have different goals in life.
Their goals certainly don’t match mine. I’m very proud to be a homeowner and, since my local area never really had what I wold call much of a real estate bubble, the home will hold value. I love to camp and I don’t have much interest in expensive vacations for my family, at least not until the children are old enough to deeply appreciate it. Those two philosophies alone put me in a different camp than the author of that article.
But what’s really key to notice here is that they set goals and achieved them – they just happened to be different goals than I do (or perhaps you do). Their goals revolve around expensive family vacations and having a stay-at-home parent – and those goals have both notable benefits and drawbacks.
And they’re meeting those goals. They’re regularly spending less than they earn so that one parent can be a stay-at-home parent and so that they can go on nifty family vacations.
Their life may appear different on the surface, but the fundamentals under the hood are the same. Set goals. Spend less than you earn, and sock away the difference.
That will take you to your dreams, no matter what.