The Real Reason They Aren’t Homeowners: Different Goals

Realtor sign by thetruthaboutmortgage.com on Flickr!Ramit Sethi pointed me towards a The Real Reason We Aren’t Homeowners. It’s surprisingly refreshing, honest, and well worth discussing a bit (in fact, their whole section on home buying 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.

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  1. I often think back to the days when I was a tenant and not the owner of multiple properties. Things were simpler then, but I also did not have the freedom to do as I pleased with my living quarters or yard. I also did not have a bulk of the net worth that I have now because of the properties that I own (or have owned).
    With a new child at home, my wife and I are struggling to decide if she whould go back to work or not – or if she should go back on a part -time basis.
    It is amazing how one’s “goals” can change after a life event such as child birth.

  2. I haven’t read the article, so I’m only going on your extracts. Is this couple really spending less than they earn? Saving up a pile of money and then spending it all doesn’t really sound like spending less than you earn. It just sounds like they go from no savings to some savings and then back again, over and over.

    I’m not criticizing, just wondering. I wonder the same thing about myself and my husband. We have well funded retirement accounts, but right now we’re not adding to them at all. We’re throwing every extra dollar at the principle on our mortgage. So in a sense, we’re not spending less than we earn either. Even though I struggle to save money like crazy, it’s actually all getting spent (on debt reduction) rather than saved.

  3. cv says:

    Your comments about this family’s time management priorities seem really harsh. Since I rent, I call maintenance when there’s a problem, and they come and fix it. At this point in my life I have no desire to spend several hours each month changing furnace filters, installing storm windows, mowing the lawn, fixing leaky faucets, etc. My priorities are different, and I choose to spend that time doing other things I value – volunteer work, spending time with friends and family, etc.

    The idea that any of their statements imply that this family is unwilling to maintain non-house-related aspects of their lives seems pretty far-fetched to me. I think it’s great that they recognize the responsibilities that come with home ownership and have made a considered decision to use their time and energy in a way that works better for them.

  4. tambo says:

    Fwiw, I find the we’re too poor to buy a house on $55k a year” thing a bit insulting. Until two years ago, our maximum household income was BELOW $25k a year and we’ve been homeowners for more than 20 years, all with one of us working and the other home with the kid. We’ve bought inexpensive fixer-uppers and did the work ourselves, learning a lot and creating a great deal of equity in the process of moving-up into progressively nicer and bigger houses (currently a gorgeous Victorian in a small town). We made $70k PROFIT on out last house, more than 50% of its sale price.

    I know that the housing market in Iowa isn’t comparable with more coastal and urban areas, but there are still options, surely. I think it comes down to the other issues, essentially the differences between renters and buyers. I rented an apartment for a few months when I was about 19 years old and it drove me batty. I’d MUCH rather build equity than pay rent.

  5. Bree says:

    “often, someone unwilling to maintain their living quarters is often unwilling to maintain other parts of their life, too”

    I don’t think that they necessarily are unwilling to maintain their living quarters. I live in an apartment and I take pride in keeping it clean, well decorated, etc, but I still have very little interest in doing basic repairs and other upkeep that are involved in home ownership at this time.

  6. Carmen says:

    Enjoyed the post, but it made me wonder. If you managed to buy a (modestly priced) FAMILY home for about 1.8 times your combined annual salary (unbelievable really), what could you have afforded to buy?

    By ‘afford’, I mean all your savings put down in deposit and maximum mortgage lenders would typically lend based on your salary – before the current credit crisis. I’m guessing somewhat close to your dream home? So why the restraint? Or maybe the concept of cheap houses (vs income, which 1.8 most definitely is) is so alien to me that my view is jaded.

  7. J.D. says:

    Unconventional Ideas (the site that hosted this article) is great. I’ve been checking it monthly for new essays for a couple years.

    One important note: this family did buy a house just seven months after the article Trent linked to. But when they bought, they made sure that it would fit in with their goals and objectives.

    Lots of great essays at that site.

  8. KC says:

    I’m going through the process of moving out of the first home I ever bought now. Things were much, much simpler when I moved and didn’t own a home. I’m a reluctant home owner now, my husband was the one who wanted to buy. I’d rather spend money on vacations, activities, and experiences. Instead he has our money tied up in a home. Now we’re moving and we have to spend more of it to tie ourselves up in a bigger house. Don’t get me wrong, you’ve got to live somewhere and actually owning your home probably makes more sense. But I can certainly understand the goals of those who don’t want to own a home. My goal is just to make sure my home doesn’t overwhelm me and take away time and money from doing the things I’d rather be doing in life.

  9. Johanna says:

    What cv and Bree said about home maintenance.

    Also, this is the second time in a week that you’ve equated expensive travel with visits to tourist traps. You do realize that there are other worthwhile things to see in the world, don’t you?

  10. Michelle says:

    All your reasons above assume that these people want to own a home and they just cant afford it or have higher priorities. There are many people who choose not to be homeowners despite being able to afford it. We have the income to buy a home, but not the desire. The reasons all have nothing to do with affordability and I think you are ignoring these.

    -I value my freedom to move to a new place. Because I was offered a job, because I am sick of my town, because I hate my neighbors whatever.

    -I dont enjoy home maintence including the repair expenses. I keep my apartemnt clean, but I do not enjoy fixing things that break nor do I wnat to be responsible for them.

    -I like the amenities my apartment complex offers: maintained pools, landscaping, fitness center, game room, vending machines, computer room

    -As far as investments, I prefer ones that do not require a large amount of upkeep, huge closing costs, fees, etc. And ones that do not require me to move to cash in on them. With the money I save by not spending on mortgage, interest, taxes, HOA fees, maintenence, closing costs I have plenty left over to invest.

  11. Gabe Clark says:

    Like most, I haven’t read the whole essay, but I can respect people that at least stop to consider what they want out of life and then live accordingly–even if I may have different values or may not understand their reasoning. I think that’s the key to effective planning, which people often neglect: figuring out what you really want, not just going with what people around you may think you should want.

  12. GEoff says:

    @Tambo

    “We made $70k PROFIT on out last house, more than 50% of its sale price.”

    If that’s true, then congratulations! However I find that most homeowners simply don’t keep detailed enough records to ever know how much they profited from a sale. I constantly see people say ‘I bought the house for 100k and sold for 150k and saw a 50k profit’ without accounting for closing costs, interest, maintenance costs, taxes, improvements, and the myriad of other costs of home ownership.

  13. Helen says:

    Sorry Trent, you were a bit judgmental about this family’s feelings towards home maintenance. I own a condo rather than a freehold house, and although this is mostly for financial reasons, it’s a very big perk to me that I don’t have to do any of the big jobs that I would have to do if I owned an actual house. I’m on my condo’s strata council so I do contribute to the building’s well-being (I hope!), but I’m just not very handy around the house and that’s all there is to it. Better for me to spend my time doing things that I’m good at or that I enjoy than trying to wrestle with a paint brush or keep the plants in the garden alive. It’s definitely a stretch to judge these people’s attitudes towards everything by their attitudes towards home mainentance.

  14. Trent Hamm Trent says:

    “There are many people who choose not to be homeowners despite being able to afford it. We have the income to buy a home, but not the desire.”

    That’s the exact point I was trying to make. You have other priorities – your freedom to move, your lack of interest in repairs, the “perks” of your apartment.

  15. SP says:

    Your post is good in spirit, but still seems to imply that renting means coming out “behind”, even if the reasons are fine. Choosing to go to Disney World over owning a home is almost undeniably foolish, but you oversimplify their choice to that.

    I agree with others about home maintenence. I maintain my apartment, but I’d get no joy over, say, a kitchen remodel. Ug. Home ownership comes with burdens and rewards.

  16. Rick says:

    The more people that want to rent, the better, because that means more tenants for my rental properties.

  17. SP says:

    Sorry to offer only the negatives. I did also mean to say a thanks for pointing me to this essay, and the site. I’ve been trying for quite some time to wrap my mind around why I don’t want the american dream, why it doesn’t make sense for everyone, and what the alternatives are. This is some good stuff.

  18. Lurker Carl says:

    Anyone who rents is actually paying the mortgage, taxes, maintenance, repairs, etc for the owner. Once that mortgage is paid off, most of the rent payment then becomes income for the owner because your monthly rent will not drop. What little money is saved up front is spent many times over after that.

    Those who brag about big profits when selling their residence seldom brag about their new mortgage payment lower. Most folks spend that profit (typically, much more) for the new residence. There isn’t any real gain because you have to live somewhere, unless you move to a much less expensive area.

    Even the landlord loses when they sell. Taxes swallow most of the profits because the real estate is not a primary residence, thus no tax relief unless a new rental property is purchased immediately to replace it.

    Homes are shelters, not financial investments. There is no free ride!

  19. mjukr says:

    “someone unwilling to maintain their living quarters is often unwilling to maintain other parts of their life, too”

    I don’t think you’re interpreting this passage correctly. He’s not saying “I leave dirty dishes and food spills all over the place because I’m too slovenly to clean.” Rather he’s saying “I’d rather spend my time reading, relaxing, spending time with friends and family, instead of mowing the grass, fixing leaky pipes, and cleaning out the HVAC system.”

    Your interpretation is condescending.

  20. Tim says:

    I’m just glad to see someone else sho shares my feelings regarding home ownership. I do own a home (or I guess I should say the bank does since I pay a mortgage), but I don’t want to.

    I hate home and yard maintenance so much that I would rather give up building equity in a house and pay rent every month on an apartment.

    Unfortunately , my wife outvoted me in this decision.

  21. Ms. Clear says:

    On the East Coast, $55 K a year probably won’t buy a home, except after years of scrimping. I make in the mid 40s, and there’s just no way. I’m too poor. Nothing wrong with owning that! I still spend less than I make.

  22. Ryan McLean says:

    I have a goal to be a homeowner. But first I have the goal to be a full time blogger. I am currently focusing on getting my online business and blog up and running and increasing the cashflow of that so that I can move into working online full time so I can make a fair amount of money.
    Cool to see your goals and how other peoples differ but that is still ok

  23. Kenny Johnson says:

    I’m too poor to own in SoCal. Houses here are going for $500-700k. My wife and make about $75k.

  24. tambo says:

    Well, GEoff, we paid $19k cash for it and sold for $120k. Sweat equity is a grand thing. :)

  25. Cambo says:

    Wow, I laugh when I hear what Americans say about real estate.

    Different economies and cost of living, but the average house price is 7.5x average yearly earnings in Australia which is $55k.

    To put it in perspective a schooner of beer at a pub(385ml) is $4.20, a big mac medium meal $7.70 a 120gb iPod classic $339.

    Interestingly it’s been shown by local commentators that financially it’s a better decision to rent then invest a good chunk of the difference you would be paying on a home loan in a good mutual fund. My decision is to rent and invest $1000 or so a month, that way I’m building some security over the long term and can still enjoy life now.

  26. Carrie says:

    Count me in on thinking that the post and response is condescending. I used to own a house and hated spending the little spare time I had doing home repairs, yardwork, and other chores I detested. It’s not fun after working 60 hours a week. Now I live in a condo, which means I still have some repairs, but no yardwork. Now I have more time for other things that I feel are more important and more enjoyable. I’m sure there are renters who feel much the same way I do. Home ownership is simply a life choice that works for some people and not for others and certainly nothing to be smug about. In some parts of the country, renting is a much more sensible financial decision than owning.

  27. Todd A says:

    One thing home ownership offers — sweat equity. Granted, sweat is a key word in this opportunity. But, I’ll take an investment in decent real estate over a thinly guised gamble in an equity market, anyday.

  28. Jess says:

    Thanks to JD for the update.

    Agreed, they have well written, simple, familiar tone articles which I find refreshing although they are quite different from TSD and GRS.

  29. Jade says:

    @Rick – I’m with you on that! I help my dad manage his rental property, and lots of renters makes it easier to keep tenants in my dad’s apartments.

    I think the reason I’ve always liked home ownership was because nobody could force you to move as long as you’re paying your mortgage and property taxes. For a very long time my grandmother rented her house from a relative. Well, relative died, widow inherited, and then after a few years the widow sold my childhood home out from underneath us. That experience of having to totally uproot ourselves in a month from a house that we’d been in for 33 years is why I went and took a real estate principles class and eventually got my salesperson’s license. So we moved into another house, which the owner sold 2 years later, which meant having to scramble and find another place and move everything with a month’s notice… Moving over spring break is always lots of fun…

    And sure, renting is great because the landlord (supposedly) maintains the place, but you’d be surprised by the kinds of dumps people try to rent out… I have a friend whose landlord doesn’t want to fix much of anything around her place, like the leaking roof… Or the hole in the wall in the attic that is supposed to provide some fireproofing between units…

    Not all landlords are wannabe slumlords though, I have seen some pretty nicely maintained houses and apartments on the market as well. You better just hope there’s one available in your price range when you want to move…

    There are pros and cons either way you go. This post got that right, it depends on what’s important to you. Me, I like stability. I prefer not having to move on a moment’s notice (less of a problem if you rent an apartment I suppose, very rarely does the landlord want to owner-occupy your unit). Unless I decide to refi, my housing payments are not going to change very much until they plummet when the mortgage gets paid off. Yeah, there are property taxes too, but that’s why I love living in CA. Prop 13 rocks!

    But if I was renting an apartment in a rent controlled city with a good landlord, or I didn’t live in CA, or if prop 13 were repealed, then I might feel differently about owning a house…

  30. Mark B. says:

    Trent,

    I know that your area has not seen a signigicant housing bubble, however, could you do a post for those of us that have seen our home values decline significantly?

    I live in the Detroit area and our home values have decreased 25-30% in the past 4 years. I bought my house 4 years ago with a decent down payment, now I am more than $20,000 underwater on my home, not including the commision to sell the home, so I would have to come up with roughly $30,000 at closing if I were to sell.

    We would like to move, but I feel that we are now trapped for many, many years until the prices rebound.

  31. Chad @ Sentient Money says:

    Overall, I found the article fair and neutral. However, like many commentors I found the comment in the Time Management section to be arrogant and condescending.

    “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.”

    Disheartening? What do you care if he rents or buys? Owning a home is by no means the “American Dream” it is talked up to be.

    Should we renters then assume that most people that bought houses paid too much, are house poor, have foolish ARMs and have no financial sense?

  32. Missi says:

    I’d much rather make the memories associated with a family trip to Disney World (or Africa like we did last year) than double our housing payment (and that’s to get a low cost home, 150K) just to own a house. Because we rent, we can afford to travel. If we owned a house right now, all our money would go to the house leaving nothing left for fun or travel.

  33. April says:

    I don’t find any fault with the article, but I guess I’m less sensitive than most.

    My husband and I are building a home on 4 acres. We want something we can invest our time and money in for years (we don’t plan to move, ever), we want land to garden and build upon. I also like knowing that our house will be paid for by the time we retire.

    I can understand why someone would choose to rent, but for me personally, I like knowing that my money goes toward my home every month, rather than to a landlord. I also read the follow-up article where this family DOES buy a home, and all of the reasons they list for doing so resonate with me. Just my two cents.

  34. K says:

    I am just amazed at the prices of homes in some areas. Most places I have lived (all over the country but no big cities or along the coast), you can get an average sized, 3 bedroom house in the suburbs for $70,000-$90,000, and houses in the city cost more like $40,000-$50,000. To buy a $200,000 house, you were pretty much buying some of the nicest 10% of homes in the entire county.

  35. A.M.B. A. says:

    There are pros and cons to renting and buying. We like the idea of ownership and the freedom to decorate/paint, etc but also are not crazy about outside maintenance. That’s why we’re in a condo – we take care of the inside and our association fee handles the outside.
    And we have two kids ages five and six. We have access to the outside via the common greens. So it’s off to a nearby park for play structures and swing sets.

    A.M.B.A.

  36. Jessica says:

    I, like may commentors, find the home maintenance portion of your article quite harsh. I rent an aprtment which is inexpensive, kept very clean and well decorated, and use the time and money I save on lawn maintenance and home repairs to do other things I enjoy like working, writing, cooking, etc. All these activities help me make or save money in time that I would spend mowing or fixing. It’s a frugal choice for me. I also live in an area where neighborhoods change rapidly and a home’s worth in any neighborhood would fluxuate greatly, probably decreasing when I have reason to move. This is also a frugal choice.

  37. Sush says:

    “Every time we get $5,000 to $10,000 together, we go and blow it on another family vacation.”
    As a fellow Indian living in the United States, I understand when Ramit says the above line. I have absolutely no family here. So I would like to see my parents in-laws once in a while! And when you consider the price of the tickets for a family of four, $10,000 is optimum. Do consider that there isn’t much shopping you can do with that budget :(
    Gifts for family,transportation within India eat up a lot of money.

    So, while 5 – 10 K might sound like an extravagance for a family vacation to you, note that it is the cost of living very far from our family for us.

    Sush

  38. rebel says:

    This si very interesting. Sometimes, people may make a decision that is not the most financially sound, but still have many sound principles. At the end of the day, you have to be happy. And if you are happy where you are, what motivation is there to change?

    This brings up something interesting I have been thinking about. When is it a good idea to buy a home and when is it not?

  39. Beatriz says:

    No one has mentioned our motivation for owning a house: pets. We have lots of pets and renting was difficult (and more expensive with the added pet fees). Also, when you own pets you want to make changes to the place, i.e. add pet doors, screened porches, fences, that the owners could object to. So, although we don’t really like the house maintenance aspect of home-ownership one bit, we were eventually forced to consider buying.

    P.S We live in Miami, and if we hadn’t bought a house fifteen years ago, we wouldn’t be able to afford it now, even with the price depreciation!

  40. Very interesting article.

    How is it that we have been conditioned to believe that homeownership is the be all and end all? In continental Europe and particularly in Germany there is a culture of long term renting. People aren’t as keen or eager to buy their homes. Note that Germany have one of the highest savings rates in the world. I’m sure there is a connection.

    I like the attitude of the person who wrote the essay. He is having the good life and not going overboard and obessing about this thing called homeownership.

    Just because he is not driven by money doesn’t mean that there is something inherently wrong with him. I think that he has a more ‘Live for the moment attitude’ which in a lot of cases can be dangerous but he seems to know what he is doing.

  41. Aggie says:

    My father-in-law for most of his life rented. He didn’t mean to, but the years slipped by and the next thing he knew, 15 years had passed and he had spent years giving someone else money.

    Personally, if I’m going to pay rent or mortgage, I’d rather pay mortgage. At least the house is sort of mine, I can improve it and try to sell it for more than I pay into it. Mortgage interest is deductable, whereas rent is not. What I get back in the spring, I try to shove back into my mortgage.

  42. Carrie says:

    Sush (at comment 37) raises a good point regarding family vacations. If your family lives outside of the US, seeing them can get expensive. Yet another reason not to judge people’s spending practices from simply the numbers. It’s interesting that people automatically assume that spending $5K or more on a vacation means going to a tourist trap. Don’t people have friends who are from immigrant families? If they did, maybe they’d be more understanding of these types of expenses.

  43. I want to echo all the other comments thianking you for the link to the Unconventional Ideas website. I’ve just clicked on a few links, and it’s really good.

    My favorite is the article to teens, here. The essay says a lot of things that make sense, although I think it does take a dim view on the world & the future.

  44. Suzie says:

    Owning a home is a really important goal for me, but I can understand that for others it may just not matter much. Still, I agree that the post did seem rather negative towards renting, despite attempting to portray it as a legitimate and viable alternative to buying.

  45. Kelly says:

    My husband and I own a home, but in order to really afford this “home of our dreams” we were working way too many hours, at jobs we really didn’t enjoy- just so we could have this beautiful house! We loved our house but we hated our way of life, because we had no life. Now we moved, are trying desperately to sell our house out of state, and are living in a tiny rental (which thankfully allows our pet)– but even though we miss our house and we miss having more space- we LOVE actually eating dinner together every night, and spending our weekends together as a family, and we both love our new careers. We are still planning to save up and buy another home in a few years, because we like loud things (dogs, kids, motorcycles, trumpets) and that’s our choice, BUT we will be lots smarter about how much of our income goes to the mortgage next time, and what kind of life that means we will have. Home maintenance is expensive, yard work is time consuming, but it’s your choice. Your dreams are your choice, it’s important to think about all the good and bad details, like a career change, or becoming a parent. Be smart and be as prepared as you can and then enjoy your life!

  46. Kenny Johnson says:

    Some of the comments here seem to suggest that when you rent all your money goes to the landlord, but when you own all the money goes to yourself.

    But what about other ownership costs? Like mortgage interest? Repairs? Higher insurance costs? Property taxes? And in many places and much higher own to rent ratio?

    If it costs me $1500/mo to rent and $3500/mo to buy… I don’t see renting as throwing money away.

    I’m not saying I’ll never own, but right now, with the current market (in our area) and my current wages, it makes NO sense for me to own. I’m not going to have 50% or more of my take home going to house payments.

  47. Red says:

    Essay: “Which brings up another point: we don‚Äôt have any spare time in our schedule for home repair, maintenance, or upgrade projects.”

    Trent: “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).”

    I don’t see how subjecting one’s self to extra work is a character flaw. Why spend time maintaining your home if you don’t have to?

    The original essay is not talking about being tidy, changing lightbulbs, or vacuuming, but repair and maintenance, such as putting on a new roof, fixing plumbing, or yardwork. These are a significant time sink and unless you gain satisfaction from it, your time most likely could be more productively spent in your personal or work life.

    Your anecdote seems judgmental and the result of a protestant work ethic than anything else.

  48. Jim says:

    To each their own. Everyone has different priorities and thats just fine. Buying a home is a personal choice. Financially I think buying a home is the best long term choice. But if your priorities are different then thats your choice. Our personal preferences and priorities often outweigh what is the best financial option.

    I however would be concerned about what happens when someone retires and still has to pay rent out of a potentially limited retirement income. If you choose to rent instead of own then this is something you really need to make sure you’re looking ahead towards retirement age.

    Note that the article is 7 years old, so those numbers are a bit out of date. They live in Portland Oregon so the home prices have appreciated substantially since then. In 2001 median home price in Portland metro was around $150-175k range and now its up to $260-280k level.

    Jim

  49. Red says:

    @ #4 (tambo)

    “Fwiw, I find the we‚Äôre too poor to buy a house on $55k a year thing a bit insulting”

    If that’s true I believe it’s do to a misunderstanding related to cost of living.

    According to bankrate’s cost of living calculator, a $25K salary in Des Moines, IA is equivalent to a $45K salary in San Francisco with an average house costing more than 800K. A $55K salary would be approximately equivalent to 100K in San Francisco.

    We don’t know where this couple lived, but if they lived in a major city 55K doesn’t stretch very far at all.

    A used condo for two people around 1000 sq. feet starts around 450K in San Francisco, which means a 20% down payment will put you out $90K. Doable, sure, but it will take you a few years to save up.

  50. Red says:

    @ #7 (J.D)

    Thanks for linking to the follow up. Interesting to see how things turn out.

  51. Andrew La Barbera says:

    The GOVERNMENT acted and told the lending Institutions that they must loan(lend) money to people who couldn’t afford to pay it back. Guess who now is going to pay it!!
    The GOVERNMENT should get out and let the people run business.

  52. Vanessa says:

    Do homeowners usually view their home as their source of funds for retirement? I net around $22K/year and could probably afford the mortgage on a say $100K home (which is not fancy but not a dump in my area) but I could not contribute much to my Roth IRA and I’ve been working on maxing it out. Does home equity replace retirement savings?

    I have around $20K in my emergency fund which has taken my whole life to build. Being single with no family nearby, I would not feel comfortable dumping it all into a down payment for a home. And by the time I save that much money again, houses worth $100K really will be dumps. How do people manage to save up for the down payment?

    I rent and for the time being I am comfortable with that. But if I wanted to buy a home, would it even be feasible? Tambo claims to have been able to afford homes with income under $25K and while I won’t dispute that, I have to wonder how he/she is able to accomplish so much on so little, while I am scraping by with not even a family to support. I am not a spender, I live bare bones in an area with a pretty reasonable cost of living (to me at least) but obviously I’m doing something wrong, right? Maybe home ownership is not for single people? I have noticed that most homeowners with success stories are married.

  53. Kristine says:

    I rent half of a two-family house to get my kids into a top-tier public school district in NY. I crunched the numbers, and it was by far cheaper to rent and send my kids to our fantastic ivy-league feeder public school, than to buy (or even rent) in a less expensive area, and send our kids to private school.

    My husband is a professor, and I am a teacher. We pay 1900 hundred rent in a neighborhood where the houses average 750K. (We make les than 100K combined) The towns around us have houses averaging 2 mill. I am sure we pay the least of anyone on our block to get our kids this fine education.

    Does every child need this kind of caviar education? Maybe not. But I am blessed with the awseome responsibility of nurturing two highly gifted kids who IQ test at about 178. Where we last lived, excelling in school made you a social pariah. Here, in the land of wealthy professionals, the same drive gets you noticed and respected at school. Big difference. Can we afford Ivy League? No. But my kids will have a better chance of scholarships, and I have taught them that the bill must be in balance with the expected after-college income. They will likely be able to go free to a tier 2 college, and probably will.

    Why don’t we leave NY and buy a house? (I’d really like to.) Well, there is a biological dad in the picture who lives here. Otherwise we’d buy a house in one of the 3 states that on the grounds of regional diversity practically guaranteees an ivy league scholarship to achievers: Montana, Mississipi or Alaska.

    So, we rent to get the priveleges of the rich, living just a hair below our means, and stand vigilant against any tendency to keep up with the Joneses.

  54. Rob in Madrid says:

    Accidental landlords, when someone can’t sell the first house and is forced to rent it out well below maintenance costs. This has happened to several friends of mine. Huge drain on the budget.

    Best time to buy a house when rents and mortgages are about level.

    Currently in Madrid rent for a 2 bedroom apartment 950€ or less, mortgage for same (if you can get one) 2000€ +

    People who say “I sold and made X thousands of dollars” forget that a house is a liability not an asset. It costs you money to maintain every month. An asset earns you money.

    Lastly I know tons of people who are, after a big run up in house prices, asset rich, cash flow poor.

    Best way to own a house is when it’s paid for and you have loads of cash flow free, unfortunatly not many people do that.

  55. conny says:

    …and many owners don’t calculate that a house will be worthless in the long run… (not many houses that are old in the realestate population is there, so a 1-4% price cut is actually the price to pay for your rent. And if mortgage is less then you don’t pay your rent…)

  56. Kenny Johnson says:

    @Jim

    But if you have a $500k, paid for house, but little savings (because all your money went in to the house) or you have $500k in liquid assets and a $1500 rent. Which is the better position to be in when you retire?

    I’d rather have the liquid assets and a rent.

    Again, I’m not against owning a home, I’m just not going to do it at the expense of my retirement savings. And where I live, it would be. I’d need about $100k down and pay $3k+ a month for mortgage.

  57. Bill says:

    And the “mortgage you’re paying as a renter,” well, when the landlord took it out in 1988, or 1998, it’s usually better to rent than pay for a 2008-level mortgage.

    People who talk about the money they make selling a house never, NEVER, consider the maintenance (at least 1%/year), taxes (3%/year in many areas), or any upgrades (paint, floors, wallpaper, kitchen, etc.) in their calculations.

    And no, you never recoup the cost of upgrades.

    They’ll only tell you purchase and resale price, even leaving out transaction costs like that hefty Realtor commission.

  58. suzanne says:

    Look, everything is a trade-off. For some people, in some situations, home ownership is a pain in the butt, and for others, it’s a dream. Saying “everyone should” is stupid.

    I’m a 30 yo single woman and own my own home. I love it. I love being able to garden. I love having room for my two dogs. I love the whole painting/decorating/fixing/rehabbing part–even refinishing the floors is a kick. I crave my own space, and I love and need privacy. I live in a market where my monthly rent and monthly mortgage are similar. It’s a small town near my family with a climate I love. Buying was worth every penny for me.

    My best friend is a 30 yo single woman who rents. She lives in a big city with prohibitive housing prices. She dislikes the isolation of living by herself, and would rather have roommates. She has absolutely no interest in home decoration or furnishing, and the idea of a DIY project is enough to kill her off. I don’t think she owns a table, or feels any lack of it. Her preferred pet is a goldfish. She loves living in the center of a vibrant music community, since much of her spare time is spent composing music and playing various instruments.

    I will never convince my friend to buy a house. My brother is trying to persuade me to sell and come live in Boston in an apartment. He’s never going to convince me. Essentially, we’ve each paid our money and taken our choice, and each of us has chosen what is absolutely in the best interest of our happiness. There’s nothing wrong with either of our decisions.

  59. Gordon says:

    It would be interesting, if those folks who chortle about the sale price of their home, would also subtract the interest payments that they had made along the way. Then how many of them would claim to have even made a profit, much less a killing?

    “Owning a home” is something of a misnomer, since most of us are in the process of “buying a home,” which is essentially renting from the bank or mortgage company.

    So, when those of us who are paying mortgages look at our statements… we have to admit that the vast majority of the cost, the interest, is really the equivalent of making a rent payment to our landlord, the bank. The small amount that goes to principal is the only equity we are building up. And even that amount needs to be balanced against the cost of upkeep and maintenance paid by us, not the landlord.

    To sum up:
    In my opinion, financially, there is not a lot of difference between renting and paying a mortgage.
    Psychologically, that is a different story. And, as Trent points out with the 6 examples, there are lots of good reasons to decide either way.

  60. mk says:

    Interesting topic. Probably comments are far different than in 2005. At least for me, I rent years, recent 3 years as a condo owner. I could have bought cheaper if I decided to buy earlier, yet I was able to live in a great neighborhood/school district, save more in 401K and family vacations for great memories.

    My condo is a security blanket for me. This is my default living quarter beyond working years. Mortgage will be paid off before retirement. I would rather have this done over extra $$$ in retirement fund value. During my new home ownership, This is my way of balancing my finance.
    There are no right or wrong to all posts. Any approach that make sense to each, it is a choice.
    I do share my value with those city dwellers and world travelers, and also with those who love “nesting” with pleasure of simple pleasures at home. We all should listen to your inner voice, rather than “American dream” slogans.

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