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I was recently called and asked to participate in a Gallup survey, and for some reason I agreed. Eventually, after wading through questions about political beliefs and the economy, the question about my personal happiness came around. I thought about it for a second, and didn’t have anything to complain about. I felt content with life so I answered “Yes, I am happy” and I finished the survey.
After I hung up the phone I kept asking myself, “Am I truly happy?” and “What could I do to make myself happier?”
…and thus a personal journey of self discovery began.
I could bore you with an endless array of what I found about myself, or I could answer it for you in a simple sentence that might contradict the American dream: the opportunity cost of owning a house at 23 sucks.
No, we aren’t hurting financially like many Americans. We bought a house that we could afford, we got a low interest, fixed rate loan, and we put down a good sized down payment (10%). We have an almost fully funded emergency fund, we are both employed, and we live a frugal lifestyle. The issue comes when I look at the opportunity cost of home ownership, or what we could be doing if we didn’t own a house.
The thing about owning a house is that no matter how much financial knowledge you have you can never really account for the opportunity costs of this often emotional purchase that is deemed a “necessity.”
I think about how much money we spend each month on our mortgage, taxes, insurance, utilities, and HOA dues and I cringe when I think about what else we could be doing with half of that money if we had bought a less expensive house, or even if we were renting. One of us could work while the other focused on entrepreneurial ventures or attended grad school. We could work for a year, save up, then quit our jobs and travel the world for a year. Even if we waited another year we could have saved up enough money to put an even larger down payment on a house, thus lowering the future monthly burden.
I look at our house as the reason why we have to work. I feel like I work a job not because I want to (even though I do), but because I have to, and this feeling of burden makes work seem like a chore instead of a learning experience.
So I challenge you, as you are tempted by a free $8,000 first time home buyer credit, to truly think about how much money you want to spend on a house, and the opportunities that you will give up as a result.
For the record, my wife disagrees with me. Her rational (and mine at the time of purchase) was that we bought a house in which we could grow into and start a family, while this is true, I believe that the only thing that would make me a happier person right now would be owning a less expensive house that wouldn’t feel like a burden.
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Comments
04.10.09
I couldn't agree more with you. As a single mother, I bought my first house at age 28 under great pressure from my parents. Talk about a learning experience. Home-ownership is not for everyone and it does not have to be everyone's American dream.
After living in my "starter home" for 2 eyars, the market started to crumble and I couldn't sell the house for what I owed to save my life. Meanwhile, property taxes and homeowner's insurance steadily increased making my home nearly unaffordable for me to live in.
After 5 years feeling stuck in a city I no longer wanted to live in, I found a great job four hours away. I lost my behind on that house and don't care to ever own a home again.
04.10.09
Wow, this could be my life. We bought a house last summer because housing prices had dropped and it just seemed like the obvious thing to do. Buy some property, build some equity. I suspect in the long term it will be fine. But in the short term, I think that we could have downsized to rent in an even cheaper place and saved money. We put a decent amount down too and have an emergency fund, but I still regret not saving even MORE. There are so many things that can go wrong in a new home. In our case, it was the plumbing. And I worry every day about continuing falling prices and how I just hope that when/if we have to sell in a few years it will actually be worth what we owe on it. It's sort of depressing. Friends my age are astounded I am a homeowner now, and possibly even jealous that I have reached some more "adult" pinnacle. But if I had it to do all over again, I would have saved a LOT more money ahead of time, and only bought when I was absolutely absolutely certain it was the perfect home. Because after you move in those things you thought wouldn't bother you, start to bother you and worry you. Thanks for letting me know there's someone else out there. And I think maybe your wife is just trying to reassure you. I know my husband regrets the decision often, so I try to be the positive one comforting him that it's okay and in the end will be fine (that's what we women do). On the inside she might be stressing as much as you are.
04.10.09
I just signed off on a house yesterday; 30 year fixed @ 4.5%. Our mortgage, homeowner's insurance, and taxes combined will end up costing us 200 more than what we we pay for a 2 bedroom 800 sqft apartment. Yes, we're a little overwhelmed etc. (a chunk of our savings is gone), but it will be nice to have a backyard for our dog and I'm tired of all the cigarette butts near our front door. Anyways, my wife and I have gone back and forth on buying a house for a few years; where, how much, should we etc. There is nothing wrong with renting for life or just a long time, but we decided to buy... And the house we bought is in excellent condition, so I feel like we'll finally be able to travel again, 90% of our savings won't have to go towards a down payment anymore...
04.10.09
We just bought our first home and are tremendously happy--but both of us had been renters for a long time and knew WHY we wanted to buy a house. It isn't for everyone, but it's what we want.
I would caution people to take a careful look at that "credit." We didn't take it, because the version that applies to our situation really a loan that we would have to pay back. Make sure it works for you before you claim it.
"And I think maybe your wife is just trying to reassure you. I know my husband regrets the decision often, so I try to be the positive one comforting him that it's okay and in the end will be fine (that's what we women do). On the inside she might be stressing as much as you are."
@Miles: Or she might have a different opinion and priorities than he does. This is a big leap to make, when only the two of them can identify this accurately. Your experience may not be theirs.
04.10.09
Thanks for the responses everyone!
@KateNonymous, I'd say your right about the priorities between my wife and me. Not to say that homeownership isn't a priority of mine, I just wish we would have gone about it in a different way, where as we live in a brand new house and my wife already has a to do list. The house has the potential to be lived in for the duration of the loan, which is another way to look at it.
In hindsight I wish I would have gone the cheap starter house route, then keep it and rent it when we are ready to move on.
On the flip side, we live in a very nice house in a fantastic neighborhood, so I really guess I don't have anything to complain about.
The real issue is that I feel overwhelmed with how much debt we have, and it takes the fun out of work because I work because I have to.
I'm glad to see that I'm not the only one either.
04.10.09
@Daniel, I know so many couples who want different things from a house, and don't really discover that until they get into the process. I know you're not alone!
04.10.09
My wife and I bought a home right before we got married, before the market fell out. We wanted to get in before her student loans got on her credit, thus preventing us from getting in. Well, we nearly went bankrupt (and divorced) over it, as it was much more expensive and she didn't find work as soon as we thought. Then, the house literally began to crumble, due to a sinkhole.
We ended up making it out OK, as the insurance company paid off the house and we sold it. We're now leasing a larger house in a nicer neighborhood (for less money). While we certainly plan to be a homeowner again, we're fortunate to get the experience to plan better next time.
08.07.09
one must be sure about the cost he can afford before going for Home-ownership , things might change and you`ll end up beating your head
08.07.09
@ ClaudineRenee
"Home-ownership is not for everyone and it does not have to be everyone's American dream. "
partly true but people do dream for it , it hurts only when things like recession occur
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