30 March 2007
Monday, March 12th, the Wall Street Journal carried an article entitled "Why Your Home Isn't the Investment You Think It Is." In this article WSJ reporter David Crook focuses only on the financial aspects of owning a home, and not very positively at that. He quotes a large investment firm - competitors with the real estate market - touting investments over home ownership. Here are our comments:
Skewed for a purpose. The article was skewed for a purpose. Someone should tell Mr. Crook about a certain family we're currently working with that made their decision to buy because of their landlord's insensitivity. As is always the case, people vote with their feet - and these folks have voted to leave.
"Randy and Cathy N". were debating all the "tangibles" of home ownership - they'd owned before - with an emphasis on finances just like Mr. Crook. Though they had sufficient income, they had pretty much decided to put up with inconveniences of renting for an additional year in order to address some debt that were trying to eliminate. Cathy wanted a home for her family, but wanted a solid marriage more, so she backed off her efforts to force the issue, even when she knew they had to re-sign their lease for an additional year and would be stuck in their energy-eating duplex apartment once again.
The first to crack was Randy, a computer programmer who works out of his home for his second job - programming contract work. The family had often walked around in heavy coats this past winter - their first in the place - to save money on heating costs wasted through insufficiently insulated walls and attic. The fact that wind would drive snow drifts around the cracks of the front door - far from having been "plumb" in a couple decades - a foot or more into the living room could be ignored as it occurred infrequently. But when it became too cold to type, Randy jumped on the home ownership bandwagon. Can't type, then no money from the second job. No money, then what are they doing there?!?.
It was then that Cathy began to waiver. She had previously agreed with her husband, and so now was looking for reasons to stay put. So she called her landlady and tried to voice her concerns about the ludicrous heating bills, the front door, and certain exterior maintenance issues. She was actually laughed at when she told the landlady how cold they were - laughed at. Ignoring that - but keeping score - Cathy decided to pursue the maintenance question, and was brusquely met with am emphatic "no" there as well - too much money had been spent on that place already. "If you want cheaper utilities, you'd have to buy a new place," was the taunt, as if the N's would never be able to do THAT! So much for detente.
Then Cathy volunteered they were looking at a possible move; one which might not be accomplished by the time the lease was due for renewal. The landlady consented, in a demeaning way, that they could have one extra month to vacate because she thought she might be able to trust them. Just as the whole conversation, this statement was meant to diminish the lives of the Renters as insignificant and to establish all power over quality of life with the Landlady.
Within 15 minutes the N's were back on the phone with me, asking if the mortgage numbers we'd discussed would really work (they would). Within two hours their Realtor® (a Keller-Williams Agent, no less) was there writing an offer on a home the N's had visited earlier, a place where the power bills were a third of theirs now (great agent service got those numbers) - and the home wasn't much newer- it was just not a rental, either.
What Mr. Crook doesn't address - and the narrative above does - is that people buy homes to acquire level of life-control, to get a sense of autonomy, and for increased self-esteem. too. Even if his horribly skewed investment numbers and homeownership cost calculations were correct, people will not live like Third World citizens to achieve an obscure future. The Here and Now has significance as well.
Home ownership never used to be about investments, profit, and appreciation - these are recent perspectives. How many GIs returning from World War II, progenitors of the Baby Boomers, actually calculated how much home equity they'd have in 30 years? Was a home about money, or was it about things more important; like life and love and family?
All the tired old cliches about home ownership and dreams are real. Investment firms might be all about creating wealth, that is true. But Realtors® (and mortgage lenders, of course) are about creating lives.
And, as it almost always happens, the lives of most homeowners are filled with wealth of all kinds.
Art Blanchet
Bill Quigley (Reprinted from our ActiveRain blog: http://activerain.com/blogs/ranchexit)
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