Why I Will Never Own a Home Again (and You Shouldn’t, Either).

Via on Mar 27, 2011

house-of-cards

Many people have said to me in the past month, “I’m going to buy a home.” Or, “What do you think of the idea of me buying a home?” I like the second batch of people. They are my friends and it seems like they are sincerely asking for my advice. And I’m going to give it to them.

Whether they meant it or not.


I have some stories about owning a home. One of them is here: “What It Feels Like to be Rich” where I describe my complete path into utter depravity and insanity. The other one is still too personal. It’s filled with about as much pain as I can fit onto a page. Oh, I have a third one also from when I was growing up. But I don’t want to upset anyone in my family…so I’ll leave it out. Oh, I have a fourth story that I just forgot about until this very second. But enough about me.

Let’s get right to it.

There are many reasons to not buy a home: [By the way, I also put this in the category of Advice I want to tell my daughters, including my other article: 10 reasons not to send your kids to college.]

Financial:

A) Cash Gone. You have to write a big fat check for a downpayment. “But its an investment,” you might say to me. Historically this isn’t true. Housing returned 0.4% per year from from 1890 to 2004. And that’s just housing prices. It forgets all the other stuff I’m going to mention below. Suffice to say, when you write that check, you’re never going to see that money again. Because even when you sell the house later you’re just going to take that money and put it into another downpayment. So if you buy a $400,000 home, just say goodbye to $100,000 that you worked hard for. You can put a little sign on the front lawn: “$100,000 R.I.P.”

B) Closing costs. I forget what they were the last two times I bought a house. But it was about another 2-3% out the window. Lawyers, title insurance, moving costs, antidepressant medicine. It adds up. 2-3%.

C) Maintenance. No matter what, you’re going to fix things. Lots of things. In the lifespan of your house, everything is going to break. Thrice. Get down on your hands and knees and fix it! And then open up your checkbook again. Spend some more money. I rent. My dishwasher doesn’t work. I call the landlord and he fixes it. Or I buy a new one and deduct it from my rent. And some guy from Sears comes and installs it. I do nothing. The Sears repairman and my landlord work for me.

D) Taxes. There’s this myth that you can deduct mortgage payment interest from your taxes. Whatever. That’s a microscopic dot on your tax returns. Whats worse is the taxes you pay. So your kids can get a great education. Whatever.

E) You’re trapped. Lets spell out very clearly why the myth of homeownership became religion in the United States. Its because corporations didn’t want their employees to have many job choices. So they encouraged them to own homes. So they can’t move away and get new jobs. Job salaries is a function of supply and demand. If you can’t move, then your supply of jobs is low. You can’t argue the reverse, since new adults are always competing with you.

F) Ugly. Saying “my house is an investment” forgets the fact that a house has all the qualities of the ugliest type of investment:

  1. Illiquidity. You can’t cash out whenever you want.
  2. High leverage. You have to borrow a lot of money in most cases.
  3. No diversification. For most people, a house is by far the largest part of their portfolio and greatly exceeds the 10% of net worth that any other investment should be.

Personal reasons to not own a house. [Also, Follow me on twitter. ]

A) Trapped, part 2. Some people like to have roots. But I like things to change every once in awhile. Starting March, 2009 I was renting an apartment directly across the street from the New York Stock Exchange. It was fun. I’d look out the window and see Wall Street. How exciting! Before that I lived in The Chelsea Hotel with Chubb Rock. Last year we decided to relax and move a little north. Now I look out the window and see the Hudson River. And its quiet and I can walk along the river in the morning with no noise. It took us two weeks to pick a place and move. No hassles. I like to live a hassle-free life.

B) Walls. You can’t change the walls when you rent. A lot of people seem to want to tear down walls. Or paint them. Sometimes when you rent you can’t do these things. Well, make sure you have a landlord that lets you tear down walls. There must be some ancient evolutionary tic that makes us want to tear down walls or put nails in them or paint them. I don’t get it. I like the walls to stay right where they are.

C) Rent. People will argue that the price of the mortgage, maintenance taxes, etc is all baked into the price of rent. Sometimes this is true. But usually not.

D) Psychology. Look at your personal reasons for wanting to own. Do you feel like you can’t accomplish something in life until you own a house? Do you feel like its part of getting married and “Settling down”, i.e. creating a nest for your future children? For you, is it a part of becoming an adult. Is this what your parents taught you? Examine the real reasons you want to own and make sure they are coming from a good spot in your heart.

E) Your time. Do you really want to spend all that time working on your house? Is this where your time is best spent towards creating a happy and fulfilled life for yourself?

F) Choices. I feel when I rent I always have the choice to leave. To live wherever in the world I want whenever I want. Adventure becomes a possibility even if I never take advantage of it.

G) Stress. For me (not for everyone) owning a home equals stress. I saw what my parents went through at their worst moments owning a home. I saw what I and others went through in the Internet bust when I first owned a home. I saw what people went through in 2008. People were killing themselves. I don’t like that sort of stress. This is how I deal with stress.

H) Cash is king. I like cash in the bank. I like having access to it. I don’t like it all tied up in one illiquid investment. I want to fill a bathtub with all the dollar bills I would’ve used as a downpayment on a house. I want to bathe in that bathtub. I’m going to do that later today in fact.

By the way, this is going to sound like a contradiction: but I think housing is a great investment right now. I think housing prices have gone down far enough and I can list the reasons why housing as an abstract investment concept is going to go higher from here. But I don’t like to write about investing on this blog. Suffice to say there are many stocks you can buy, with leverage if you want to take advantage of the rise in housing.

But I’m never going to buy a home again. And sit there in the middle of the night thinking, “why the hell did I do this to myself again.”

___________

Follow me on twitter.

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18 Responses to “Why I Will Never Own a Home Again (and You Shouldn’t, Either).”

  1. Claudia Azula Altucher Claudia says:

    I remember the hard work of trying to maintain a house on my own a few years ago, I was lucky I was able to sell it… I know that different people may have different priorities, but to me it is definitelly not worth the trouble…

  2. anniegirl1138 says:

    There are many things to consider when deciding where and what will be home. Nice post.

  3. Charlotte says:

    I bought my house 20 years ago, and I'm currently paying 1/3 the amount in mortgage payments that I would pay if I rented an equivalent house. My house will be paid off in 3-5 years. The reasons you cite for not owning a home are valid for you and for many others. On the whole, I have loved owning my house.

  4. Kristina says:

    I'm 24 years old and bought my first (town)house this year. Why? Because paying huge money monthly for rent seemed like such a waste to me. I wanted to turn that money around and put it back in my pocket (eventually). I don't plan on staying in this house forever, and I also don't feel it's bogged me down in any way. If I wanted to travel for a whole year, I can simply rent it out to someone on a one-year lease…no big deal. I can also sell it in 3-5 years and get all of my money back, if not slightly more (depending on how the market is by then). I did the math. It's a condo, so it's fairly low maintenance.
    Unlike the author of this article, I watched my parents succeed and truly benefit from the investment of buying a house. They immigrated from Eastern Europe, bought a house within 5 years of living here (in Canada), and have now almost completely paid off a larger house. In the meantime, they've purchased an apartment in Europe that they are renting to people, they travel as much as they want (which is at least a few times per year) and they're not even close to being retired.
    I grew up with the understanding that when there is money to spend, buying land is the smartest way to go. Anyone I've watched who has done that, has capitalized on it (they're not rich, but they're steady and content). I don't know a whole lot about investing, but buying stocks seems scary to me since it isn't actual matter – it's imaginary. At the same time, I'm not interested in being rich.

    • poppymama says:

      Good comment!

    • iloveginger says:

      i am so happy for you! what state do you live in?
      in california, buying a condo in 2006 for over 400K, with 100K down..and now its worth 200K and will never go back to 400. and it was built in 1972. this area was on FIRE! everyone said BUY NOW, its only going up and up!!

      like so many, we have tried to rent it out, and the rents have gone wayyyy down- so this will not cover the mortgage in resort ski town, California. my boyfriend as well as so many others, lost so much.

      for me, i am thrilled to be free, im so with you James! love!

    • iloveginger says:

      mind boggling! are you in canada? maybe the housing market is different there? EVERYONE i know who has bought a house in the past 6 years is losing tons of money

  5. Sherry says:

    I'm currently eager to own a house in a few years, but I can see why someone wouldn't want to. Having rented my entire life I would like to own my home so I can do what I want with it.

    The one thing that confuses me is your commentary in the second "trapped" section. I'm not American, I'm Canadian so I wonder if this is different in the U.S. I'm about to move partway across the country but to do so I had to announce to the landlord that we were not renewing our lease. Do you not have leases the same way there? My current province is Quebec and here our leases run from July 1st to June 30th. We had to let the landlord know before the middle of April or the lease would have been automatically renewed.

    Meanwhile in my new city, Halifax, there isn't a strict July-June lease period BUT we would still have to give three months' notice to cancel our lease. The idea that you were able to just up and decide to move and did so two weeks later is totally baffling to me. Just curious, I guess, as to how it works there.

    • shelbyd says:

      In the US we usually have to give 30-90 days notice to end a lease contract, as the lease terms are coming to an end. Otherwise, the leases typically go "month-to-month" at a higher rate. I think what Mr. Altucher was referring to is the ease of moving into a new place when you rent. (Not waiting for months for closing, etc.)

  6. elephantjournal says:

    #
    Judy Worth Friedsam I couldn't agree more ! Owning is not the be all to end all….soooo seldom with the "average" owner ever get the money back they put into the house…ever ! When you sign on that dotted line, you just forfeited life's freedom !

    #
    Tom Mallard
    In Phoenix, AZ, since the Civil War homes went through boom-n-bust cycles about every decade to the present day where the middleclass homes lost their value and became poor, then gained it back. Happened everywhere … homes are just a toy,… they aren't made to handle the needs of living, all that's piped in or you have to buy one because the system is designed to make money, not take care of the needs of living.

    "Autonoumous architecture", off-the-grid and off-the-sewer has had engineering textbooks for a decade, those books based on built homes and apartments.

    It changes everything to have the home provide it all … search on "Garbage Warrior" for even simpler building concepts that address this.

    #
    Tamarah Ruesch Rosen Excellent article!

    #
    Blake Wilson Depends on your reasons. To own anything just to own it is not the best reason. To own one for a financial return in the future is not the best reason. To own one so you aren't beholden unto the whims of a landlord, so that your children will always have a place to call home, so that you can build a sustainable life… yeah… pretty damn good reasons.

    #
    Magdalene G Mitchell check out the ASCENT OF MONEY. home ownership is a delusion…you are enslaved through it. if i could do it over again, i would have bought a home in the ghettos. i need shelter, not slavery.

    #
    Michael Shearer I rent and have always rented but I want to buy a home. Why, because of the reason Blake listed above. One time my wife was 8 months pregnant (with bad morning sickness) and our landlord wouldn't let us renew our lease b/c her daughter was moving back and she wanted to give her the house. We had 30 days to find a place and move. We already had 2 small children with another on the way. That situation was far from ideal and was a cause of the insecurities in renting – so there are definitely huge downsides to renting as well.

    #
    Nils Montan Real estate gives and real estate takes away. I have made some big bucks with my houses over a long life and I have lost some big bucks. I have also broke even. You never know boys and girls, it's a crap shoot. I doubt that I will buy another personal residence again, for many of the reasons set forth in the post. The main one is I don't want to be tied down. There is also NOTHING quite as depressing as trying to sell a house in a downward spiraling market. Just a seller in Las Vegas.

    #
    Laurie C Ney
    I have owned a home for 17 years. I will have it paid off by the time I retire and will only have to make a $250 per month property tax payment for 4 bedrooms and 2 bathrooms. I'd be a bit worried about retiring and having to pay close to $…2000 per month to rent a place to live.

    Sometimes I think people only think of a home as temporary. As an investment. But I don't want to "sell and upgrade" every 5 years.

    My home is like a nest. A place where my family can come when they need me. A safe place. A love place.

    And I won't loose it when I retire.
    #
    Belinda B. Barnes Way to go Laurie! That's awesome. I'm a Realtor in Hawaii so I say buy a home and buy here now because interest rates and home prices are low. I originally bought in Hawaii, because I had two dogs that I absolutely adored and couldn't live without. I like owning homes because I can do what I want in them. I've never like rules, boundaries, and limitations much ;) it's doesn't feel like "home" unless i own it.

    #
    Magdalene G Mitchell i am not against home ownership. i am against living above your means. i am also against leaving the communities that would benefit most from us most by staying.

  7. Carlo says:

    It's so ingrained in us that buying a house is part of life. that's it's a black and white decision. I don't know how many times I've heard people arguing that they'd rather be paying into their own mortgage than into someone else's, that paying rent is a waste of your money.

    Whether or not owning a home is the "right" thing to do, not many people actually really consider everything, they just take for granted that this is what you're *supposed* to do. How many people do you know who loved living in the city, but had to move to the suburbs because that's where they could afford a house? That is a hell of a sacrifice. Lifestyle is very important and to me not worth the sacrifice.

    Everyone is going to have different agendas/priorities, but please just question your motives…the author isn't preaching what the right thing to do is, he's stating what is right for him, and encouraging others to think about it, to make sure your reasons "are coming from a good spot in your heart."

  8. boulderwind says:

    I love owning my home, making it my own, decorating and landscaping it as I please and (the best one) never having to deal with crazy unethical landlords ever again! I have owned my own home for over 14 years. So yes perhaps I bought at the time when it was still affordable and reasonable. I could not even afford a home in my own neighborhood anymore if I was buying today.

  9. [...] Why I Will Never Own a Home Again (and you shouldn’t either) | elephant journal RT @elephantjournal: Reasons never to own a home http://bit.ly/gwGZYj #rent #lease #buy #realestate (tags: buy lease rent tweeted realestate) [...]

  10. Kate says:

    I love owning a home because I love being connected to, and a steward for, a small piece of land. I like to see it change over time. I like to watch how the seasons change it, how the years change it, how trees grow… how different wildlife comes and goes. I like the continuity of it. I like to be in my own place and feel it in my bones. I like the memories that build up in layers over time. I like the community of my town and the people who are my neighbors. I like how when I have a crisis, they are there for me and I do the same for them. I love the man down the street who plows my driveway with his ancient tractor. I like being able to modify the place to suit my needs. My morgage is very low, and soon it will be paid off. Then I won't have "rent" at all, just some taxes and repairs. I am not really a traveller and when I go on vacation, I miss my home. I am just naturally a homebody.

  11. iloveginger says:

    perfect! yes! everything i believe in! hassel free lifestyle~~leasing and moving around the map! sharing on my page

  12. This article gave me some great insight… Thank you James! I'm 21, but was considering buying a house instead of finding an apartment on my next move. But you've convinced me to keep renting for the time being. Being "tied down" sounds awful.

    ~lauren

  13. wbtphdjd says:

    I think you should make the point more strongly: No one EVER realizes investment gain on their primary residence, for the reason you state above — you have to have someplace to live, so if you sell your house, even at a large increase over what you paid for it, either you'll pay just as much for an equivalent house, or buy another that is significantly lower in value, whether in terms of size, location, amenities, or whatever else.

  14. wim says:

    what you wrote maybe works for you, i am not convinced of that. you are a writer with something to sell. your report is flawed.

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