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Homebodies…

23 Apr

Catherine Rampell at The Washington Post explains why buying a house is stupid (well, she puts it slightly more diplomatically).

The fact that Americans still financially fetishize homeownership baffles me. Never mind that so many people lost their shirts (among other possessions) in the recent housing bust. Over an even longer horizon, owning a home has not proved to be a terribly lucrative investment either. Don’t take my word for it; ask Robert Shiller, winner of the 2013 Nobel Prize in economics who previously became a household name for identifying the housing bubble.

“People forget that housing deteriorates over time. It goes out of style. There are new innovations that people want, different layouts of rooms,” he told me. “And technological progress keeps bringing the cost of construction down.” Meaning your worn, old-fashioned home is competing with new, relatively inexpensive ones.

I suppose there’s also the emotional continuity of numerous tense holidays in the same house. I’m not a holiday or even really a celebratory person (besides my eventual funeral) so I never quite understood it but I know the sentiment exists. Unfortunately, the changing economy makes it less likely that you’ll retire in the same house you bought when you got married. People move for jobs for far more often now, as a thirty-year commitment to a company is becoming a thing of the past in our brave new world of maximizing shareholder profits. Selling a house every five years or so is not just a headache but it’s usually a financial wash.

 
1 Comment

Posted by on April 23, 2014 in Social Commentary

 

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One response to “Homebodies…

  1. observeratlarge

    April 24, 2014 at 9:36 am

    Apparently, Catherine Rampell has never lived in a house. The #1 reason to live there: IT’S YOURS! You can do what you want with it, as little or as much as you like. You can hang pictures, and no one can bitch about it. You can paint the walls black if you want to, and your landlord can’t say anything. If you need a new kitchen stove, you get one that you like. Like white walls, paint the whole thing white. Like wallpaper and colors? It’s up to you. Prefer carpet? Go for it.
    #2 – reason: tax advantages. Your property taxes and the mortgage interest are deductible. None of your rent is deductible, so home ownership is still the best financial device you can invest in, even if the value may go down somewhat. The value of my house has decreased about $150,000 in the last seven years, and now has gone back up about $80,000. But it is still worth almost $400,000 more than it was when I bought it, and I have probably saved in state and federal taxes far more than the decrease in value from the peak of the market.
    #3: Your housing costs, except for the increase in property taxes, are frozen at the price you paid for the house. So while you are sitting there paying a (mostly) fixed mortgage, rent goes up every year. You will be living in a comfortable, 8-room house that is all yours while renters are living in a 2-bedroom crackerbox with a kitchenette and no dining room, inadequate closets, no washer/dryer, little freedom of choice, paying twice what you pay for housing costs.
    #4: When you sell it you’ll make a profit, and the money is all yours. As long as you reinvest it in another house, or you’re over the age limit — which I think is 55 or 60? You don’t have to pay income taxes on it.
    Apartments, in fact, are also in old buildings and they are updated far less often than houses. So unless you’re paying top dollar for a penthouse with a view, $1,200/mo maintenance costs, and not a blade of grass to call your own, you are living in far less comfortable circumstances than your brother who owns his own home.

     

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