Not counting the posts I’ve written and saved as drafts and never actually posted (often times for very good reason), this is the 1000th post on this blog. What started during Christmas 2006 as an experiment suggested by a friend has turned in to something that I count as crucial to my understanding of the market and how to best explain it – sometimes poorly, I’ll admit – to the people I work with. I’ve been thinking for quite a while about how to acknowledge the 1000th post … it seems like a milestone of some kind.
The idea that owning a home “is the American dream” is just another sales tactic someone somewhere created. It’s a product of “get it now while the getting’s good“, and to be honest, Ifind it disingenuous. Truthfully, as a new agent, I bought into it. I went around with my car signs, and my REALTOR(R) pin, and I touted the virtues of home ownership. “You’re throwing your money away! It’s an investment! Don’t be a fool!”. Okay, I probably didn’t tell someone not to be a fool, but you get the point. I’m a real estate agent. My income is derived from people buying and selling homes – why wouldn’t I want everyone to be a homeowner? That´s why before I get into explaining the situations of buying a house, I honestly think it´s best to go to the plan collection so you´ll see how you can build the house of your dreams.
If home ownership were for everyone, we wouldn’t have leases and sometimes, renting a home is just the right decision. I once had this discussion with a friend, who in a former life worked as a vice-president for a corporation that developed and leased apartments for rent, and who now teaches others how to effectively manage apartment complexes. She’d post links to articles from around the interweb that talked of how home ownership was a bad investment decision, or to missives that argued for the creation of more leased housing options. I couldn’t understand how she promoted leasing a home versus owning, when she herself owned her home! Sacrilege!
She talked of how so much of housing is tied in to employment, how we buy houses Orlando and of how the trends in employment were no longer the “stay 30 years and you’ll get a gold watch.” Employees are changing jobs almost as much as they change their underwear – hey look, you noticed that! – and a job history can have several stops over just a few years time, but with great CVs and cover letters that can be fixed. To be honest, her argument didn’t convince me. But now that I’ve had the benefit of more time in this industry, and the first hand experience of seeing people struggle with their home as an “investment”, I think she’s right.
Job hopping? Don’t buy a home.
Don’t have 10% (or more) to put down? Don’t buy a home.
Not sure you really want to buy a home? Don’t buy a home.
Seriously, I mean it. On the one hand, you hear story after story every day about how the economy is in the tank, and on the other hand you have the real estate industry saying that NOW is the time to buy. Consider this article from CNN that says that you should absolutely positively buy a house right now (Buying a home now is a no-brainer), and this article from Reuters (What’s a home worth? Pick a number, any number) that says that there’s no magic formula to figuring out a home’s real value.
If you’re not reasonably sure you’re going to be in this home for at least three – or more – years, do not buy a home. Yes, rates are lower than they’ve ever been before (although they’ve started to trend up a little bit). Yes, there are sellers that really want to sell their homes. And yes, I want to make a living and I like to eat so I hope people DO buy and sell homes. But as Scott points out regarding FHA loans (that require only a 3.5% down payment):
Purchasing a $100,000 house with a 96.5% FHA loan results in a $96,500 loan, which has only been paid down to $95,000 one year later. With such a small down payment, it can be difficult to re-sell the home in a short time frame without bringing cash to closing.
Life will always take a different direction than the best-laid plans – sometimes that direction shows us a better way, and sometimes it derails us completely. But I want my clients to be as prepared as they can be for those changes in direction, and owning for the right reasons – not just because I said they should. Scott was correct when he wrote “Buying a home isn’t for everyone, but excellent housing opportunities abound for those who plan to stay in the same geographic area for the years to come.” Longevity is key. If you’re thinking about buying a home, whether it be to live in, to rent, or to house your kid while they attend college, three years should be your barometer. If you don’t intend to own the property for at least three years, don’t buy in to the “I want one” philosophy.
Here’s to hoping this post doesn’t run me out of business, and that I’m on my way to writing my 2000th.
Thanks for reading.