A friend of mine just bought a new home. A co-worker is finally putting his on the market. I just refinanced my house. Anyone not waiting for the implosion of the American economy is out doing something in real estate. The time has finally come for us to go out and reclaim our little island of the American landscape after the last few years of riding the real estate roller coaster. I only wonder why we are going back to the over built, over valued homes that brought us to the recent real estate disaster.
And yet, few of our peers have changed their underlying perspective on their first home. Take my neighbor for example. He's a smart guy, has a little family money and has been renting for 5 years. In short notice he's been told to vacate his rental and inside of 45 days purchased a home valued at 750k. His argument: I wanted to be close to a particular dog park in a particular neighborhood. His first home investment of his life is at 3/4 of a million dollars. I, of course, do the neighborly thing and tell him he did great on concessions and negotiations, because he's my neighbor and I want to be nice, but inside I cringe and wait for the phone calls.
What happened to buying a starter home? Are there no decent middle America neighborhoods anymore? Where are the ratios of income vs home value? Nowhere to be found I suppose. The drive is too long is probably a good excuse. More likely the truth of the argument is the expectation of social living we have developed since coming off the gold standard. Live better today for more debt in the future. We are pulled to a fourth bedroom and luxury installations while on the path to home ownership so quickly and expectantly that no-one notices that we are returning to the same risk valuations that created the real estate mess just a few years ago.
Is there shame in purchasing a small humble home with 2-3 bedrooms? Granite counter tops need not be the status by which we declare our presence in the middle class. There is no shame in putting a 20% down payment on a small house instead of a 5% down payment on a large house. It amazes me how we drive around town trying to save 10 cents on gasoline per gallon and then jump $100k in home size without thinking about the cost of interest in the purchase.
I don't know if my neighbor can afford his house. I try not to judge his decision, because I don't know his financial situation. Maybe he has money set aside he doesn't want to talk about, that's fine. I hope he does. I am concerned however, that he doesn't know how to maintain and manage his home. I am concerned that we jump into these large expenses not realizing the additional costs of maintenance, financing and insurance. These additional expenses, because my neighbor is not going to install his own appliances, will undoubtedly add up every time he calls a handyman or a gardener. These are respectable professions that have men filled with common sense and have no qualms to change the value of their estimate depending on the neighborhood where they are doing the work.
Sure enough, my neighbor doesn't disappoint. Hey buddy, can you come over later and help me install a reverse osmosis water filter? Oh and as long as you are here, can you help me install some fans? Neither of these tasks are particularly difficult and I want to see what 3/4 million dollars buys in Southern California, so I say yes. He's moving in a few weeks and the excitement of closing on his home is still driving the adrenaline in his veins.
In a few minutes I'm gonna throw my small tool bag in the car and drive over. I'm sure I will be impressed by the home and the neighborhood. I'll stop and dream for a minute about living in a large 4-5 bedroom place with a den and and office. But tonight, I'll be sketching the remodeling that we want to do to our home, purchased at 15% of the value of his, and I'll make a note in my calendar to ask myself the question sometime next next year: How much happier is my old neighbor in his large new home than I am in my old small one?
I think I already know the answer, but I think we have to remind ourselves sometimes.
No comments:
Post a Comment