In the last century, the message put out to Americans was, “You can have a piece of the American Dream by buying your dream home. It’s an investment in your future and a place to call your own.”
And the reasons to buy made sense. Having a home near good schools, be part of a community, you had job security, your home will go up in value, etc, etc.
It was part of the traditional path- find a girl, get married, have a big wedding, save for a down payment, buy your home, furnish it and make improvements through the years so you can sell it after the kids are gone, make a big profit and retire to sunnier climates and play golf and bingo.
Everyone had a stake in the con. Fannie Mae, banks, Wallstreet, investment firms, real estate agents, brokers, home insurance, home furnishings chains along with state and local tax collectors. Hell, even trades like construction, roofing, plumbing, masonry, electrical, fencing, pool installations, home decor benefited from the con.
Then reality hit in 2008 and we saw that a vast majority of people buying homes were not equipped financially or mentally prepared for the true costs of home ownership. Many tried to make little lottery winnings in flipping homes repeatedly. Then they got fucked and had to move in with their parents.
We saw that Wall Street was rigging the game-again. We found out that when adjusted for inflation, if you were lucky to sell your home in an average geographical area during a bull market, you were only obtaining a 2-3% return on your initial investment over a 20 year period. This is factoring in the interest you paid on the loan, cost of upkeep on the home, any sudden breakdown of the system in the home (plumbing, furnace, electrical) costs related to landscaping, tree trimming, watering the lawn, electric costs, heating, cooling and painting. Let’s not forget TAXES!
Meanwhile, the cost of living continued to rise, the buying power of the dollar sank (the gov’t printed trillions of new paper money to bail out failing industry leading companies) and full time jobs with good salaries and benefits disappeared like your brother does every time the bill comes at the family dinner. Even if you are lucky enough to own your home outright, you still have landlord- the state. Because you still have to pay taxes each year on your home, even if it’s paid off.
And now, after all we’ve seen, the message is still being put out that it’s part of being a good American. “It’s your duty to buy a home.”
MOBILITY IS THE NEW BLACK.
Call it geo-arbitrage or whatever. The ability to be mobile is one of the biggest assets you can have. As markets change and money flows to other parts of the country, growth cycles are happening in smaller cities for different reasons. Being able to go to these new markets without being tied down to particular address is essential to survive in today’s economy. I left a state teetering on bankruptcy and high state taxes to go to another area where growth is exploding. I also left an industry that’s on the verge of collapsing and moved into an industry that’s recession proof and always going to be around. I was in a position to pick up and leave and I’m on track for generating a half a million dollars in revenue for my new company withing my first year. I wouldn’t have been able to do that if I stayed where I was.
I wouldn’t have able to make this sudden shift had I had a house that I was tied to. With home ownership, you are locked down to one location, a 30 or 15 year mortgage and the very real chance you can lose your home in a lawsuit or divorce. And you are at the mercy of the emotionally fickle market if your trying to unload your home. The cost of moving, storage and other services related to home ownership are not cheap.
Mobility is a necessity. As weather patterns are changing around the world and natural catastrophes are more frequent than ever, why would one want to be tied down to a home that is constantly under threat of wildfires, earthquakes, hurricanes and tornadoes? As insurance rates go up, many are finding out they cannot afford the additional costs incurred with home ownership.
The reality of homes today is that they are poorly designed. Instead of being designed for function first and then taking form into consideration, they are designed from the outside in. The use of space is wasted. The amount of energy used to heat and cool the illogical floorplans, high ceilings and unnecessary room division leads us to be slave to the grid. This is a grid, by the way, that is antiquated, overloaded and susceptible to 21st century terrorhacking.
So, if owning a home is a waste of your hard earned money, what should one do? In my next post, I’ll point you in the direction that makes the most sense when it comes to your money.