Home Ownership is Overrated! | The Frugalista

Home Ownership is Overrated!

by frugalista on August 15, 2011

3692095103 cdf66d70fa 300x229 Home Ownership is Overrated!Did I catch your attention? I’m dramatic. I was recently interviewed by CNBC about my views on home ownership. I’ve lived in Florida for many years and have often had conflicted feelings about the housing market here. When I first got here in 2000, homes were really affordable and then the housing prices increased to outrageous numbers. It was one of the hottest markets in the United States with people going crazy to try to buy. People were flipping homes right and left. We all know how that story ended up. The effects of the real estate bust still lingers. It’s impacted everything from the job market to government. When the housing market is sick, it’s really hard for a community to reach its potential. Personally, my apartment complex has been overrun by stray cats because people are leaving their pets behind. Also, two neighbors in my complex abandoned their properties. One had all of her goods thrown out on our grass. Ugh!

Despite having a real savings account now and knowing that I can get a nice condo for under $100,000, I am still not interested in buying. Why? It doesn’t fit my lifestyle. The likelihood that I will live in Florida for the next five, or even three years, is not good. To recoup closing costs and other investments in a home, I won’t be sticking around long enough. Yes, interest rates are low, but if you are getting a deal for something that you don’t want or need, is it a deal? Also, I work in media. I love South Florida, but it’s not a media capital. Tourism is the main industry. I do not work in the hotel or cruise industry.

I got this info from a Smart Money article on Home Ownership:
Warren Buffett, who has lived for more than 50 years in a home that cost him $31,500, made a resonant comment on this issue in his latest letter to shareholders of Berkshire Hathaway: “Our country’s social goal should not be to put families into the house of their dreams, but rather, to put them into a house they can afford.”

When I worked at a business television program, I remember producing a story about housing and home ownership. Over the course of a 30-year mortgage, a home’s value pretty much appreciates with the rate of inflation. I know we’ve been fed for decades that home ownership is the way to riches. I think it’s the way to own a home that you want to live in. And that’s not a bad thing.

If home ownership fits your lifestyle and you can afford it, I say go for it. It is an accomplishment and you deserve it , if it works for you. It would be irresponsible for me to buy a home, just because I can afford it. Home ownership, I feel is a lifestyle. If you move around a lot or work in a really unstable industry (media!), be sure to factor that in before you decide to buy a home.

Check out this article and video from Nightly Business Report on whether you should rent or buy.

Here is my CNBC appearance!

Do you own a home? How do you like it? Do you think home ownership is a way to build wealth? Does your mortgage stress you out?
Mike Licht, NotionsCapital.com, Flickr

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{ 8 comments… read them below or add one }

Shon Brooks August 15, 2011 at 1:33 pm

I absolutely agree with you. This especially true if you have a small family or no children at all. Apartments are not meant for families, however newer WELL BUILT town home communities or duplexes in larger cities are. I am still perplexed for paying thousands of dollars for a house built in 1931. Although I love my home, am blessed to have a great fixed interest rate, and a fairly reasonable mortgage I am constantly tinkering with something. Home improvement stores see a fair share of my disposable income from repairs. Real estate is not the resolution for security in good ol’ Americana these days.
You cannot even determine your length of time at the home based on your career anymore. With the market being so volatile and people than ever willing to relocate for an upward career move, you may end up planting costly roots in a city that your career has no intentions of you residing in. Renting allows flexibility that home ownership doesn’t. In addition, if your company offers a corporate housing option, I would strongly suggest that in a relocation situation.


Rasheeda August 15, 2011 at 2:29 pm

The fact that home ownership has traditionally correlated with wealth is something that people look at and say, Gee, I should buy a home.

But, I think the home ownership is the cause of later wealth. I think home ownership is more a symptom, and the cause of later wealth is an investor attitude, not the house. People who look at home ownership as a way to “get rich quick” will tend to fail. People who try to get rich quick are speculators and gamblers, and they rarely have long-term success. Investors, however, do.

SUCCESSFUL investors buy low and sell high. SUCCESSFUL investors ride out the market’s ups and downs and are in it for the long haul.

In the past (not this recent market craziness that led to the mortgage crisis), people who tended to buy homes, and buy them young were simply prone to good investments. They didn’t go buy the most expensive house out there — typically because they couldn’t afford it (they were young and broke, you see!). They followed the first tenet of good investing and found a good value at a low price. They also tended to have a certain confidence in themselves. They felt they could fix it. They weren’t planning on spending $500 on a plumber if the faucet broke. They may not have been plumbers, but they felt a certain confidence they could do minor repairs themselves, so they wouldn’t be paying any more than if they were renting. However, by owning, they’d have one advantage the renter didn’t have: a steady monthly payment not prone to increases.

Another thing these people did was plan to stay there for the long haul. Now, do people who plan to stick around move? Yes, of course. But, these people had plans to be around long enough to capture investment growth. And people who stick around in a place also tend to set down roots, perhaps get married (a second income; more wealth, yay!).

But, here’s the last thing. Like true investors, the traditional homeowner who ended up wealthy later in life knew when to hold ‘em and knew when to fold ‘em. If they got a better job with better pay in a new place, they looked for the best way to reconcile the home investment with other investments (new job) in their portfolio. Sometimes, if the market was down, they’d come out OK by renting (because their payment wasn’t too high because they bought low — an affordable house). Or, maybe they just sold at a loss, bought a new house at a low price and assumed they’d recoup their loss with the appreciation of the new investment. In investing, you can’t be afraid of temporary losses, because the market is never always up. And people who buy homes, affordable homes, are well aware of this.

So, I think home ownership, in terms of a wealth strategy, works out like any other investment. If you buy high and sell low (ie. jumping on the bandwagon and buying the stock while it’s at or near it’s high, then holding it for six months while it drops, determining it’s a bad investment and then selling at a loss), it doesn’t work out. If you buy low and sell high, it’s going to be fine. And, as long as you’re in it for the long-term, on some level, it’s not going to matter if you buy affordable (you can sustain a temporary loss because overall the market will eventually be higher –and when you’re young, time is on your side).

To answer your other questions, I own a home. My mortgage doesn’t stress me out any more than having rent would stress me out. I have to have a place to live. The only difference, in my opinion, between a house and an apartment is what happens when you’re ready to leave. Yes, it’s a little more responsibility when you own it, but I like the perks that come with that responsibility, and find the downsides an acceptable risk. Plus, my father was a landlord for all of my life, owning as many as 40 properties, so I have a great confidence in being able to rent out my home if I don’t want to live in it. I also have a great confidence in my ability to fix broken things (without paying for expensive repairmen) if necessary. I think sometimes people let their fear of repairs, lack of confidence in their own handiness have too much influence over whether they buy a home and the kind of home they buy.


Smarty P. Jones August 15, 2011 at 2:49 pm

I never associated homeownership with wealth as much as I did with having a family. The thought of buying a house never crossed my mind because I don’t have a family to put in one. Add to that the fact that this media industry is fickle and I don’t know how long I’m going to be here or whether or not I’ll be laid off a week after I close.

The majority of the folks in my inner circle are homeowners and to me it seems like more of a headache when there is a problem with something. When I have an issue in my place, I call the front office and it’s fixed that day. If I owned it, it would get fixed when I could afford it. I’m not responsible enough to be a homeowner yet. LoL!

You’ve given me a lot to think about, tho.


Frugalista August 15, 2011 at 3:09 pm

@shon: I agree 100 percent! I really need the career flexibility, right now. I’ve often thought about saving up for a really long time and then buying a home cash when I’m near retirement.
@Rasheeda: I love it! See, you are the perfect candidate because you know what you are doing. A lot of people think that they can be landlords-on-the-fly and they don’t have a clue of the expenses. You’re prepared for the ups and downs.
@tiffany: Man, I used to cover local government. Hell hath no fury like upset homeowners. When their home isn’t right, they lash out. Three cheers for the front office. Got my air and washer and dryer fixed, today!


SistahChef August 15, 2011 at 3:52 pm

You are absolutely correct! If only I knew what I know now I don’t think I would be a homeowner. At the very least, I would have listened to my gut and purchased a townhome, as opposed to listening to my real estate agent and loan officer when I purchased my home. I absolutely LOVE my home, but it’s only me. And taking care of my home has become my lifestyle. Although I am in my forties, I still have time for fun. But, my finances are allocated to stuff for the house as maintenance and routine upkeep will always be there.

Where were you two and a half years ago? LOL


frugalista August 16, 2011 at 7:34 am

@SistahChef: Right! How many people tell you that owning a home requires care and feeding like…PARENTHOOD! Here’s to a big raise at your day job so you can play a little more! :)


Literary Marie August 18, 2011 at 9:40 pm

Like so many other “investors,” I flipped houses. It was great money at first. Now, being a homeowner really is overrated. Most homeowners owe more on a mortgage than the house is worth in today’s economy. If you do find a foreclosed or short sale home, you have to commit time and expenses of maintaining the home. As a landlord, homeowner, and renter I would advise against it right now.


BigSerenaVeeFan October 18, 2011 at 7:46 pm

Agree. Home ownership also comes with other obligations – property taxes, repairs, insurance(flood, earthquake balloon in case of accidents and someone sues against your house) etc. Most people would be better off if they rented.


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