Everywhere I go I have people telling me (including, most annoyingly, nearly all members of my family), "You really need to buy a house to-day!!" "Interest rates are lower than ever!" "Housing is a great investment!"
So far I have resisted their exhortations. Why, you ask? "You're missing out on a lifetime of gains by throwing your money away renting!" they declare - even after they have watched their net worth (mostly tied up in their homes) plummet dramatically, putting all their retirement plans to pot.
Gotta love baby boomers. They just can't deattach themselves from the orgy of overextension and moral gluttony that has produced this current crisis of civilization, and is sure yet to lead to much excess death.
No, sirrah, I have my reasons for staying as far from that turkey as possible. Purchasing a house, contrary to popular delusion, is actually a poor financial investment, and probably the most ignorant thing you can ever do with your money. To wit:
1) Precious few of us can hope to buy a non-ghetto dwelling with accumulated cash, given the wildly inflated value (still) of most real estate to-day; therefore to purchase housing we must borrow. If you are reasonably prudent (I'm not even going to mention the madness of subprime borrowing here), the standard option is to pay 20% as a down payment, and borrow the remaining 80% as a fixed 30-year mortgage.
To borrow such a sum of money for such a long period of time is sheer madness. I would carefully examine the mental comportment of anyone engaging in such an activity.
Consider. 30 years is the majority of an adult's working life. To enlist into an agreement to pay this amount over this length of time is basically making a promise to a borrower that:
- I expect that my source and level of income will remain stable and secure for three decades
- I expect that there will be no disruptions to my income
- I expect that the price of the real estate I am purchasing will retain the value of the purchase price
If you hold these assumptions, you are delusional. Between job security (or lack thereof) and the dwindling value of real estate (it doesn't always go up!) to make a promise such as this is disingenuous at best, delusional thinking at moderate, and criminal madness at worst.
Maybe some people can make this promise and be sure that they will fulfill their end of the bargain. (We call them "trust funders" in da hood.) But most working stiffs in good faith cannot do so. And so the rational of these rent, and the irrational lose their shirts when the housing market catches cold.
I shed no tears. They have been warned.
2) Real estate investment is not a sure bet. Read your local business page for details.
In truth, the rate of housing appreciation has always tracked inflation over time. Some great investment there.
3) I prefer not to be a slave to a bank for thirty years. A rental contract is much more short term (one year on average, give or take) and thus can be exited far more easily if you happen to experience income flow problems.
This applies not only to mortgages, but other long term debt such as auto loans and revolving credit. If I had to borrow, I would only string out payments for a year at maximum.
4) Closing costs - an excuse to burn currency if there ever was any. Gotta love the real estate industry, another parasite "profession" if there ever was any.
5) Once a home is purchased, somehow it induces additional expenses in the form of furnishings, "improvements", and other claptrap. In short, it becomes a money sink, which you pour dollars into, only to see it sell for less than a hot dog cart in five years. Nice.
Life is capricious and harsh, and curveballs can fly at us any day that can cause us to lose everything in an instant. Take that as free friendly advice from someone who experienced firsthand this nation's greatest tropical-borne natural disaster in history.
So do not get caught up in the housing charade. To dickheads, it is all one big gamble anyway, another method of obtaining something for nothing, which as we all know is the dickhead's favorite pasttime. So RENT for now!! I know it might stink, but it's better than dealing with the quagmire of the real estate industry, which is just salivating over the prospect of separating dollars from your wallet with an exertion of mimimum to zero effort.
If you must purchase a home, do it when you have the means and ability to do so.
Or you can just wait a few months, when the vast majority of housing will be worth less than a 1989 Celica.