August 15, 2004
This is not my beautiful paid-off house
Most of my friends from my generation (tail end baby-boomer, pre-GenX) own their own homes. The few who don't are mostly divorced single mothers who are of an age and educational background which make the prospect of upward mobility in their careers and comfortable retirements somewhat shaky. We worry about them and want them to do whatever they can to acquire a house because something deep in our American psyches tells us that real stability comes with owning a piece of the land and a roof. The thinking seems to be that husbands come and go, but a house is forever. Of course, recent trends in the real estate market that have seen some of our properties double in value over the last few years have made us feel even more smug in this sentiment. We forget that the market is fickle.
I don't know about the wisdom of counseling a friend who is less than twenty years from retirement and living on a fixed income to buy a home at all costs rather than rent one. Sure, you can get lucky with your investment, even lucky enough to fund your retirement from the equity that builds up. But houses are notoriously unreliable -- roofs cave in, foundations crack, termites invade, heating systems break down, trees fall, plumbing leaks, basements flood, and real estate taxes go up along with market values. If you get into home ownership without a substantial rainy day fund, you could easily find yourself having to empty out your bank accounts and tap into your retirement savings to maintain your house, or even end up losing your property through foreclosure. Many people find that when they total up the cost of maintenance over a period of several years, that amount exceeds the tax benefit from their mortgage interest deductions over that same period of time.
If you buy a house in your forties or fifties, and get a thirty-year mortgage, you won't have paid off the mortgage by the time you retire. I bought my house six years ago, and I know that I'll never live in it mortgage-free because when my daughter is grown, I intend to down-size and live in a maintenance-free apartment. Why? Because home ownership is bloody stressful, and one little body can't possibly need so much space. The goal of living in a home that I own outright and doesn't rob my bank account has eluded me as well as many people I know. Yet, oddly, we still wish home ownership upon all our friends. Old beliefs die hard.
Posted by HK at August 15, 2004 08:48 AM | TrackBack