Last week a study came out saying that 61% of people asked still believe that they want to buy a home and that they see it as a great investment. I hate to bring people down, especially since I’d love to see the housing market recover, but that’s just not reality.


by James Thompson via Flickr

Only 5 years ago, buying homes was all the rage. There were multiple TV shows on showing people how to buy a house that was a mess, clean it up with some minor improvements, then sell that home at a nice profit. When the housing mess hit, many of those people found themselves in a world of hurt and all those shows disappeared. You also notice you don’t see all those commercials on TV anymore showing you how to buy homes for nothing and sell them for thousands.

The reality is that the housing market is a mess, and if consumers are looking to buy homes they need to buy them for better reasons than thinking it’s a great investment. Let’s look at 3 myths of buying a home.

1. Investment. In at least 10 states right now, many people are selling their homes because they’re now worth thousand, for some hundreds of thousands, less than when they purchased the house. It used to be thought by many that owning a home for 30 years meant you’d cash out at the end of it and be living high.

The truth is that whatever you purchased your home for isn’t the only consideration you need to think about when it comes to figuring out if you’ve made any money or not. How much did you spend in improvements? How much did you have to pay for work on your lawn, broken utilities, etc? When houses used to cost $25,000 and could be sold for $200,000, maybe it was a great investment. These days, you might buy a home for $200,000, put another $50,000 into it, and sell it for the same amount if you’re lucky. It’s not a great investment anymore.

2. Freedom from rent. Let’s talk about this one for a bit, and I’ll use my own numbers, if you will. We purchased our home for less than $100,000. Our initial mortgage payments were around $1,200 a month, which included escrow and home insurance. Our utilities averaged around $375 for the first year, which means a monthly outlay of around $1,575 for at least 2 or 3 years until we refinanced. Our 3-bedroom apartment cost us $670 a month when we moved out and we were paying utilities of around $25 a month, since heat was included. Therefore, our initial outlay was about 150% less than what we ended up paying for mortgage, et al.

Even now, years later, though my mortgage has come down after refinancing, utilities have gone up because of the price of oil and I’m still paying more for it all than I was while renting. Not only that but if something breaks I have to pay for that. I have to pay for upkeep. I have to pay for extermination services here and there. In other words, there’s way more money coming out of my pocket than there was in the apartment, where everything was covered.

3. Personal space and privacy. If you think this one is real I’m about to burst your bubble. Sure, in the apartment there were people all around me, but I never knew any of their names because they kept to themselves. Apartment living is like that for the most part; you might get lucky to know a couple of folks here and there, but in general you may never say anything more than “hi” to anyone in the building.

When you buy a house, there are a lot of people who know you, or of you. In my neighborhood, everyone knows everyone to a degree. They watch your house during the day, which does offer a bit of protection, but they also know when you’re home, not home, having a party, cookout, etc. They know who does your lawn and who does your roof and if you’ve lost your job. How do they know? They just do. There’s no privacy at all, even if you try to keep to yourself.

Of course it’s not all bad; at least I know where I’m parking my car every night, and in the winter don’t have to shovel it before I go anywhere. Then again, I have to shovel my own driveway or pay someone & hope they come early enough to get out of the house. Does it all still sound like a dream?
 

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