Traditionally, a man buying and owning his own house was a major milestone in a man’s life along with marriage and having children. However, just like marriage I would argue that buying a house today is also a bad idea. Some men take great pride in owning their own homes and will disagree with me on this point, but I will put forth some logical counterarguments for why I believe this to be true. My parents and my high school economics teacher told me in my teenage years that buying a house instead of renting was the smartest things I could do and if I didn’t I was “throwing away money by not building any equity.” Although this was before the housing crash in 2008 I assume that many ROK readers are still hearing similar arguments.
It Is More Expensive Than Renting
According to this mortgage calculator, the total interest paid on a 250,000 mortgage at 5% interest is $106,000 for a 15 year mortgage. That is almost $600 per month you are losing which is the most I have ever paid for rent. You must also take into account other costs such as homeowner’s insurance which is higher than renter’s insurance, realtor fees for selling the house, property taxes, and repairs and upkeep for the house (although if you are the handyman type who enjoys home projects the last wouldn’t amount to much). It is true that money paid against the principal does turn into equity for the house, but the other expenses bite into your wallet and that is money that could go into a 401K, starting a side business, or some other investment with a steady return.
Low Interest Rates Are An Illusion
People will try to convince you that buying a house when interest rates are low is a good idea because the interest payments will be lower. This is true, but if interest rates are low then housing prices are high. Home buyers don’t look at the full price of a house when deciding whether to buy it. They look at what their monthly mortgage payment will be. The feds brought interest rates close to zero after the housing bubble burst to try to bring housing prices up and prevent too many people from feeling that a strategic default was a good idea. Eventually the feds will have to slowly bring interest rates back up and when they do that housing prices that were kept artificially high today will begin to drop. Many young people who buy houses today will find that the lowering housing prices will keep eating away at any equity they build on the house.
It Is Not A Good Investment Anymore
Home prices have historically been rising even before the bubble of the 2000s began. There are a number of reasons for this.
- Since historically prices kept going up people would pay more for a house than it was worth since it was an “investment.” Hence the housing bubble.
- Inflation has gone up and home prices went up with it.
- Society has moved from one wage earner families to two wage earner families as women entered the workforce so the cost of consumer products such as houses have risen accordingly.
These factors made buying a house a great idea a few decades ago, but the trend is reversing now. Women make up half of the workforce so they can’t grow much larger. The housing collapse that brought about the recession is making young people wary of thinking of a house as an “investment” when they see their friends with mortgages underwater years after they bought a house. Inflation is going up still and will continue, but that won’t raise housing prices anymore for a number of reason.
- As mentioned above in the interest rates section, as inflation raises housing prices and people’s mortgages are no longer underwater the feds will feel it is safe to raise interest rates thereby lowering housing prices.
- Inflation is going up, but the average worker’s salary is staying about the same. This problem combined with massive student loan debt is making many young people rethink the idea of owning a home or even renting one.
- The Shadow Inventory
The Shadow Inventory
Following the housing bubble crash many houses went into foreclosure. What many people don’t know is that many of these foreclosed houses were never sold or even put on the market. If a bank gave a $400,000 mortgage to a man in 2006 for a house and then foreclosed on it in early 2009 they can keep the house on the books as a $400,000 asset even if the house is now only worth $250,000. If they sell the house they have to log a $150,000 loss so it is easier for them to keep it off of the market and just pay some guy to mow the front lawn once a week and clean the windows. There were almost 2 million houses on the shadow inventory as of last October. Just as diamond companies keep prices high by restricting the supply, banks are keeping housing prices high by keeping empty houses off of the market. If they were to dump all of the houses in the shadow inventory on the market tomorrow housing prices would plummet. As inflation raises the price of a house close to the levels before the housing crash some of the banks will start to sell off a few of their assets and the price of a house will not exceed what it was in 2007 irregardless of how much inflation we have.
You Are Stuck In One Location
Employment uncertainty is an unchanging reality in today’s world. I have had four jobs (all starting out as temp) and moved four times since I graduated from college three and a half years ago. No man should be held down by needing to live in a specific geographical area because they have a house there. You could get an offer for your dream job 300 miles away and have to turn it down because of a house. Or you may decide to expat out of this country if shit really hits the fan and it would be better to have your savings in something that is more liquid like a mutual fund than a house.
Houses Attract Golddiggers
Unless you got a vasectomy and your chosen method of game is luring in late 20s, pre-wall provider hunters having your own house could be detrimental. If a woman feels you are excellent long term relationship material she will be more likely to hold out on sex.
Houses Get Filled With Useless Stuff
Almost everyone in the western world including (hopefully to a lesser extent) ROK readers like yourself belong to the cult of consumerism. Being a member of this cult makes people fill their living areas with lots of useless junk that they don’t need. Having a small apartment or just a room in someone else’s house is one way to keep the influence of this cult at bay. If you have a large house you will need to buy lots of junk to fill it. A small place requires a very small amount of junk to fill it.
Think hard before you decide to believe the hype about needing a house. The government and banks have been manipulating the market so hard in the last few years that is has had the unintended consequence of making young people see owning a house as unnecessary and wasteful. Once this trend truly catches on in the culture banks and government will see the opposite effect of what they intended.
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