Home is not necessarily where you buy it

The rarely-dull, often-controversial “Brazen Careerist” seems to have an especially “brazen” tone today in her Yahoo! Finance column about “5 financial calculators you should use cautiously.” #4 on her list caught my interest:

4. Renting vs. buying calculator
It used to be that the American dream was about buying a house. Today, the new version of the American dream is about time and personal development — and the best way to get more time is to not be tied down to a house.
You don’t need to worry about repairs and maintenance and earning enough to “buy the most house you can buy.” You also have more freedom for personal development if you can move around easily. So it’s time to get over the idea of owning a house as the achievement of the American dream — it’s just holding you back.
Before most of us turn 32, our jobs typically last less than two years apiece. Yet it doesn’t usually make financial sense to buy a house unless you plan to stay in it for at least five years. And most people who want to make a career change stop themselves because of their financial commitments (read: mortgage). What’s wrong with this picture?
Clearly, for a lot of people, buying a house is an unnecessary, career-limiting decision.

I don’t always agree with Penelope Trunk, and while I don’t know if I’d frame buying or not buying a house as a career-limiting decision, she does have a point about home ownership tying you down in various ways.

But as reports about the “subprime meltdown” should be reminding us, buying a house doesn’t necessarily equal owning one these days. An “interest-only” loan is exactly that, and it’s the principal payments that build equity and create ownership. I feel for a lot of people who could potentially lose their homes because they didn’t understand what they were signing up for, but the situation arose from the whole “American dream” thing – which we’ve all been fed for a long time, and which lenders played into by relaxing standards and lowering “barriers to home ownership” that may have existed for a good reason. This may be one of those things that, like entrepreneurship, isn’t necessarily for everyone, like it or not.

We’ve been talking about this a lot around our house, which is actually our rented apartment and will probably continue to be that for a long time. Ten years ago – in different locations and different marriages – both my husband and I were homeowners, but we’re just not seeing that happening for us together. Since we actually do understand what “interest-only” and “zero-down” mortgages mean and don’t want to get caught in that, we have the traditional “barrier” of a down payment – and in our Southern California market, that can be a big barrier without another house to sell. And with joint-custody arrangements involving two school-aged children, moving somewhere less expensive isn’t a realistic option for us at this time either. So we’ll rent, we’ll save up what we can, and we’ll be grateful we do have a comfortable place to come home to, even if we don’t own it.

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  1. WG – Maybe that’s why home ownership is the “American” dream. :-). I think feeling shut out from it bothers my husband more than it does me…I come from New York City people who were lifelong apartment dwellers and renters, and my parents didn’t have much aptitude for being homeowners.

  2. The issue behind this discussion has to do not only with mortgages and home equity but also with the value of geographical mobility. I don’t look at my commitment to staying in my city as an obstacle to my career (though undoubtedly it is) – instead I evaluate my career in terms of how well it can enable me to put down roots in this city where I have family, friends, and (yes) a house.

  3. b & p – Good point. I think that geographic mobility has a value that may change depending on where one is in one’s professional and family life, and how many roots one has put down already. My son’s just out of college and he wants big-city life right now, but we don’t know how long he’ll feel that way. My husband and I actually have the community roots, so it’s ironic in a way that we can’t strengthen them by becoming homeowners, but in the community we’re “rooted” in, it’s not financially realistic right now.