…and it decidedly is not a “dream.” That’s an embarrassing little truth that Evan lays bare in a recent post at My Journey to Millions. In a burst of his characteristic common sense, he wonders whether a better name for “the American dream” might be “the American nightmare.” In a shoot-from-the-hip comment, I vaguely agreed with him, despite several commenters’ arguments that “owning” a home is better than renting. But since his post went up, I’ve found myself returning to his query of the sacrosanct American ideal. The question is impossible to brush off, especially if you’ve had any serious experience with homeownership.
Consider: if we do a search for “real estate” in our city, we find a Google link to Trulia: “Find Homes For Sale in [Yourtown].” Realty Executives wishes to direct us to “Historic Phoenix Homes,” something that surely is an oxymoron, to say nothing of moronic. We’re lectured that “Buying a home is one of the biggest investments you may ever make financially” and “the Urban Team can help you buy a home,” to which we answer, “That’s quite a trick,” because my dears, home is not a place; home is where you hang your hat.
We don’t buy and sell homes. We (and our mortgage lenders) buy and sell houses. A house is, in most (but not all) circumstances, an investment. Because real estate prices in livable neighborhoods are so outlandishly huge, few of us who live outside the One Percent can afford to pay for a house in cash; consequently, most of us borrow outlandishly huge sums, putting up our “homes” as collateral and nailing ourselves to debt that will persist for upwards of 30 years. Over three decades, should we last long enough to pay off the loan, the mortgage interest alone will be as much as or more than the purchase price of the dwelling.
Some investment, eh?
Oh, you say, but in 30 years the house will be worth many times more than what we paid for it! Well…not quite.
In 30 years, the value of a dollar will be worth many times less than it was when you bought the shack. If you are very lucky and the neighborhood doesn’t decline, the amount you can clear from the sale of your future paid-off house will be just about enough to purchase a similar home in a similar or lesser neighborhood. In terms of real purchasing power, then: no. Thirty years from now your house will not really be worth more than what you paid for it.
In the meantime, though: you’ve actually disbursed, to the mortgage banker, twice as much as the house’s purchase price. That is, after thirty years have passed, the place is worth about half what you paid for it, over the long run.
But not quite: you’ve installed at least one new roof ($5,000 a hit); repaired and probably upgraded the plumbing system ($5,000 to $10,000), likely upgraded the kitchen and bathrooms two or three times ($5,000 to $15,000); painted inside and out four or five times ($2,000 to $5,000 if you hire someone to do this bitch of a job); replastered the pool ($10,000); cut down a 25-year-0ld shade tree ($1,000) and replaced it with an expensive specimen tree ($500); installed a new security system ($1,000 + a monthly subscription); installed energy-efficient windows ($5,000), replaced the door the burglar kicked in ($500 to $1,500; $500 deductible for the home insurance, plus the increase in premiums), replaced two water heaters ($500 to $800 apiece), repaired the HVAC system three times (a lot) and finally replaced that, too ($4,000)…and on and on and on.
Begins to make Evan’s “American nightmare” sobriquet ring true, doesn’t it?
You know, it’s not necessary to pony up mortgage payments for thirty years to achieve the “American dream.” If you crave to own a house, some day, you could do what my father did:
Don’t purchase the roof over your head until you retire, at which time you will need housing that doesn’t drain your bank account once a month.
Instead, during your entire working life, either rent or live in company housing. Take the savings that result — which will be considerable, since you will not have to pay for maintenance, repairs, insurance, taxes, mortgage interest, and fancification of your dwelling — and invest every penny.
Then, when you’re ready to retire (which, if you’re not paying through the wazoo for the roof overhead, is likely to be well before the age of 65 or 67 or 70 or 75 or whatever standard “retirement age” is inflicted on your generation), use part of your savings to purchase a modest but comfortable, low-maintenance house in cash. This will vastly reduce your monthly out-of-pocket costs — now you will have to pay neither rent nor a mortgage — and you will have achieved the “American dream.” Since you will have been married for upwards of 25 years, it’s unlikely you’ll divorce, and so your investment in the “dream” will be pretty safe. Voilà.
During the entire time I was growing up (and before then, as far as I can tell), my father never owned our several homes. He and my mother rented, except when we lived in Arabia, where Aramco provided our housing — essentially the same as renting. My mother, who was in charge of finding and maintaining these dwellings, usually got us into fairly decent places to live. Some were very nice indeed; only one was typical Southern California ticky-tacky. We never wanted for comfortable, peaceful housing. And as for said housing being a “home”: home was what the people who lived in it created.
My father was 53 when he quit his job to retire; my mother would have been 48. He moved them to Arizona (women didn’t make these decisions then, nor did they buy and sell houses, at least not without a power of attorney from their dear husbands), because taxes and real estate prices were far lower than anything they could find in California. He bought a house here in cash, providing them with a place to live that cost almost nothing: a modest annual tax bill was about it. Of course, they had to pay for the utilities and maintenance — but because the house was new, maintenance and repairs were almost nil for quite some time.
For him, the American dream was to quit working. And he achieved it largely by avoiding what Evan aptly calls “the American nightmare.” My father didn’t let himself get sucked into the myth.
Why should you?