Real estate

…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.

Almost.

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?

 

 

 

Is this some kind of a miracle or not?

Zillow says my house is now worth $235,000. That’s three grand more than I paid for it!

Now, o’course…it must be said that in times past we’ve been known to pontificate that Zillow is full of beans. But possibly its beaniness is in the mind of the beholder…

On the other hand, as we scribble there’s a foreclosure on the market, just around the corner. The bank seems to believe it’s worth $225,000, even though it’s a short stone’s throw away from the conduit of blight that is hideous 19th Avenue.

That house need$ work, but it has good bones: it’s SDXB’s model, hands-down the best floor plan in the tract. And the asking price is not quite as ridiculous as the three hundred grand another bank hopes to get for a decrepit house just down the street, same floor plan as mine but with a second-rate garage enclosure bloating the livable square-footage.

😀

Phoenix is a city of small enclaves. The result is a patchwork of property values. In the North Central area, some areas are rebounding in value, to the point where prices are already looking ridiculous again. Others, elbow-to-elbow with $500,000 neighborhoods, are still on the downscale side.

The increases haven’t struck M’hijito’s neighborhood, at least not exactly. Cattycorner across the street from him, a house is on the market for $350,000. But it has five bedrooms (it’s been hugely added onto) and someone went amok with the renovations in there. Zillow still values M’hijito’s house at under two hundred thou’.

On the other hand…just now almost nothing is for sale in his area. All the foreclosures are finally off the market. Prices for truly cute, centrally located mid-century houses within walking distance (for a young person) of the much-touted light rail line are very reasonable just now. I think that returns the neighborhood to the status it held at the time we bought: ripe for gentrification.

It’s perfect for young professional singles and couples.

IMHO we’ll be rightside-up by the end of this year. And if the economy holds for just a few more years, we should at least break even on the thing.

Okay, all you folks who observed that seven rooms sprawling over 1,860 square feet is a bit much for one single old bat: how d’you like this little patio home?

Needs work, IMHO, but it’s kinda cute, isn’t it? That thing is about a block from the church — maybe a little less, actually. I could walk to choir practice (though walking back at 9:00 p.m. might not be well advised). It’s very central. On a good day I could actually walk to my favorite purveyor of gourmet groceries. I could even walk to my son’s house. Wouldn’t he be thrilled! 🙄

Theoretically the area is in a prime part of Our Beloved City, off North Central between Seventh Street and Seventh Avenue. In reality, though, it’s on a street zoned some decades ago for high-density housing, and so is part of a motley collection of aging apartments and patio homes. One of these little developments, right across the street from the church, has been converted into a rather grim-looking nursing home. If you can get to the page that lets you view the street, you see it’s right next door to a sixties-looking two-story apartment building. It must be pretty much surrounded with those, plus it’s sandwiched between two schools: noisy, crowded, and starting to run down at the heels.

On the other hand, the price is incredibly right: $129,000, and you probably could get it for less.

But back on the first hand…if I cleared $180,000 from the sale of my palace and scored that thing for $125,000, I’d have $55,000, all of which would probably be consumed in making the joint habitable.

Those pink carpets…OUCH! They make your eyes hurt just looking at them in a photo. The walls appear to be painted shiny raspberry, perfectly godawful. Or green. Or white. Whatever…I hate shiny paint, especially on the ceilings (!!), and so even if it weren’t Kool-Aid Pink, it’d have to be repainted. That glossy stuff would take some prep and might require two coats to cover: $1,000.

But before we painted, I’d be wanting to do something about the slit-shaped pass-through between the kitchen and the living area. Actually, the kitchen is kind of amazing for such a little place: look at all that cabinetry. Yes, it does appear to be pickled oak…yet it redeems itself by its plenteousness. But…it’s ugleeeeeeee! One might paint it. Or dub it “retro” and get used to it.

I’d want to take out that soffit with the long row of single-door over-the-counter cabinets. That would open up the space pretty well. Removing the ledge thingie and making the countertop flat would complete the effect. Imagine that countertop, flat, with no ugly soffit over it, and made of granite… Hm.

So, another eight hundred to a thousand dollah to pull out the soffit with the cabinets and do some drywall work. Countertop? Anyone’s guess. Can’t tell how long it is, really, so I’d hesitate to hazard a guess. It appears to be formica, not too offensive…if it’s in good condition, it could sit there for a few months or years while one dealt with more drastic offenses.

Like, for example, that fluorescent ceiling. Oh gawd, hideous, eye-scorching fluorescents! What I’d want to do is take the lights out, and then build a skylight into the cove. Then install recessed lighting all around the perimeter of the thing, with maybe some cool glass hanging lights hovering over the countertops. Skylight plus drywall plus rewiring: about $1500, I’d guess.

Those pendant lights that used to be blindingly expensive when they were at the pinnacle of snooty high style are now available at Home Depot and waypoints, pretty reasonably priced.  Could be kinda nice over a completely flat, ledge-free counter, demarcating the living room from the kitchen.

Then the flooring. Holy mackerel. Tired vinyl (undoubtedly tainted with asbestos) in the kitchen and gaudy rose carpets throughout the rest of the joint. I’d probably want to put down wood or a convincing imitation thereof. Hm. Fifteen hundred square feet of it. What? $8000? Bet you couldn’t get it done for much less than five grand.

And we have the accursed electric stove. The place has gas service. “Gas heat” means they probably have a single line going to the gas pack on the roof that’s not a large enough gauge to serve any other appliances. So if you want a real stove, what you have to do is switch out the gas pack for a heat pump: $5,000.

Then you have a plumber run a line into the kitchen. Cost: depends on the difficulty of the job. I got mine done pretty cheaply, but it usually costs a pretty penny. All told, though, this project is going to run around $5,000 to $6,000.

New gas stove: $530 for a decent Kenmore free-standing gas stove; about a hundred dollah less for one that looks flimsier but would do the job just fine. Delivery & installation, probably another $100.

Usually the dishwasher has to be replaced: $500, plus or minus.

I’ve never moved into a house whose water heater didn’t have to be replaced forthwith: 40 gallons, nine-year, natural gas, $485. Plus installation, prob’ly another hundred bucks.

That strange little alcove behind the square arch looks like an add-on. It probably started life as a patio. That or a one-car garage: notice the ad doesn’t say anything about parking. Though it looks like a professional job, add-ons are notoriously hard to air-condition here in Arizona.

Notice all those floor and table fans. What are they trying to say to us?

There’s only one bathroom, and it looks like it only has a shower. Seriously? No bathtub?

If I’m right that the place has no garage, then the only storage may be that kitchen cabinetry. The bedrooms don’t appear to have anything special in the way of closets, and nothing else is highlighted in the ad. Explains the uglification, anyway.

No patio roof, meaning no shady place to sit and read the paper over coffee. No private place outside at all, though it must be said that the grounds are pretty pleasant.

Don’t you love the way the Realtor doesn’t mention what kind of plumbing is behind those walls? Interesting. Built in 1963…were they still installing black iron in those days?

Over here one finds a little more information: you get a storage shed, a carport, and a “slab” (i.e., uncovered parking space).

The homeowner’s association fee is a bracing $367 a month…but it includes a lot. My water, sewer, & trash pickup bill this month was $91; I pay Gerardo $75 a month for the yard work; I’m paying about $70 a month for the high-speed Internet connection, which is cable that doesn’t include television. So we’re at $236 right there, and that’s for a month when the water bill is low. In the summer water can go up to almost $200; so let’s imagine the bill averages around $145: total out of my pocket for services covered by the HOA fee would be $290, and the HOA fee also covers exterior maintenance, roof repair, and roof replacement. Looks like it’s about a wash.

It’s in the Arizona Public Service electric district, which means $300+ power bills in the summer. Way more than I pay APS’s competish, Salt River Project. It probably would cost the same or more to live there as it does to live here.

What would the fix-up and doll-up costs come to? Let’s see…

Mm hmh.  I’ve never had a move into a pre-owned shack cost me less than 40 grand, but that’s always included landscaping work. Ripping out the lawn and replacing it with desert landscaping ain’t cheap, even if it does pay for itself within a few years. So let’s assume the figure in the “realistic” column, conservatively adjusted for Murphy’s Law, is about right.

Maybe, I might clear around $55,000 in cash on the sale of this house after buying that patio home. Fifty-five grand minus $36,700 leaves $18,300, enough to buy a pretty nice new car, assuming a trade-in value of $3,000 on the Dog Chariot.

Not bad.

Think I should hurry out and buy it?