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?

Look at this. And this. Or maybe this.

A hundred and ninety-five grand for that first hacienda, and I’ll bet you can get it cheaper. Matter of fact, I’ll bet I could rent something like it for less than a 5% return on investment from the proceeds of sale of the house I’m living in right now.

Gardener in: clean up courtyard, plant flowers, plant una jacaranda. Owner’s furniture out. Local purchases in.

Aquí: all my furniture goes to my son. The junk, like the books and the piles of trash I never even look at, goes away. Dog gets a double dose of every vaccine known to veterinariankind.

I throw my clothes, a few favorite pots and pans, and the dog in the car and drive to San Miguel…never, with any luck, to return.

Why in the name of God am I still in this place?

Consider:

I don’t want to work anymore, but I can’t live here without working. I have to work like a horse to keep a roof over my head in an aging tract bordered on two sides by increasingly dank and violent slums, under siege by pistol-waving thugs pursued by legions of cops. The central part of the city, except for three or four small, elite, and expensive enclaves, is steadily deteriorating; it’s already reached the point where young adults say they would not live in a home south of the Loop 101…that’s nine miles to the north of here. If you covet middle-class neighbors and infrastructure, you have two choices: you can live in a sea of elbow-to-elbow cookie-cutter houses built so shabbily that by the time they’re ten years old they’re falling apart, or you can mortgage your first-born son to live in Scottsdale or Carefree. There really is surprisingly little in between.

The U.S. is turning into a third-world country. Why not move to a real third-world country and enjoy the amenities?

Amenity numero uno being that I could live like the Queen of Sheba on my Social Security in this place.

Amenity numero dos: For as little as half of what I would clear from my shack, a fun and original and downright unique place awaits.

 ← Go ahead. Just try to find a detail  like this in the US for $135,000…

How about a brand-new colonial-style hacienda? ↓

For just a few…

…thousand dollars more than I could get for my house…

Amenity numero tres: Hired help in Mexico comes even cheaper than the real estate. Much cheaper, as our industrialist friends know, the folks who have sent our jobs down there. You and I could own a place like this and afford to have someone come in and clean it and take care of the grounds. And still have enough left to go out to eat!

Just imagine: this for about what I can get for my dowdy little tract house…

Okay…whence this little frenzy?

Welp, in the aftermath of the most recent little drama, a strange blue funk settled over me. Weird, because there’s really little reason for it: I was not harmed, was not even especially alarmed…although I surely would have been had I not moved myself to go check the locks on the garage and back doors. The could’ve been, it develops, is more disturbing than one would expect. So, too, is the bizarre irony that as the most recent episode was coming down, I was cruising the Web looking for “better” places to live. Whatever those might be.

Know how long I’ve been looking for a “better” place to live?

Not weeks. Not months. Years.

Because the houses in this neighborhood are solidly built of masonry (unlike the standard stick-built Phoenix-area tract house, which is ticky and tacky), because they are well designed, because they’re a block from a very nice park, because they abut a tract of $500,000 to $1 million homes, because they’re centrally located, you can’t find a thing that’s a few blocks further from the Conduit of Blight for anything like what a normal person can pay. Yes. I could sell my house and apply the proceeds as a down payment for a comparable (but not as nice) house further from Crook Central. But for what looks like an even exchange but is not, I would end up owing about $60,0000, get a teensy little lot with about six feet between buildings, and drive halfway to Yuma, Prescott, or Tucson for the privilege.

In the unlikely event that I could get a 30-year loan for such a balance, I’d add $304/month to my already straitened budget; more likely, the best I could get would be a five-year loan, with a monthly payment of around $1100. Let’s say I netted $200,000 on the sale of my present home and invested that in instruments that return, on average, around 6% (as has been the case with retirement savings…with, alas, some notable exceptions). That would pay $1,000 a month…less 15% taxes, for a net of $850. A $200,000 loan at 4.5% would cost me $1,013 in principal & interest alone, meaning I’d have to come up with an extra $163 a month from someplace.

This means I don’t have much choice but to buy a house for no more than what I can net on the sale of this house. After closing costs, the best I could do would be around $190,000. Right now, not counting foreclosures (which are problematic), there are 12 houses in that price range in one North Central zip code, none of them in good areas (one does not want to be in Sunnyslope; one does not want to be east of Seventh Street or west of Seventh Avenue); thirteen in another (including a house in my neighborhood but closer to the Conduit); in another, one kinda cute little patio home that backs onto a shopping center; and in two in the last—one of them a decrepit patio home and the other one-bedroom apartment in a high-rise. I’ve looked at the latter; if claustrophobia is your preferred state of mind, it’s perfect.

Following the white flight, we find one, count it (1), house in the $150,000 to $200,000 range north of the Loop 101; several in Scottsdale but most are apartments and most overlook the freeway; quite a few in the cookie-cutter tracts in Mesa, Chandler, and Gilbert (invest in oil futures to fund your driving habit!). On the west side, where you have to go past mile on mile on mile of blight to get to middle-class tracts, there are about three trillion vacancies in Sun City; several new tracts are (still…) under construction on the far, far, far west side (more oil futures!), and KJG and I saw some gorgeous new houses going up on large lots for around $265,000…plus.

Moving to these distant suburbs requires you to invest in a reliable vehicle and resign yourself to spending half your waking hours on the road. I could no doubt afford a tract house sitting on top of five adjacent neighbors’ houses out there. But it would mean I would have to give up seeing all my friends, give up choir, give up teaching at Paradise Valley… For heaven’s sake! If you’re going to move away from your entire life, why move into a tract where the houses will be “old” and need renovation in ten years? Why not move to Mexico?

* * *

A day or two ago it occurred to me that my paradigm is wrong. Something is wrong with the search paradigm. But what?

• Could I be searching for the wrong thing (should I be looking for an apartment, not a house? How about a big RV?).

• Or maybe I’m looking in the wrong place (somewhere other than Phoenix, for example? Like…say, Mexico, the south of France, Yarnell?).

• Or…maybe the search should not be for new-to-me housing but for better ways to secure this house and for more accuracy with a pistol.

Maybe the reason I can’t find anything I care to live in and that I can afford in an area where I want to live is that I really don’t want to move. Possibly I’m complacent. Or possibly I actually have found housing that’s as ideal as it’s going to get at this time in my life: paid off, relatively low in maintenance, centrally located, and except for the occasional moment of drama, mostly pleasant to live in.

On the other hand…in Mexico, one could live reasonably well on one’s Social Security benefit alone.