Sep 17 2009

Thoughts on a possible housing revival

It’s possible that this recession is winding down. New house construction is on the rise, according to CNN. Perhaps people are moving out of rental units and are becoming first-time house-buyers.

However. People are still losing their houses to foreclosure. And as the article points out, many adjustable rate mortgages are about to reset. If folks were unable to refinance (because their houses have dropped in value and they owe more than its worth…) and haven’t enjoyed a substantial increase of income since they acquired their mortgage, well, they’re going to be hurting pretty soon it seems.

I do hope we, collectively, will not forget some important lessons.

In the past, people bought into the idea that a house was always a financial investment. House values always go up, or so went the common thought. They don’t “always” go up — in fact, they can tumble just like a baby learning to walk.

Buying a house can make good financial sense. If you can absolutely afford the payments and upkeep, and if having a mortgage is cheaper than renting, then go for it.

I am extremely relieved that we didn’t buy a house this year. We simply could not afford it. We could have moved some numbers around on paper to make it look doable, but I think we’d regret it.

Why get a mortgage sooner than you’re ready? Why put yourself and your family through so much stress? Is having your own walls to paint and your own little plot of land really worth it? Because if it were me, we probably wouldn’t have the money left over to paint my toenails, let alone a house.

We’re steadily adding to our house savings and with a little luck, in a year and a half or so, we should have enough money thrown together to actually consider buying without it being incredibly foolish.

It would be great if the house we buy appreciates in value, but I won’t count on it. I’ll be thankful if, when we sell it, it keeps up with inflation. It would be great not to owe on it, too. But to expect a house to turn into an amazing investment is just wishful thinking, in my humble opinion. After property taxes, repairs, mortgage interest and realtor fees, it probably is a great thing to just break even.

As baby boomers start to retire and trade their houses for condos, apartments, vacation rentals, in-laws quarters, assisted living arrangements, and uh —  the grave, we’re going to see even more houses available for sale.

I’m going to speculate that in most markets, this will keep house prices in check. No ma’am, I don’t think we’ll be seeing astronomical inflation on house values again anytime soon.

Check out Mr. Tough Money Love’s article on this from earlier this summer.

And if you’re a first-time house buyer, check out this article in the NY Times (H-T Bethany).


I don’t know if you noticed, but I paid careful attention to use the word “house” instead of “home.” To me, home is where your family is. If you live in an apartment, trailer, mansion, bungalow or anywhere in between — if you rent or buy — your home is where you and your loved ones live, rest your heads and park your stuff.

A house is a structure. Period. I think people get caught up on the word “home” and the happy feeling it connotes, and equate its significance with having a mortgage, or being a “homeowner.” You don’t need a mortgage or a property deed to have a home.

7 Responses to “Thoughts on a possible housing revival”

  1. I could not agree with you more, Kacie! Your little footnote made me smile. I’m actually watching a big discussion of this very issue on CNN right now, as they tout the 8k government tax credit, etc. The tax credit is great, but I think all too often people see the 8k and nothing beyond that. Kinda scary stuff. Great, great post :)

  2. Thanks for the mention. And I agree with your argument that owning a house should not be a goal unto itself. Make where you live your home. If and when a house purchase makes sense, go for it but not before.
    .-= Mr. ToughMoneyLove´s last blog ..Splashing Cold Water on the Frugal Garden =-.

  3. Well said, Kacie!
    .-= Bethany´s last blog ..…on those Indiana nights… =-.

  4. You’re absolutely right! It’ll probably be another two years before we can buy a house. That’s okay with me. More time to get prepared!
    .-= Karen´s last blog ..Necessity is the mother of frugality =-.

  5. Kacie,
    You are so right, as we have found out this year. We have realized rather quickly what a stupid decision financing a house 100% was–even if “everyone was doing it” 3 years ago. We will not be so hasty the next time we go to buy, and I admire you for making the wise but not easy decision.

    .-= Vanderbilt Wife´s last blog ..Heaven and Fall in One Little Cookie =-.

  6. I agree with you on the house vs. home thing. I live in an apartment and have rented for 10 years since I left high school. I cannot afford a house right now but I do love my home.

    I love that when something major goes wrong I can just call the office and they send someone to fix it. I love not having to mow the (very large) lawn and I love that when the tornado winds knocked off roof tiles….there was maintenance to fix it. I do dream of owning a house…but I am not in a rush to get one (especially when I think of all the work that comes with one.)

    I have made my apartment my home and I love it.
    .-= Lulu´s last blog ..Tracking My Finances In 2009: 17 September =-.

  7. Hi Kacie, When we bought our first house in 1988 we got first time home buyers $$’s in the form of a tax credit that equaled 2% off our interest rate for the life of the loan. There will always be first time “home” buyers $$ available, just may have to search for it.
    Do you remember the plaque the sales agent gave us as a home warming gift?
    “A house is made of brick and stone, A home is made of love alone”

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Hey! I'm Kacie, wife to Shane and mother to Jonathan (7), Vivienne (5) and Amelia (2) . I write about my family's finance: how we save money, improve our spending, and plan for the future.

I hope I can inspire and encourage you to improve your situation. See disclosure.

I'm adopting a much slower-paced posting schedule, and treating this as a hobby blog now.

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