The Happiest Homeowners
Over the weekend, Ron Lieber walked through some of the reasons that you should still consider home ownership. Because this has been on my mind a lot lately, I wanted to highlight one very important issue Mr. Lieber brought up, the idea that there is much more to home ownership than a line item on a net worth statement:
“It is possible, as a homeowner, to make very little money but still buy plenty of happiness.”
With that in mind, consider the following:
1. Buying a home solely as an investment is a bad idea.
Treating your primary residence as a good, old-fashioned home (and forgetting about the possibility of its being an investment) leads to greater happiness. I am not saying that owning a home always makes you happier than renting, which is another discussion entirely.
2. If you aren’t thinking long term when you buy a home, your odds of disappointment are high.
I have often heard people from my parents’ generation say that their home was the best investment they ever made. But that is simply because it was the only thing they bought and held on to for 30 years. Often when you do the math, the home barely keeps pace with inflation. However, because they avoided making many of the classic behavioral mistakes (buying high and selling low) that we make when we invest in the stock market, it was still the best investment they made during their lifetimes.
3. Don’t treat your home like a piggy bank.
Before the the last 10 years, people thought of the family home as a sacred place and not something they thought about flipping at the first sign of profit. People didn’t treat what the last house in the neighborhood sold for as a quote for their own home, and they didn’t get an appraisal every six months so they could get a new line of credit. In fact, I think it is fair to say that most of the time people didn’t know or care what the family home was worth. They lived there and didn’t plan on leaving.
4. Owning a home isn’t for everyone.
Not everyone is suited to owning a home. For many of us, times are different. We might be required to move more often for work, and that introduces some complexity that didn’t exist for previous generations. In those cases, it might be better to rent instead of playing the buy-and-hope game. If you find yourself in the fortunate situation that you can buy a home someplace where you plan on staying for a long time, treat it as a home and not as an investment. You will be happier for it.
This sketch originally appeared in The New York Times on August 30, 2010