My colleague, Derek Thompson, has collected comments from young people explaining why they think it's a bad idea to buy a house. There's a lot there to think about--one thing that jumps out at me is that after the last five years, it's finally starting to sink in that buying a house is not some sort of fantastic retirement plan that also comes bundled with granite countertops.
A lot of it is, however, reminiscent of the way that I thought even before the housing crisis. A lifelong New Yorker, I was accustomed to a renter culture; even at the peak of the bubble, only one third of New Yorkers owned their homes
. Well into my thirties, I was adamant that I had no interest in buying a home. I liked the freedom of knowing that I could pick up and move anywhere. And I didn't want to be responsible for maintenance.
Plus, economically, I understood that it wasn't the magic investment that most of the rest of the country seemed to think. Buying a house has high transaction costs, and it's an illiquid asset at the best of times. By 2002, I'd started to suspect that we were in a housing bubble, which made me even more leery--though if I'd understood the devastation that was preparing to descend on US homeowners, I would have been even more leery.
And yet, eventually, I changed my mind. I thought it might be worth running through some of the reasons for young people who expect a lifetime ahead as footlose renters.
1. You're not always going to be as mobile as you think. Eventually, most of you are going to acquire spouses and kids. Those spouses will probably have jobs (particularly if you're in the demographic that thinks it might move to San Francisco--or Paris--at any moment.) Those jobs will not necessarily allow them to pick up and move across oceans or continents so that you can explore some exciting new opportunity, or see what it's like to live somewhere different. Those kids--attached to their friends and schools--will, after a certain age, also be very resistant.
2. Moving eventually gets really old. I'm not saying I loved it when my possessions filled one or two trips of a minivan. But it started to become really hateful once my lifestyle expanded beyond 500 square feet--which, yes, you will eventually want to do. This was right around the time when I started to really feel those aches and pains that come from moving yourself out of one third-floor walkup, and into another. Your friends get similarly creaky, and wealthier, and busier, all of which means it's a lot harder to get them to show up to carry boxes.
That's when you start having to pay for movers, which costs thousands of dollars a pop, right at a time when you probably need some new furniture to fit your new digs (or because the old, much-moved stuff fell apart). And it takes weeks and weeks to pack and unpack all your stuff.
3. You may eventually tire of apartment or group house living. I remember sitting in my old apartment with my future (current) husband, and asking why people hated apartments.
"There are all these people around you all the time!" said my Florida-raised husband.
"I know! Isn't it cozy?" I said.
Now that we live in a row house, I've suddenly realized the joys of my own back yard, and not having strangers moving around overhead at odd hours of the night. Plus we have lots of space for entertaining and guests. Having grown up in an apartment, I'm also aware of the benefits (no stairs!) but overall, I like having more space and privacy.
4. You can get evicted from a rental. It happened to me in the last apartment I had in New York (yes, I paid the rent; they wanted to turn it into condos.) I'd lived there for three years, and was planning on staying for the indefinite future. Therefore I had put a lot of effort into making it a nice place to live--replacing a shower head, setting up a closet organizer, buying custom blinds, even having a friend make custom shelves. All lost when I was forced to move on a couple of month's notice.
And since I was at the bottom of the New York rental market ($1,300 for a one bedroom, albeit a tiny one, in a good neighborhood), it would have been very, very difficult to find anything equivalent.
By contrast, as long as I pay my mortgage, they can't move me.
5. You stabilize your housing costs. This depends on the area, of course, and it's less powerful in times of low inflation. But it's still a factor. Around here, rents are increasing at least 5% a year. We like knowing that we'll have a relatively low, fixed payment.
If we stay here long enough to pay off the mortgage (as we hope to), we'll eventually have nothing except property taxes to pay, which is (almost necessarily) a fraction of what the rent would be.
6. You can get better quality. Except for the very high end, most rentals come with the cheapest grade of everything. And some people will never care about having a nicer washer-dryer, a higher-end range, or a huge refrigerator. But many will--especially if they have kids.
7. You don't have to hassle with the landlord. Whenever something broke at our old house, we braced ourselves for another round of "how is this the tenant's fault?" We usually won, of course, but it's bad enough when a malfunctioning washer-dryer floods the living room and ruins some of your possessions. You don't want to also have to fight with the landlord about who's paying for repairs. We eventually had to go to court to get our security deposit back.
Then there were those "is it really broken?" questions, like "should they have to regrade a brick patio that dumps puddles into the kitchen during heavy rains?" or "how many roaches constitutes an infestation?" When it's your house, you can decide whether minor problems are worth the expense to fix them, or not. When you're a renter, you know what the answer will be. Not.
Not all landlords are so difficult, of course; I've had some gems in my time. But it's always a risk. And most of them do seem to regard security deposits as a sort of bonus.
8. You can make improvements. Want to hang a picture or paint the walls yellow? No one's stopping you. Hate the landscaping? Rip it out and plant something else. You can have the kitchen and bathroom and yard you want, not the one that's easiest to rent to the median buyer.
9. Over the long term, the cost of renting and buying should be about equal. This hasn't been true recently, of course. But landlords have to cover all the costs that you would have as a homeowner: the mortgage, the property taxes, the repairs. There's some spread, of course: landlords may have bought years ago, and they often have staffs that do maintenance. But unless you are in a housing market where everyone has experienced significant price appreciation, "bought years ago" should not matter much. And landlords often save additional money on repairs by doing the cheapest work possible, rather than the work you would actually want done.
10. Prices are not going to frequently drop by double digits It was obviously a very bad idea to buy a house between 2004-2010. But even if prices fall farther, this is not going to continue indefinitely. On average, outside of a few hot urban markets, house prices are not really all that volatile most of the time, which means that most people are now probably overcautious about the possibility of losing a ton of money, or not being able to sell the house when they need to.
11. Projects are fun. I didn't think so in my twenties. But it turns out that I like planning my tiny front garden, staining my own countertops, and picking out paint. If you're in a high-pressure, highly mental job, it's actually nice to have stuff to do that isn't high-pressure and doesn't require seventeen hours of reading and debate.
Of course, there are good reasons not to buy too: if you think you'll want to be mobile, the relationship between house prices and rents is really out of whack in your neighborhood, you can't seem to save a reasonable downpayment, or you just really hate doing anything around the house. There's nothing wrong with being a lifelong renter, if that's what suits your temperament. But there's also nothing wrong with changing your mind.
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