Houses =/= Free Money

[firebyrd]

This article from Newsweek disturbs me greatly. A couple (no children are mentioned) spend $750,000 on their 3,500 square foot dream home in Florida. They built some of it using an inheritance, did not get an ARM, and can afford their payments. Now, a little over a year after completion, the husband has buyer's remorse because he chose to build too big and the house's value is dropping because of the real estate crash.

I find this utterly ridiculous. Why on earth would someone build their dream home and then be sad they can't sell it for what they paid for it after a year? If you spent all that money, custom-built your house, etc, etc, why wouldn't you plan to stay there long term and enjoy it? A house is a place to shelter you, and if you go into it with those expectations rather than planning on getting a 52% value increase in five years, it's a lot easier to be satisfied. Even if you are looking at a house as an investment, expecting a return after a year is stupid. Investments are supposed to be long term. Additionally, if you're not going to be in a house for three to five years at the very least, it's stupid to buy one. The insane value increases we've been seeing recently are not the norm and you just won't gain enough equity to even break even without settling down for a few years.

I just can't get over the implication that he would sell their dream home if the price is right. If we ever get to build our dream home, the people at the nursing home are going to have to pry our old, arthritic fingers off the place and then drag us away kicking and screaming.

Comments

[seyrah.livejournal.com]

I'm with you. Investment-wise, except in the era of the huge, weird upswing we were having for a few years there, real estate is a slow and not always sound return. If you're looking to make X number of dollars in a year, you're better off with a CD or a money market account. It's only if the combined value of living in the place AND whatever return you get when you sell it are going to be worth more to you than your rent + whatever return you could get on your more liquid money.

[firebyrd.livejournal.com]

Exactly. To me, a home isn't an investment. It's a place to live where I don't have to worry about getting evicted or worry quite so much about people complaining about my birds being noisy and be able to change things to suit me. If you look at it strictly or primarily as an investment, you're inevitably going to be disappointed when the market goes into another slowdown, which it always does eventually.