To buy or not to buy: The housing question

Buy or Not Buy

You graduate from college. You get a job. You save up for a down payment. You buy your first home. It’s a smart investment, right?

For centuries, buying land or property of some sort has been a marker of financial success. And for centuries, this has made sense— property created wealth. However, in today’s world, there are many more options when it comes to investing and owning a house is no longer the only way to grow your wealth.

This isn’t to say everyone should reconsider real estate. For some, it’s the right decision, depending on lifestyle and risk tolerance. But, if you are thinking about buying a house, or thinking about selling yours, it’s worth sitting down and assessing—or re-assessing—your values and goals.

My clients, Troy and Dorene, recently went through a similar process. After questioning the necessity of a home, they made the decision to sell and travel long-term. Full-time, meaningful travel had always been a dream of theirs, and once they removed the emotional pull to having a home, they realized they didn’t need one. They used the sale of their house and possessions to fund their new lifestyle and form Travel Life Experiences.

How do you make sure a house is, or isn’t, right for you? It starts with the basics: your goals and values. Write down four or five of your most important values (see my previous blog for a list) and discuss the common goals you can create from these values with your loved ones. If you find security tops your list, then perhaps investing in real estate is right for your lifestyle. However, if something like freedom is high up there, there are other options.

A home is the least liquid of investments—if you need money, you can’t take it out. Instead, you end up paying thousands of dollars in repairs, upgrades, and property taxes. That’s not to mention the mortgage you’ve taken out to buy it in the first place. And, although likely, you aren’t necessarily guaranteed to make this money back when you sell it.

You’re also fairly tied to the property. There are options to rent it out, but being an absentee landlord can come with a whole new set of issues!

It’s also worth considering the historic low interest rates we’re currently experiencing. Once these rise, and I believe they will, it will be more challenging to buy a house and maintain a mortgage.

So you’re with me so far, but there’s one thing missing, you say? What about the…stuff? If you’ve always envisioned a house with all the fixings, you’re probably wondering where you’ll put all the things you plan on accumulating. Alternatively, if you’re thinking of leaving the housing market, you’re probably wondering where you’ll put the things you already have accumulated.

Well, without a house, there’s certainly less “stuff”. Home ownership can perpetuate a cycle of buying material things. With a home comes home décor, more storage space, more rooms to fill. It’s not too long before you become trapped on the hedonic treadmill—acquiring new things to replace the old ones that have lost their novelty, and being no happier for it.

On the other hand, research indicates people are happier when they invest more in experiences or their passions instead of empty spending on things. Freeing yourself from a home means freeing yourself from possessions—granted not all possessions, but the ones that it turns out mean very little to you.

Without a house, you’re able to explore more flexible and diversified investments, as well. There are four other asset classes in which to invest: fixed income, U.S. stocks, international stocks, and commodities. Any combination of these, depending on your risk tolerance, can grow your wealth.

Once you’ve determined your goals and values, you may find owning a house is right for you. It is a secure investment that, for the most part, appreciates over time. You can also use your home equity and mortgage against other big purchases and to build up credit. A mortgage can be a forced savings mechanism where you have no option but to pay for the house.

If you’re thinking about getting into, or out of, the housing market, and want to explore the investment options open to you, feel free to send me an email. I’m happy to discuss this further as it applies to your unique lifestyle, goals, and values!