mad anthony

Rants, politics, and thoughts on politics, technology, life,
and stuff from a generally politically conservative Baltimoron.

Wednesday, August 15, 2007

Why I kind of wish I hadn't bought a house...

I've been having a discussion with bsom and his wife on the housing market. I'm pessimistic on the housing market for the next few years, mostly because I bought a house last year and whatever I do is usually done at the worst possible time. I became an MIS major in college right when IT went in the shitter, I bought a PT Cruiser the week they went from being the hottest car to darling of the rental lot, and I seem to have bought a house right before the market tanked. If I ever start buying stocks, you should probably short them.

bsom and his wife are more optomistic. They bought a house about a year before I did, around the corner from where mine is, so they are in a similar situation, but since they don't see the world through shit-colored glasses like I do, they think things will be OK - that prices will eventually pick up, and that BRAC (Base Closing and Realignment, which is going to supposedly create a bunch of jobs at the Aberdeen Proving Grounds, which is about 20 minutes away from Casa De Mad, will drive up prices.

From what I've seen, prices around Baltimore seem to be pretty stable. Looking at Zillow, I don't see any townhouses in my development that have sold for less than mine did, but most of them are probably 3-bedrooms and may have some other improvements. I also didn't check the mortgage deeds, so I don't know if any of them had cash back to the buyers at closing.

But I'll sometimes page through a local realtor's site, and see houses that look nicer than mine at less than I paid for mine. It could be that they are worse in real life. But it also seems like there is a good chance that if I'd waited to buy, I could have snagged a nicer house at a lower price.

I also think that the subrime explosion is going to have a profoundly negative effect on the market for houses, especially my house. As a "starter" house, there is a good chance that a potential buyer would be the kind of credit-challenged buyer that would need an IO/ARM/stated income or whatever to qualify, and nowdays you can't get those kind of loans. That sharply reduces the amount of potential buyers, and anytime you reduce demand and keep supply the same, prices drop.

I feel like I'm losing money by owning a house. I probably could have rented a decent place for less than my mortgage payments. My previous rent was about half of my mortgage, and included utilities. Sure, it wasn't building equity, but if I'd put that money in an interest-bearing savings account, I probably would have earned more than the negative return that I'm getting from paying interest on the depreciating asset that is my house.

I've also lost a bunch of freedom by owning a house. Pre-house, I had an escape plan. If I ever got too fed up with my job or life in general, I could quit and try something different - go to law school or something. I had about a year's salary in the bank. But then I went and threw that money away on a down payment and closing costs. Now I can't leave my job - I'm chained to making that mortgage payment every month for the next 38 years and 11 months. If I sell, I'll be broke - negative appreciation plus closing costs and realtor fees and the rest. So I feel like I've lost my freedom. Would I have made a drastic life-changing move if I was still renting? Probably not, but it's nice to have that option available.

The other thing is I'm not sure I made a great choice in the particular house I bought. I didn't look at a whole lot of houses before I made an offer on this one. There are things I like about it - good floorplan, big bedrooms, fireplace, plenty of bathrooms. But there have been issues, like the AC I needed to replace, and there are a bunch of things that I still need to do to make the house more livable - fence in the backyard, replace the front door, renovate the kitchen. These things all require spending money, and I'm reluctant to dump more money into this money pit - but if I ever do sell, these things will bite me in the ass. Also, I wonder if the layout - 2 bedrooms - will hurt me when it comes time to sell. I prefer having two big bedrooms to 3 tiny ones, but I'm not the typical buyer. I also wonder how much more "deferred maintenance" I'm going to discover as I keep living here.

There are certain intangibles I've gained by buying - I have more room, I don't have to fight for a parking space, I can go to yard sales. But all of these could have been achieved by moving to a nicer rental, and I'd have enough money in the bank to buy an Escalade for cash. Instead, I have a house, and enough money in the bank to buy a used Kia.


At 5:21 PM, Blogger tralatrala said...

You really are ridiculous.
Add tax break to your positives list.

There will ALWAYS be first time a matter of fact the reason that prices have remained stable in homes like ours is b/c they are the affordable homes in our area. The "bubble" burst on homes 400k + months and months before the stagnation started in our level. It's a cycle. We're in a slump, it WILL take an upswing again...and all that being said, and you really do decide to up and leave Maryland for whatever reason, give it 5 years, and you've broken even on your closing costs and you can cut your ties and run.

If the market hasn't stabilized in 5-10 years, and you don't make money on your house, I'll eat crow and cow to your pessimistic ways, but since I know I'm right, I know you'll be the one eating crow!

At 7:41 PM, Blogger tralatrala said...

One more thing, another way to look at the whole "hard to get loans leading to less potential buyers" thing...if you look at it on the flip side, if you had waited until now or a year from now, YOU may be on the end of not being able to get a loan, OR you may have been approved for far less then you were for your current house because of risk levels leading you to not being able to afford "better houses" anyway. So why not make the best of your situation (which btw is a GOOD SITUATION) and make your house what you want it to be, and enjoy it since you're paying for it. Stop focusing on the "I should haves" and start focusing on the "I am gonnas" and take action to make positive things happen.

I will keep posting these obnoxiously positive notes if I have to!

At 9:47 PM, Blogger mad anthony said...

what can I say? I can find the cloud in any silver lining.

Tax breaks do help the equation, but you are still really only getting back a portion of YOUR money that YOU paid in in the first place. If rent - interest earned on money that would have gone to a down payment is still less than mortgage payment - tax refund, renting still would have been the better choice.

I guess it might have been harder for me to get a mortgage. The thing is that it SHOULD have been harder for me to get a mortgage. Prudent lenders don't make loans to barely-employed twenty-somethings where the mortgage payments are half their net income.

To be fair, interest rates probably would have been higher had I bought now. But they would have been 0 if I never bought.

As far as making my house what I want it to be, well, that would take money, which I don't really have, since I bought a house and thus am almost a quarter-million dollars in debt.

At 6:37 PM, Blogger Tiago said...

Both buy or sell a house fast have several risks, but you shouldn´t regret your decision, in that time it looks logic. When someone is sure that did everything he could to achieve something even if he doesn´t succeed he has nothing to cried.


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