There’s no point in mincing words when it comes to the U.S. housing market. Your choices will inevitably be between bad, really bad, and intolerable. It’s depressing and ties up an astounding 30%-40% of the average household budget. It’s a sad fact that fewer people can even afford homes these days. Two years ago 78% of people could afford a home on the median household income; last quarter that figure dropped to just 62%.
Most suburban homes are cheaply made, overpriced and require constant upkeep. Yet consumers are not only eager to plunge into this financial cesspool, they dream about it. Open houses in posh new neighborhoods inevitably draw a parade of Looky Lous who, in wide-eyed wonderment, wander through dreaming of the day all this could be theirs.
Certainly you can opt out of buying a home easy enough but renting has problems of its own. Many apartments are so poorly constructed you can hear your neighbors with embarrassing intimacy. Then there are lease agreements with pages of confusing legalese that deny renters fairly basic rights, such as redressing grievances through the courts. Right now there are few perfect housing solutions and the few that do exist are managed communities, some of which were started as experiments.
So you’re stuck with a lot of bad options when trying to do something as basic as keeping a roof over your head. Here are some better ways to get more for your housing dollar.
Avoid Emotional Purchases
An 1,100 square foot house three blocks from one of the best schools in the area may be a better deal than a 2,500 square foot dream home in the suburbs, even if you don’t have kids. If you’re buying a home the hardest thing to consider is selling it but that’s where the real estate industry really gets you. Everyone thinks they’re going to stay in a home more than 10 years, while in reality people move every five to seven years.
Stop Thinking Of Your Home As An Investment
That so many people consider an owner-occupied home as an “investment” is a good reminder why most people are poor. Your house is an illiquid asset with a high barrier to entry and very high ancillary costs including insurance, taxes and maintenance. Accounting for inflation, very few people actually make money on an owner-occupied dwelling and then only in a relative handful of neighborhoods. When you stop thinking of a home as an investment and reduce it to an asset that keeps the rain off your head, you’ll be taking a big step toward making housing work for you.
Your Real Estate Agent Is Not Your Friend
Oh, real estate agents are friendly for sure. Sometimes they’re an actual friend or relative, usually a friend of a friend. Real estate agents aren’t trained to be your friend, they’re trained to sell you the most house you can afford. They will happily sell you a house in a neighborhood they themselves wouldn’t drive through at night. They might know a certain homeowner’s association could be run by the Gestapo but don’t count on your agent telling you. Certainly there are some honest agents out there but they’re so diluted by the success school graduates that you really can’t trust the industry. Never forget you’re on your own after the closing.
The Neighborhood Is As Important As The House
Everyone knows the old industry jingle that reminds everyone “location, location, location” but few people understand how that applies to buying a home. The neighborhood is, in some ways, more important than the home itself. Schools, crime and traffic are all considerations that need to be considered but the home’s location within the neighborhood is also significant. How the area might age, flight patterns, drainage and traffic patterns are all part of a thorough analysis of a neighborhood. Finding the premium neighborhoods takes a lot of painstaking research, none of which is possible just flying in for the weekend. It’s no surprise that the most attractive neighborhoods usually have the fewest homes for sale and they are not on the market very long.
Consider Alternate Housing Options
Finally consider options for alternative housing. Tiny houses, living in an RV or building your own home are all options few people consider. You might not get to see some of the more interesting housing options in a new area because they may not advertise or pay your real estate agent a commission. Alternate housing is not for everyone but it’s good to review your options. A used prefabricated home on a small tract of land may not spell dream home for many people but it might be your most cost-effective housing option.
For too many people a home is a dream or a status symbol and not an asset to keep a roof over their heads. The housing industry knows most people are suckers and have continued to push housing costs higher while chipping away at the quality. It’s sad that our options are so limited but it’s going to take widespread consumer revolt to make changes in an industry with such deep roots in traditions that go back hundreds of years.