It’s a little long so bear with me, but this is something I have been noticing:
I’m a rare bird. I’m a millennial homeowner. It’s not the biggest or the best home but it checks off most boxes in what I was looking for and it’s 100% mine. It’s about 1000 square feet on a 5000 square foot piece of property. It’s nearly 70 years old and I got it for about $200,000, making my mortgage roughly $2,000 per month. Due to taxes, it’s up over $300 since I bought it in 2012.
I’ve slowly realized, however, that I am lucky I got it at all. This home, with two beds and one bath is a true condo/apartment alternative, but with added storage in the basement and attic, and my own lawn for whatever I want to do with. I am lucky and I won’t deny it because an actual condo/apartment goes for as much or more than what I pay per month, and comes with a lot less in storage and true privacy. I’ve said this many times, that the best homes are all spoken for, and it’s rare to find a decent home pop up on the market, at a fair price, that needs minimal work.
My home was sold by the original owner, and she took great care of it, but there were some things that needed attention. Of course, I have to maintain everything myself. If the AC dies, a pipe bursts, or a door won’t latch right, it’s on me to fix it or hire a guy to do it. On the other hand, if I want to knock down a wall, add a few new outlets, or do a full kitchen renovation, I can without needing to go through anyone but the town.
There’s always a trade off. Homeownership responsibility is fully on the homeowner. The condo/apartment life typically has shared responsibility or mostly falls on the landlord, and is included in the rent or association fees. There are many exceptions, but this is the simplistic take on it. All this is understood I would imagine, and we all see the cost of living in an apartment is starting to outpace the cost of owning a home. A person was once able to live comfortably in an apartment and save up for a home within a few years. Now, it’s basically becoming the only way to live, but I’ll get to that later.
So what am I saying? The cost of affording a place to live in is essentially the beginnings of a problem I have observed over the years. It’s sort of become a lame and often repeated joke about millennials not being able to own a home. Unless you find a home like mine, and you don’t have many hang ups about rolling your sleeves up and doing some maintenance on an older home, you probably aren’t going to find an affordable home. And I am not trying to sound conceited, but seriously good luck finding some home worth living in at an affordable price in this market. But if you can, jump on it and learn how to maintain as much as you can yourself. You gotta build that equity, fight through the storm, and hope to capitalize on the potential earnings of this home to help you get to the next home. You cannot do this with an apartment. Rent does not go into your home as equity and if the market favors your particular area, you cannot profit by moving out of your apartment.
But even if you find a decent home, and somehow beat the system, we’re all just barely staying afloat. There’s so much more I have observed in the past decade or so that’s making it harder to be a homeowner. We’re all a few rules and regulations away from having a decent home become worthless, or rather worth something, but not to the homeowner. To take a loss on a home now would cause many to concede to the rising tide of apartments. The landscape is changing. Everywhere I look, they are building new apartment complexes. They are tearing down decrepit, old commercial and industrial structures and building apartment villages and shopping districts. All of them are complete with shops, gyms, plazas, theaters, hotels, and access to public transit. All of them are mini-towns, built for convenience, commerce, and commutters, and all of these housing blocks are stylishly built with the word “luxury” slapped on every complex’s sign. This idea is taking off everywhere. If the “luxury” housing block isn’t a self contained unit, it’s built near a mall, a downtown area, and commuter spot. In a sense, it’s genius, because it’s redeveloping failed plazas from the 80s and 90s and even merging them with malls on their last leg. But at the same time, it’s something to be weary of because not all these housing blocks are as luxurious as they might seem and all of them further take the idea of ownership out of having a home.
Meanwhile, I am about to sell my home as it has supposedly gained some value and I would like to have a little more land. But the market is different and the goalposts have been moved since I was last in this position. In the past several years in my home, it has increased $40,000 in value and I have invested $20,000 through the down payment and mortgage payments. I am looking to get $60,000 back if all checks out. Though, I have dumped $30,000 into a full kitchen renovation four years ago, so I really get $30,000 profit (of course technically I got use out of the kitchen so I can’t fairly say it’s a $30,000 loss). Plus after 5% commission to my realtor and attorney and closing costs, perhaps it’s about $15,000 profit. But then there’s the buyer’s potential complaints after inspection and it’s gonna cost me as I have an old roof and hot water heater. Maybe if I’m lucky, I’ll break even or get $5,000 profit. So when all is said and done, I will have, hopefully, $40,000 to put into a new home… but not in my town.
My home benefitted from a boom, but so did everyone else’s. As a homeowner and potential seller, I’m on the hook for all repairs or credits. There have been more crackdowns on ensuring all permits for work done on your home, even if it was done by the previous owner. And there has been more scrutiny from buyers over what the seller should do before selling. Even realtors recommend doing things like painting, ripping up carpet, and spiffing up the place. That’s more cost. Then there’s the taxes going up so my home might attract fewer buyers. The only competition I have is all those new “luxury” apartments going up around me. They offer so much more than I can. The only thing they don’t offer is equity and potential profit from selling a home, but if I only make $5,000 after all bets are settled, what’s the point really? Tha;s less than $1,000 for each year I lived there.
Plus, in looking at other homes in my town, they are either more built up and crazy expensive or abandoned and bank owned. And that’s where it gets more tricky. In the end, the bank sets a more realistic, but unobtainable price. The guy next door to me wanted to move last year, but could not afford to take a loss or repair things in his home for a new buyer. His house was valued at $290,000. To “save money” he stopped paying his mortgage and got foreclosed. He was booted out, moved to an apartment, and the house was sold by the bank for $170,000. It was, in turn, bought by a flipper, and he now wants $360,000 from it… no $340,000… no $325,000… okay how about $315,000? And now he’s taking a loss on his work and still has to pay the mortgage til it sells. Despite his hard work, the town did not deem that house any more valuable than when the original owner tired to sell it. Best of luck to him if he wanted to make a profit. Even the house across from me has gone through a similar ordeal, but the sellers pulled through by selling to an older woman buying a house for her millennial daughter and husband.. And the house behind me has been foreclosed several times. Plus the most affordable homes around me on the market are sitting abandoned, and they all have potentially expensive issues.
But those “luxury” apartments are new. No need to worry about costs there. No need to think about it. There you can have everything you need. You can shop just feet from your home, and roll out of bed to hop on the bus or train to work. You hardly need a car (another expense to consider) and you can live out a fairly regulated existence. I mean, what’s the point in going the homeowner route if equity doesn’t matter?
I mean I want a new home, but when I saw what’s around me knowing my hard work, time, and energy are not enough to afford something near me, and that playing the same game my parents and grandparents played in building up isn’t working out for me, I opted to look further out in the country. Yeah, I could afford those homes, but there’s nothing out there. Getting to work would be harder, getting groceries would take longer, and nothing would be as accessible. To play this game, I must either move way outside the population area or concede to the apartment life.
In the future, and I have already seen slight beginnings of this in towns closer to the city and along major commuter lines, they are going to let these homes become more unattainable. Soon the banks will snatch up blocks of homes and trade these assets with one another at those low prices to consolidate properties. They will make flippers give up on turning a profit by making it hard for them to ask for what they deserve. Then they will simply redevelop the blocks of land and put up more apartments. Any holdouts will be eminent domained out of existence. Soon enough the only way to live in major metropolitan areas and suburbs will be via rent. And soon it will be the only place to easily live. I wholeheartedly believe towns and developers are in bed together making these backroom deals to make it hard for those starting out to afford a house and to squeeze people out who can.
Down the line, owing land will be a true luxury. Those who pay property tax will become super-elite and those who rent will be dismissed. If you can already see the class divide now, then you should take caution and keep your mind open to this potential future. It’s already on its way. We are willingly trading the right to own land and a slice of the American Dream to live near a quick way to work and by a mall. We are trading backyard barbeques for gathering at Starbucks. We are trading ownership and our nesteggs for a little bit of convenience and the illusion of comfort and luxury. We are sailing into a future in which we rent and subscribe what we covet and ownership will be a relic of the past.
TL;DR If it is possible for one to own a home, the cost of maintaining it at the expense of taking a loss when selling it is forcing people out. Whether it is through taxes, demands of the market, or foreclosing, banks are playing the long con. They are working with townships and developers to make owning homes less appealing than the new “luxury” apartments and shopping districts popping up everywhere. If you choose to live in an apartment, especially one of those “luxury” ones, the cost seemingly outpaces the cost of owning a home. If you manage to somehow sell your home, the profits from equity and prospect of buying another is overwhelming unless you live in the country. And soon, blocks of houses returned to the banks through foreclosure and eminent domain are sold cheap to developers to make even more “luxury” apartment blocks. The class divide will widen more as property tax payers will have a status renters could never have… Sorry, that was somewhat long too.