Home Ownership Checklist

We had one of those great talks during Ward Conference that made us feel guilty - the speaker strongly recommended buying a home over renting an apartment. This surprised us, since pricing in our area means that renting usually makes more sense financially. There are certainly other benefits to owning a home though, and I think it's a good goal for any family. At the blog "The Simple Dollar", there's an article up talking about four things to DO while preparing to buy a home.

Four Atypical Things to do Before You Consider Buying a House

The suggestions are great - and ought to help anyone to make sure they are prepared to buy a house, and know that they can afford the house they will buy.

Need a bigger place?

People are always talking about needing more space. We start to feel cramped with our kids and our stuff and the messes we make. But how much will we gain with the new square footage? These photographs might change your perspective a little bit.

These photos from a series taken by Michael Wolf in a Hong Kong apartment complex. All of the rooms in the complex were 100 square feet.

The article accompanying a few of the photos in the New York Times photography blog ends with these thoughts:

Mr. Wolf finds the most interesting way to display the photographs is in a 10-by-10-foot room.

"If you’re standing inside a room which is exactly the same size as the room you’re looking at, then you realize how small that space actually is," he said. "And then you realize that people have been living there for 40 years. And then you realize that they are happy! That something like that can be, I think that’s the amazing thing. That people can be happy that they have 100 square feet to live in and nice neighbors. That’s basically all you need."

Buy as much house as you can afford, right?

Here's a great old article on how much to spend on a house:

Advice on Buying a House

The problem is that everyone seems to have taken this advice at once...

A few real gems:

The Claim: The basic rule is that you should buy as much house as you can afford. Stretch a little.

This advice started to get really bad once various sub-prime and ARM loans became available, making it so that people could suddenly "afford" a much larger mortgage.

The Claim: Use a mortgage broker.

Mortgage brokers aren't always on your side: When to Use a Mortgage Broker

The Claim: Homes are an investment, so buying bigger is better - because it appreciates faster.

Homes may be considered an investment, but they're not a great one. A larger house is going to increase utility bills and upkeep, and the amount of appreciation is, in general (besides the recent housing bubble), probably less than the interest rate on the mortgage. In addition, if you consider a house an investment, doesn't that make the mortgage leverage?

The Value of Mobility

To those who are currently unemployed or underemployed (and this is a lot of you!), it's pretty clear just how bad this recession is. For the rest of you:

The New Joblessness (New York Times)

One point made in the article is about the value of mobility. Many of the recently unemployed have low mobility, because their mortgages are under water, and it is so difficult to sell a house anyway. Job options are thus very limited, since they can't simply uproot and move to a different state.

Growing up, we moved around a lot. Four times, my parents bought a house. Two of those times, we only lived in the house for a year before changes in employment required moving again. Each time, I think my parents had planned to stay for quite a while, but life rarely turns out as planned. One time in particular, I recall that my father's was doing contract work. His contract expired right in the middle of an employment downturn in his industry. He had difficulty finding work, compounded by the fact that we couldn't afford to move, because we'd just bought a house a few months before.

A couple of years ago, we were living in a different state. I'm very glad that we decided to rent while we were there. We could have afforded a mortgage (though, during 2006, who couldn't qualify?), but I didn't like the looks of the housing bubble. It turned out well for us, since after only a little over a year, I transferred to a different team at the company which required a move to California!

In general (though during a housing bubble all bets are off), buying a house works out better the longer you live in it before moving. Renting works out better if you move often, or can't qualify for a mortgage with a good rate.

In the current economy, I don't think it's a good idea to tie oneself down with a house, unless you are quite financially secure. The standard advice to pay at least 20% down and get a fixed-rate mortgage is coming back into style...

House Math 2.0

I found a great website about buying a house:

http://www.housemath.us/

We're currently renting, so I figured I'd look into whether or not it would make sense for us to buy a condo. Even in the current recession, house prices in the San Francisco Bay Area are rather astronomical.

I input the price of a condo about the size of our apartment in our area (I found it using zillow.com), the length of time we would likely stay in the house (5 years), the expected bank interest rate, expected appreciation etc. The web site then computed what price we could rent at instead to be in the same financial situation in 5 years after selling the condo. Based on that, it was pretty clear that we shouldn't buy right now - in fact, that we shouldn't buy unless we were planning on being in the area for 10 years. My life hasn't been that predictable so far, so I figure it's not worth the risk.

If you're trying to decide whether to rent or buy, this site is a pretty good resource. Check it out!