Its ok, I was there too. For a long time, I hoped and schemed that I could own a home with some property some day. But after spending a exorbinate amount of time (some may even call it obsessing) researching Real Estate, I know that it is an impossible dream. And I see the world, and especially the United States of America very, very differently.
“Bah” you say “I own my home! And I am damn proud of it!”
And to this response, I would argue that there is already a profusion of subterfuge about the very definition. So first we have to quantify what home ownership actually is.
Is home ownership an interest only loan, where the borrower takes out a 125% LTV suckers loan? On their dream property, in order to not have to put anything down?
Is home ownership a 30 year fixed rate mortgage. With the stabibilty in knowing what your monthly is never going to change over the life of the loan?
Or is home ownership when you finally pay of the mortgage, and you owe nothing more to the lender?
(I realize that there are many other financial instruments that we could list concerning housing. But for the sake of argument, I believe that these three represent a solid scale on which to reflect.)
So back to the question at hand. Which of these represent the term “Home Ownership”?
Now the first one is fairly easy to rule out these days. Most everyone has seen these loans explode and so lets just scratch it off the list.
The second one, is probably what the American populace would define as home ownership. But for now, everyone who is reading should be realizing that when you take out a loan on a home, it is actually the bank’s and not yours. So scratch number two.
At this point, most folks would settle on the definition of home ownership. Which is when you own the deed/note flat out, owing nothing to any lender. But if that were the case, then this post would be over. And my take is that most people forget about one very important aspect.
Taxes.
Yeah, good ol’ taxes. And here is where I reason that you never truly own your home. That at any point, the goverment can come and weasel your property away from you. And don’t give me the I have rights bull crap. This only goes as far as the illusion’s need. And if the need is great enough, the illusion falls right along with your rights. It is also my belief that the government is going to do whatever it can to increase taxes over the next decade (just the next decade?). I mean, face it, our nation is broke. We owe a crap load, to a lot of people.
But the land, the land is the real value!
Heh, right, the land. Is it on anything of value that can be sold on the world stage? If not, then I really don’t want the “value”. Especially the taxes that come with it.
So what I have been doing personally is realigning my goals. Understanding that a home, in an of itself, is a depreciating asset at best. And at worst, a depreciating liability when the note is held by a lender. At some point, you will have to invest your reserves into either fixing and maintaining, or all together rebuilding the home (disturbingly similar to a car, no?). And I do not want to be owned by my things. I will not sacrafice myself and my families’ opporutnites in order to make the pipe dream of home ownership into a ball and chain reality.
Its ok, I was there too. For a long time, I hoped and schemed that I could own a home with some property some day. But after spending a exorbinate amount of time (some may even call it obsessing) researching Real Estate, I know that it is an impossible dream. And I see the world, and especially the United States of America very, very differently.
“Bah” you say “I own my home! And I am damn proud of it!”
And to this response, I would argue that there is already a profusion of subterfuge about the very definition. So first we have to quantify what home ownership actually is.
- Is home ownership an interest only loan, where the borrower takes out a 125% LTV suckers loan in order to not have to put any cash down? (On their dream property of course)
- Is home ownership a 30 year fixed rate mortgage. With the stability in knowing what your monthly is never going to change over the life of the loan?
- Or is home ownership when you finally pay of the mortgage, and you owe nothing more to the lender?
(I realize that there are many other financial instruments that we could list concerning housing. But for the sake of argument, I believe that these three represent a solid scale on which to reflect)
So back to the question at hand. Which of these best represent the term “Home Ownership”?
Now the first one is fairly easy to rule out these days. Most everyone reading this has seen these loans explode. Either by watching family or friends, or experiencing it themselves. And so lets just scratch it off the list.
The second one, is probably what the American populace would define as home ownership. But for now, everyone who is reading needs to understand that when you take out a loan on a home, it is actually the bank’s and not yours. So scratch number two.
At this point, most folks would settle on the definition of home ownership. Which is when you own the deed flat out, owing nothing to any lender. But if that were the case, then this post would be over. And my take is that most people forget about one very important aspect.
Taxes.
Yeah, good ol’ taxes.
And with taxes in mind, here is where I reason that you never truly own your home. That at any point, the goverment can and will come and weasel your property away from you. And don’t give me the I have rights bull crap. These illusionary rights only go as far as their (the government’s) need. And if the need is great, the illusion falls right along with your rights.
But the land, even despite the taxes, the land is the real value!
Heh, right, the land. Is it on anything of value that can be sold on the world stage? If not, then I really don’t want the “value”. Especially the taxes that come with it. It is also my belief that the government is going to do whatever it can to increase taxes over the next decade (just the next decade?). I mean, face it, our nation is broke. We owe a crap load, to a lot of people.
But don’t worry, it is nothing to be afraid of, you just need to understand it. Once you realize that with most current home purchases you are only buying the “right” to further taxation, you are good.
I mean, think of it this way. Do you think I sat there after my brother died thinking
“Man, I am glad that Jaye got to see our new place before he passed away!”
Hell no!!!
I was happy that we had the money to make memories with him by going on trips and other awesome adventures through out his life.
And so the target must be ”buying” a home when it becomes less expensive than renting while projecting future tax increases into the model. Along with the understanding that a home, in an of itself, is a depreciating asset at best. And at worst, a depreciating liability when the note is held by a lender. At some point, you will have to invest your reserves into either fixing and maintaining, or all together rebuilding the home (disturbingly similar to a car, no?). And even with this, you must know emotionally that it will never be truly yours. And this is a good thing.
I personally do not want to be owned by my things. I will not sacrifice myself and my families’ opportunities in order to make the pipe dream of home ownership into a ball and chain reality. I plan on using my surplus cash to MAKE MEMORIES!!! That is the real value.
Despite these current beliefs, I am always open to new ideas. Because you can’t learn something new if you are not willing to listen right? And I appreciate people’s thoughts, even if I don’t always agree. So I would be happy to hear other’s perspective on this. And so I leave you with this.
“Why do you personally want to own a home?”
Recently I went to a PHP programming conference in Chicago, Illinois and was able to sit next to a Canadian businessman on our flight home. We discussed many things and some how we ended up on the U.S housing bubble.