10 Ideas why buying house could be a bad decision
I have heard arguments from both camps and heard this topic discussed on The James Altucher Show podcast a couple of times. I have been on both sides and like James, I changed by stance on it recently, although I still lean against it most of the time. I know there are plenty of reasons that buying a home could be a good decision, I can always come up with a separate list for that topic but this one generates more responses because it goes against what we have been told as it's been ingrained in our culture for years. When I go through these, I am talking about your average, middle class home buyer, not the investor, not the rich and wealthy.
1. It's stressful
Stress contributes to many negative reactions in our minds and bodies, and the added stress of home ownership can be one of the leading factors. If you are the "average" home buyer, not to say people that are wealthy and well to do can't experience stress from owning a home, most of those people can afford therapy and a financial setback more so than the average home buyer. First off, it's stressful just to go through the process, from looking at houses, deciding new build, or existing? Floor plans, how many rooms, bathrooms, type of flooring, location, the list is seemingly never ending. You look at one, then another, maybe a few within days or weeks. You discuss and you finally decide on one, and it's sold, or the price went up significantly, or your offer was rejected, or someone out bid you by $10k. Then you start over again. I have not even spelled out the process of building a home and all the setbacks, delays, material shortages and more that come with that. Plus, you have a giant debt hanging over you now. I can't speak for anyone reading this, but just going through this first idea, I am mentally exhausted and am about to change my stance on home ownership again! Just joking.
Seems obvious, but people have a hard time just maintaining their vehicles, let along their home. It can get expensive, and it may not take years for things to add up. AC/Furnaces are not as reliable as they once were, they break down. I had to replace two of them in the coarse of three years ( at least I was renting) You can landscaping to keep up with, especially if you have an HOA. Sometimes after you live in a house for a while, things you notice start to come up, the grout is bad, have to fix it, the tile has cracks in it, now we have to replace it or fix it, it's colder in certain areas of the home and hotter in others depending on the weather, maybe have to look into insulation options. The water doesn't heat up fast enough, or there's a noise when we flush this one toilet, foundation problems, hail damage, have to replace a roof, it's too hot in the larger rooms because the windows are not the best quality. I could go on. By the way, all of this contributes to #1
Moving, at least for most people, is a giant hassle. You could pay top dollar to have the best company come out to do it, you still have to pack most of what you want moved and have it boxed up. That means, you have to buy boxes and pack things up, things that you think you don't need right away, until you need them. Then you have to sort through everything and determine ok, what can I live without for a bit, what could go away, what could go to storage, what is coming with us, what needs to stay for sure. That's a lot to deal with. Then your personal items are at the mercy of said moving company. Then you book them and have to hope that everything goes according to plan with the move, move in dates have been known to change for various reasons (happened to me a few times) Then you have to unpack, situate and still manage to live around the mess, work, deal with calls, deal with interruptions, broken items from the move, you can't find the box with the stuff you need for tomorrow. Maybe some damage occurs to the new place from the move.
I have been fortunate to have good neighbors but the couple of times I didn't, I was miserable. It may take a few days, weeks or months to realize my neighbors suck! They might be the ones who party every Friday and or Saturday past midnight when you are trying to sleep. They could be the neighbors who have kids that wake up early on Sunday mornings to play at 7:30am and you typically sleep until 10. They could be the neighbors who might engage in some illegal activities and have police showing up on occasion or even knocking at your door. (I have had both occur). I know this can happen to renters, at least it is a limited contract where you sign for one, two maybe three years, but with a mortgage, you're stuck for the foreseeable future.
5. Lack of Versatility
If anything drastic happens in your life, an unforeseen change like a pay cut, job loss, pandemic, etc.. you still have to pay your mortgage. If you need to move, it's more difficult to accomplish. If you find yourself in a situation where you have to leave your home for an extended period of time, who's going to watch it for you? Who is going to do the maintenance? What if someone breaks in when you are not home? I know you could have a security service but what if you don't? You may decide to purchase one before you go, adding to the long list of expenses. What happens if you buy a single family home and you're a new couple starting out and within a year or so, you are going to have a kid? Then it turns out, you have twins! Now your two bedroom house may not be large enough or now you are crammed in it and want a larger one, because you turned one room into a media room, or you use it as storage currently, or you got a few dogs or cats or a combination of pets. If this is your biggest monthly expense, your money is tied up so it's hard to do something big or an opportunity that comes up, or what if you do need a loan and your debt to income is off now? What if you have kids and you buy a house and your kids are not school age for a year or so, then you find that you don't like the school system in your area? You're stuck. Married couples can have issues too, if they divorce, it's a giant mess with dividing assets. I am missing something here, maybe I will add it later if I remember what it was.
6. Not putting enough of a down payment
Just like auto loans, you keep seeing advertisements for $0 down, or "no closing costs" and other solicitations. Most people are instructed to do as little down as possible and finance for 30 years. To me, that is a terrible idea. You are paying a ridiculous amount of interest and unless you make extra payments, principal payments then it may be difficult to get out of that house if the need comes up. Plus, if you keep the house for 10 to 12 years, all you paid up to that point is interest. I don't know the exact amount of time, but most people move within 9 years. I also don't like the fact that you pay taxes every month, then you pay property taxes, and you still pay taxes when you spend your money, then even if you pay off the home, you will continue to pay property taxes. Plus, most people buy a house out of their budget. If they make $180k per year, then they look at a million dollar or more house, or at least a $600k house.