Wednesday, February 06, 2008

Um, House, no.

I haven't mentioned our house-hunting in awhile. This is primarily because it isn't going very well, for various reasons. We've looked at enough houses now to really understand the local market, and what we understand is that we're essentially priced out of it.

Moving from an inexpensive city to an expensive town is eye-opening. The median cost of a home where I'm from is $197,900*. In this town, it's $382,800-- almost twice as much. The population here is a lot smaller, too, so there are fewer houses on the market overall. Our budget is much more aligned with where we're from than where we are. Here, if a house is listed under $200,000, it has serious problems. We've seen a log cabin that is completely gutted inside from a fire, a 130-year-old farmhouse with all the issues you might expect (rotting sill, questionable roof, strange plumbing) as well as being pretty far from town, a house with "mold issues"-- someone else closed on that one before we could even consider it-- and a tiny cottage on a nice piece of land, but with bad structural problems. (Me: is a roof supposed to be all asymetrical like that? It's kind of arty, I like it! Don: No. and no.) I have no problem with a small place, but the idea is that it should also be inexpensive; I just can't swallow the idea of spending two hundred thou on less than a thousand square feet.

It's not that we don't have any money, or that we don't make money; it's more a matter of what we feel comfortable spending on housing. By my rough calculation, we spend about 25% of our take-home pay on rent-- that's after taxes, 401(k) contributions, health insurance, and other miscellaneous paycheck deductions. Not over-extending on housing makes life comfortable: it makes it easy to sock money away in savings, to keep credit card debt low or non-existent, to do things like eat out and travel without much forethought. Over the past few months of house-hunting, our acceptable price kept rising (ten thousand at a time, it seems) as we became frustrated with what was out there. It's not hard to calculate the monthly payment that a mortgage at x dollars and y interest rate will yield, plus property taxes and home insurance. As our 'highest acceptable price' inched up, the resultant mortgage payment crept from a little more than our current rent to much, much more.

Is owning a home worth that kind of reduction in standard of living, when we're looking at these kinds of homes? What would it take in order to spend another, say, $200 or 250 a month on a mortgage than we're currently spending on rent? Would it be the money that is currently directed into savings or our retirement plans? The money I spend on things like our CSA subscription, farmers' market produce, and organic eggs, dairy, and meat? Our charitable contributions? Or the discretionary cash we spend eating out, seeing movies, drinking lattes, and travelling whenever we get the chance? (Not often enough, sadly.) We could stretch to afford it, but at what cost?

Back in business school, I learned a good bit about fixed costs and variable costs, and how companies or even industries that let their fixed costs get out of control would inevitably get into trouble. (That's why service businesses tend to do so well-- low overhead.) This is how I try to manage the household finances, too, replacing 'discretionary spending' for 'variable costs'. Keeping our 'fixed costs' down lets us sleep easy, without worrying so much (about getting layed off, hurt, sick, etc) because we could cover what we have to on less. Sure, I blow a lot of money on my morning mochas and too many trips to Barnes&Noble, but I could just as easily stop doing that, should I need to. Whereas a mortgage payment is the fixiest of fixed costs.

To top that off, Don and I are still trying our darndest to start a family (some nights we try harder than others, but still). If--when-- we have a baby, I want the option of staying home and not returning to work. I'm not sure yet if that's what I want to do (maybe 95%) but I want the option. To simultaneously increase our fixed costs and decrease our income would be crazy/impossible. I used to believe that buying a home would be a good thing to do before baby comes along, a good first step, but now I'm starting to think they're incompatible. I'd much rather rent with the option of not working, than be forced to stay at my job by an inforgiving house payment.

Then, there's the whole other issue of time. How long are we going to stay in this area? Don's original idea (before the housing market got all depressed) was to buy a house and if we decide to move in another two years, no problem-- we just sell, and pocket the profit. It's not likely that this location, as much as I like it, was ever going to be permanent. (Don has no room for growth in his career and no intention of remaining where his is; he promised this hotel at least three years because they could see from his resume that he tends to move up into a new position every few years and they understandably didn't want him leap-frogging too soon.) The way the market looks right now, though, indicates that nobody should buy that isn't prepared to sit tight on their property for awhile. It's easy to see how a house could lose value in the next 2-3 years and even being able to sell at the exact price we payed would still leave us short the transaction costs of buying a home (thousands of dollars)-- twice, not to mention the hassle and headache of all those moves. The whole idea was to be financially smart and make ourselves some money, not lose.

So as much as I'm dreaming of a little cottage with climbing roses** and a luscious vegetable garden, perhaps it needs to wait. And as much as I'm enjoying Virginia, it's time to accept that we'll be moving again in awhile, ideally to somewhere more affordable***.

* according to Sperling's Best Places, updated 10/2007

** I'm thinking of planting an antique climbing rose at our rental house. I don't think our landlord will mind. Or notice. I mean, what if we're in this same house two years from now, and I still have no garden because I didn't plant anything, thinking that we'd just be moving before it could bloom?

*** And yet, I'm not sure we want to move back to Texas, either. Affordable housing just barely balances with the dry heat, endless pavement, and big business there. Don would like to move someplace closer to his parents (as his parents are a lot older than mine, it's an important consideration) than Texas or here.


ayla said...

our rent was half of what we pay on our mortgage, and now we pay utilities that we didn't pay when we were renting. But our space has quadrupled. Of course, right after we closed the house, I lost my job, so our budget got SO much tighter, and even so we've gotten a lot of help from my in-laws. I'm still glad we did it, though. But it might be a good idea to chill on the house hunting for a while.

You could always come to Western Mass. There's a big buyers market up here, and I could set you up with my agent, who's fabulous.

Mara said...

Sounds lovely, but...

1. How's the job market?
2. Even farther from Illinois (where the IL's are) than Virginia!

Rachel said...

Me too. As a (now) single mom, I know there's no way I can afford to live here. Neither will I be able to afford to go back to the west coast, unless someone leaves me an inheritance...and I don't have the kind of family that leaves inheritances!

An idea I'm really interested in is small and affordable eco housing, like or Those would both be w/in your budget if you just bought some land. Something to ponder!

Mara said...

It's something I'd think about were I on my own, but Don's a real brick-and-mortar type of guy. I don't think he'd relish a yurt...