When I go all Polonius to Laertes my favorite one liner is that debt is enslaving your future self to your present self. I started my home search in 2008 and I took the pre-approval amount of $200,000 (with a promise to go to $250,000 if I found the right house!) and immediately said to myself “I’m not going anywhere near that number”. My reality is not “Greater Springfield” or “Western Massachusetts” or even New England for that matter, and the fact that I’ve worked in (expensive) suburban north-central Connecticut has had zero impact on my expectations. I’ve lived in Springfield, the City of Springfield, downtown Springfield most of my life and therefore taking out a loan for more than $100,000 seemed unnecessarily risky from a financial point of view.
It is news to most people, but a home is an expense, not an investment. We all have to live somewhere and for most of us selling a home will require us to seek out new shelter in the same market in which we sold the old shelter. There are means by which to arbitrage housing of course, but since for most people that involves uprooting their entire life, it is not always the easiest thing. Apart from that, looking at “a home” as an investment because it brings an apparent return is usually flawed in that people often look at the nominal cost of the home and not the actual amount including interest paid, etc.. At 5% interest with a thirty year loan you almost double the cost of the house. Add repairs, insurance, property taxes and the like and you begin to see the actual return you’ll need to garner in order to claim a positive net return. If you really want to see the total “investment” return, compare total the outlay for the home to renting an adequate place over that same time and investing the difference in monthly cost into some other fixed investment (or just putting the difference in a coffee can!).
I chose to go into the market precisely because buying was cheaper than renting. As it still is, at least here.
On my most recently republished blogpost on Strongtowns a commenter referenced poverty in New England and the changes to the manufacturing base as connected somehow to the point of my article. It wasn’t. The northeast has lost manufacturing, but this region of New England is still much wealthier than most of the United States. There are lots of high paying jobs. My point was that people with those jobs, jobs like mine, instead of looking for the cheapest home that can fill their most minimal (let’s call them) “needs” will take a number from a bank and do their utmost to put a down payment on the most house they can “qualify” for.
Back in 2008 I made a list of what I viewed as the most important features in a home. I wanted it to be on major lines of public transit; neither of my daughters had a driver’s license (they still don’t) and I wanted mobility for them. I wanted, at the very least, a minimally walkable neighborhood by which I meant a neighborhood where at least some of my family’s daily needs could be satisfied without a car. I wanted a central chimney, one that could be used to heat the house with some level of efficiency. I wanted 3 bedrooms.
We visited dozens of homes. I began to see that two centers were drawing me. One was Forest Park and “The X”; a neighborhood anchored by an Olmsted park and the remnants of a walkable commercial district. The other was the South End; the old Italian neighborhood on the edge of downtown. There is a street, an avenue actually, which connects the two on which we looked very seriously at two different homes.
In the end we knew we had the right place when a friend recommended an old townhouse which had been a law office for at least two decades. It was on the edge of the South End very close to downtown, a block or two from my daughter’s high school, on one bus line and within a block in two directions from several major north-south and east-west lines of the PVTA. Being a five minute walk from the train and bus stations turned into a major feature as well for my college bound daughter.
In retrospect we lucked into two features I hadn’t prioritized but should have. Because ours is the middle townhouse in a row of 5 we have a backyard which is now an amazing garden. Also the down sloping grade of the property makes the downstairs a very nice apartment with separate ingress and egress and full sized windows.
Because the owners were looking at it as a commercial property and not as a residence the asking price was low for 3,600 square feet. After finding some structural issues which needed addressing the final price of $90,000 was agreed to. With a 15 year mortgage, property taxes, and insurance our monthly outlay is now just under $1,000. We could probably get $500 or so for rent on the basement apartment if we wanted to, and there would be the potential for the entire third floor to be a 1,000 square foot loft.
All four fireplaces are connected to a central chimney. With an alleyway on one side we only have the one energy saving “party wall”, but the 14 windows on that side of the house provide wonderful light. The rear of the house faces more or less south-southwest so that and the 10 windows on that side of the house gives the house some passive solar heat in winter and make for bright afternoons. Insulating the cathedral ceiling and all of the walls on the third floor and the floor in the basement, closing off the brownstone steps from the utility room, replacing the 8 most damaged and missing windows and restoring and weatherizing the rest, lowering the thermostat, and putting in a new basement door has reduced our energy use for heat by 60%-70%. On the current budget program we pay less than $200 a month for natural gas. My first winter just the three coldest months saw bills of over $1,000 each. With as many as 4 adults and four jobs we’ve only had one car.
My new son-in-law and my daughter can spend a few months in their own space in the basement and save for a new home of their own. Hopefully a very inexpensive one, in a not so fashionable neighborhood…well, you know the rest.