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Now that America is trying to sleep off the housing bubble hangover, people like me can say I told you so.  Houses are for the rich.  Always have been, and for the foreseeable future, always will be.

By definition, poor people can afford little.  So putting a poor person in a house is a fundamentally bad idea.  Unless of course, you believe that everyone should own a house.  

If you're one of the fools that think everyone deserves a house then your intentions are evil whether you know it or not.  If you're intelligent and you believe this then you must be a sadist.  Home ownership is a pain in the butt.

Home ownership requires 2 things: lots of free time and lots of money.  Where does the free time go?  Mowing, raking, clearing gutters, cleaning windows, painting, changing oil in the lawnmower, buying gas for the lawnmower and snow blower and a thousand other little projects will consume your time.  And God help you if you decide to do a "home improvement" project.

Your money goes to higher utility bills (houses are larger than apartments and therefore take more energy to heat and cool).  The mechanical parts of the home, furnace, A/C, windows, doors, garage opener, pipes all require maintenance and repair.  These cost easily consume any equity that accumulates in the house.  Of course you'd have to do an honest accounting to figure this out, the mortgage and real estate industries are not going to tell you this in their commercials.

If your poor, you have little free time.  You probably work a job that offers little vacation.  You'll be faced with problems like broken cars and sick kids.  You don't have the time to keep up a house.  Don't believe me?  Drive through any poor section of town.  What do you see?  The houses are all run down, they need paint and some maintenance.  

Home repair is more about time than money.  Paint, nails and wood are cheap.  Labor is expensive.  Most of the homes in the poor neighborhoods could be fixed up with a little money and a lot of sweat.  I know, I've done it.  However it takes a lot of time.  And any time spent working on a house is time NOT spent working for money.  And if you're poor you need money the most.

Mortgage Lenders take Advantage of the Poor

The term sub-prime refers to poor people who can't afford a home.  Poor people have bad credit.  Yet mortgage lenders take advantage of this and charge higher fees (documentation fees, etc) and higher rates.  The higher rates are disguised through adjustable rate mortgages.  It's assumed the poor will be less poor in the future.  Guess what that didnt' happen, the economy blew up and the poor are going to get hit the hardest.

Mortgage lenders know the poor are typically less educated and therefore are easily bewildered by the massive amount of paperwork and numbers that is required for a mortgage.  The poor will often take any rate.  The poor only care about the payment, the starting payment that is.  What is the payment right now.  They don't care what the payment will be in the future.  They don't care that they won't be able to make the payments in a year.  A year is long ways away for the poor.

Real Estate Appreciation is a Myth

That's right a myth.  Real estate appreciates at 3% a year (or about the rate of inflation).  Great you say, at least I'm keeping up with inflation.  WRONG.  You forgot all the maintenance costs.  I mean new siding, new furnace, painting, etc.  But I also mean all the time you put into mowing, scooping, raking, planting, etc. 

Your time is valuable.  Every hour you spend maintaining your house is an hour you can't work and earn money or spend with your family.

The real estate bubble has helped to illustrate that run ups in any asset, stocks, bonds, tulip bulbs or real estate happen again and again.  People get carried away and think prices will go up forever, or they think there's a greater fool somewhere out there.

Down Payments Are Required for a Reason

A traditional mortgage required a 20% down payment.  This down payment served 2 purposes.  First, it gave the home buyer "skin in the game" meaning the home owner had a stake in the house as their own money was involved.  Second, it proved the home buyer had the skills necessary to accumulate the money for the down payment.  

In order to accumulate $20,000 for a down payment on a $100,000, the home buyer must have been successful in some endeavor.  The home buyer managed to earn the $20,000 from their own labor.  After all, you were required to show that the money was yours and how you came by it. 

I Learned the Hard Way

I bought a home with about 3% down.  Yes, I was young and dumb and thought home ownership was the road to financial nirvana.  Now I know better.  I've managed to pay off my house in about 6 years.  My current financial success is in spite of, not because of my house.  

I've lost count of the number of hours I've spent working on my house.  I know it's in the hundreds.  I could have worked on other projects during that time.  Projects that would have made a lot more money.  As they say, experience is the best teacher.

I'm hoping my story will encourage you to hold off on home ownership.  We have to fight the real eastate agents and the mortgage goons.  We have to educate people as to the tremendous financial risk a home owner takes.

Tags    Home    House & Mortgage    mortgages

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