A Fool’s Market?

Many, many years ago I read a book called “The Wealthy Barber“, a cute story in which was embedded lots of sage advice on how to retire a millionaire. One of the the things the author discussed was the old “rent vs. buy” argument. He argued in favour of renting for a certain sector of people. I don’t remember who exactly that group was, but a couple of points he made still stand out in my mind. First, rent is not “throwing money away”. That’s like saying paying your hydro bill is “throwing money away”. You pay for electricity, you pay for having a roof over your head. Just because something isn’t an investment doesn’t make it “throwing money away” if you are getting a useful service out of it. The other point that was driven home to me is that if rent is considerably cheaper than a monthly mortgage on an equivalent home, you can invest the difference and make better returns. Especially given all the extra costs of owning. More on this shortly.

Yesterday I read a blurb in our local paper about a blog called Van Housing that is tracking the local housing market. Vancouver has been in a real estate boom for the last few years and everybody is gleefully buying up real estate at what some would consider artificially high prices. Since we will hopefully be in a position to buy very soon, I’ve been watching the market myself, albeit from a “what can we afford to buy” perspective. So today I went and visited the blog and started to read it from the beginning.

It has scared me, and made me think that perhaps the wisest thing to do is for DH and I to find a lovely house to rent and stick the rest of our money elsewhere. At least until the bubble bursts, which I suspect will be in the next few years since interest rates are already slowly climbing up. And, wouldn’t it be a lovely coincidence if the “five year plan” for my business pans out. It would more than double our family income and put us in a very sweet position when housing prices drop significantly.

But I’ve had my heart set on buying, and buying soon. I need to be truly honest myself about why I want to buy, and reading the blog made me realize that I’m falling for the same propaganda that everybody else around here is. It’s basically peer pressure among the not-in-college-anymore set and I’m getting sucked right into it.

I admit that there is some bitterness in me about being a renter. I know mamas who bought houses five years ago for $250k that are now worth over twice that much. But it’s alot more than just envying their investment returns – the world seems to treat you differently when you are a renter. Banks aren’t as generous, people don’t want to lend you money, and then there is the societal attitude that buying a home is right up there with getting a nice car and a credit card as signs that you have “made it”. People like me who are pushing 40 and who rent are generally considered losers, unless they display all the trappings of independent wealth, in which case they are considered “eccentric”. And I admit that I fall victim to this “peer pressure” alot. People ask if we are renting or owning and I admit to having to muster up every ounce of “I’m successful, really!” in my tone of voice when I reply “we rent”. Yet still, I think I can put forward a fairly convincing argument as to why renting isn’t so bad, and actually has been advantageous in many ways (despite missing out on the recent windfall – then again, I missed out on buying Microsoft in the eighties, too).

Well, it seems that the Van-Housing dude agrees with me. I’ll direct you to this post in particular, which I think sums up my arguments as well. It absolutely applies to our family, given that we currently pay in rent less than half of what we qualify for in a mortgage payment. This allows us to live a pretty comfy lifestyle and still sock away a respectful amount in our savings account each month.

Thing is, while my brain honestly believes that buying a house now would not be a prudent financial move, my heart really really wants to own. I want to fulfill my inner decorator. I want to be able to say “we own”. I want the satisfaction of knowing “it’s all ours”. And I do think that, decades down the road, owning a peice of property outright is a nice place to have put one’s money. But are these reasons to buy now? I dunno. Maybe waiting a couple more years to see what the housing market does would be a better idea. I’m going to peruse the “for rent” listings and see what kind of rent we’re talking for a nice house with a yard….

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