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My husband and I used to own a lovely home in San Francisco. (No, it was not the home in this picture…) It was, however, gorgeous and large and everything I was “supposed” to want…the house where we would live “forever” and raise our growing family and even care for our parents one day if needed.

And yet, I was miserable. I felt trapped and stuck and really didn’t enjoy it much at all. It was a classic case of not knowing myself and of falling prey to what I was “supposed” to want instead of what I really wanted. I have never been more happy than the day we sold that home….I was free again!

But the family to whom we sold the house loves it, and is extremely happy there!

Which brings me to this week’s QnA…

This week I was asked by one new friend and one old friend, “Is now a good time to buy a house?”.

So I want to answer (very respectfully, because I love these guys…):

That’s the wrong question.

I think I can save you a lot of time and agony by boiling it all down to one simple YES / NO kung fu question:

Will you sleep better at night with this home?

YES
NO

It’s that simple.

A house is an emotional and personal purchase and you need to ask yourself:

  • Will you sleep better with the house because it’s what you or your SO has always wanted and because it will be a wonderful, safe, terrific place to raise your family? Maybe you’ve longed for this your whole life (or your spouse has…remember all those hokey-but-true sayings: “Happy Wife, Happy Life”, “If Mama Ain’t Happy Ain’t Nobody Happy!” Even Bruce Lee said, “Unquestionably man has his will — but woman has her way!”). If so, then buy the house!
  • Or will you sleep better without the house because you are terrified of being tied to a mortgage loan for 30-40 years and you’re “stretching” to do it? Worried that if you lose your job you won’t be able to pay the mortgage? Afraid of losing everything in an earthquake? Think you might get bored and move in the next few years? If these are valid fears for you and will keep you up at night, then pass on the house.

Else, pour yourself a cocktail and buy the house. (And please pour me one too for making this so simple for you!). 🙂

It really is that easy.

But OK, for those of you who want the gory details and feel that I am glossing over the whole “interest-rates and housing-collapse and future-of-America and is-it-a-good-investment and are-you-going-to-live-there-for-five-or-seven-years” stuff, keep reading…

  • Your personal residence (fancy words for “your house”) is not an asset. Stop thinking this is a “smart financial move” and realize that you are in effect buying a super-fancy upscale car. It depreciates like a car, you must maintain it like a car, it will not make you money unless you rent it out like a car, it is immediately worth only 50% of what you paid for it when you close the deal like a car….well, perhaps not 50%, but if you turn around in the next month or two and decide that you would not like that house after all and sell it, you will lose a lot of money in closing costs, real estate fees, transfer taxes, moving costs, staging costs, etc.
  • House prices will probably not skyrocket in the next year. (Although note that real estate is local, so your mileage may vary). But with nary a happy piece of housing or jobs-related news in site, I do not foresee you getting “priced out of the market” in the next year.
  • Interest rates will probably not skyrocket in the next year. With Bernanke promising to keep the fed funds rate low until “mid-2013” and further working to suppress long-term rates with “Operation Twist”, you’re pretty safe. (Although at some point this will change….but when that happens you’ll have a host of other things to worry about, and rising rates might push home prices down so the effective cost of the house would remain the same).
  • Trapped Capital. From an “investment” standpoint, although again I don’t really view a house as an investment, you will be trapping your capital (your down payment and mortgage payments) for the length of time you own the house unless you are very financially savvy and can handle “pulling money out of your home” via a HELOC to purchase real assets, not crap.
  • On a positive note, though, your mortgage debt could be inflated away or paid off with cheaper dollars. Hey, if it works for Uncle Sam, why not take advantage of the same tactic yourself?

But I really do advocate the simple question above…

Stop making your life so complex and just think about that oh-so-comfy pillow and whether your eyes will be open and darting back and forth or sweetly closed like a little angel’s.

It’s that simple.

To your financial success,

— Kung Fu Girl