I Want a Brand New House
Isn’t a house supposed to be a great investment? Isn’t buying your own little piece of America the ideal place to put your money?
It has to be better than “throwing your money away” on rent, right?
Sometimes. But when you run the numbers, that’s often not the case.
The truth is we’ve been told some brilliant lies, and they start with the American Dream.
It Was All a Dream
When you picture the American Dream, what comes to mind? Probably a married couple in a single-family home with a white picket fence. Maybe a couple kids and a dog.
That image didn’t happen by accident. It’s the result of decades of programming: marketing and propaganda from real estate trade associations, banks, and even our government, all of which benefit when more people buy homes.
Most of the world doesn’t live in single-family homes. Yet in America, we’ve been taught that success equals homeownership.
A generation ago, that belief made more sense. A time when homes cost roughly two and a half times annual income. People put 20% down. Total monthly payments including mortgage, insurance, taxes, and maintenance, hovered around 30% of gross income. Those conditions don’t exist anymore. But we’re still operating under the old rules.
Today, people regularly purchase homes five to ten times their salary with less than 5% down. In other words, we’re buying homes we can’t afford.
A Couple Myths
Myth 1: Home Prices Always Go Up
They don’t. You would think that we’d know better after 2008, but we’re quick to forget when the struggle wasn’t ours.
And they want us to forget. From real estate groups, family pressure, government incentives, influencers, everyone tells us to buy, no matter what.
But the prices we see aren’t always the real price. Sellers rarely cut list prices because it makes the market look weak and it’s an easy way to piss off your neighbors. So instead, they reduce the actual cost in ways that don’t show up on paper through mortgage rate buy-downs, closing cost credits, and concessions.
All of these lower what the buyer actually pays, while the sticker price stays the same. So at face value, it still looks like home prices only go up, even when they’re effectively going down.
Myth 2: Home Values Double Every 10 Years
Even when they do, people ignore the hidden costs: closing fees, rising property taxes, maintenance, repairs, insurance, and probably the biggest one: opportunity cost.
What could that same money have earned in an index fund?
Truth is, you can sell a home for more than you bought it for and still lose money once you factor everything in. So the net is not sale price minus purchase price. It’s sale price minus purchase price minus all the hidden costs over the years.
The Numbers
“When you rent, you’re throwing money away and making your landlord rich.”
Whoever coined that phrase may have contributed to shaping an entire generation’s belief system on housing.
Isn’t it funny how that logic only applies to housing? No one ever says you’re “throwing money away” when you go out to eat dinner at a restaurant.
In high cost of living markets like New York and San Francisco, buying can be far more expensive than renting, sometimes double the cost for an equivalent property.
I’ve personally enjoyed renting. It’s cheaper, more flexible, and when something breaks, I submit a maintenance request and keep it pushing. More importantly, I invest the difference: the money I would’ve sunk into ownership.
No stressful DIY projects.
No weekly Home Depot runs.
No unexpected $7,000 HVAC replacements.
Just living where I want to live without property taxes, with the peace of mind that the leaky faucet is someone else’s problem.
How I feel texting management about a problem I don’t have to fix or pay for.
Of course, everyone’s situation is different. But if you buy a house without running the numbers, you’re likely making a mistake. A home is the biggest purchase most Americans ever make, and the hidden costs can add up.
What about buying an investment property? That can work, but again, only if the numbers check out.
And then there’s the diversification issue. If most of your investable cash is tied up in real estate, whether it’s one property or several rentals, you’re still concentrated in the same asset class. So if housing takes a hit, a big part of your net worth goes with it.
And historically, real estate hasn’t done very well as an investment for individuals anyway. Yale found that from 1915 to 2015, real home prices rose on average only 0.6% a year. Well shit, that sucks.
Bottom Line
So what’s the point? Is buying a house dumb? Absolutely not.
I’m not anti-homeownership. I’ll buy a house someday. It probably won’t be my best financial decision, but it will give my future family the life we want.
What I’m against is expensive mistakes: buying a house, a car, or even a degree you can’t afford, simply because everyone else is doing it.
I get that the pressure can be intense. Family. Friends. Influencers. Brokers. They make it seem like you’re less of an adult if you don’t own a house.
If you’re buying a home to live in, always a good idea to run the numbers and treat it for what it is: a large purchase, not an investment. If you’re buying an investment property, always a good idea to run the numbers and make sure it fits into a diversified portfolio.
But hey, what do I know? Do you.
