Freed by 50

“I think we should look at something a little smaller, and then when you have kids you can upgrade.”  That’s what I heard from my realtor over and over as I shopped for a house.  I had lived in a small two bedroom condo for eight years and the idea of buying a starter home only to move again a few years later repulsed me.

Buying my condo was a mistake that a younger, more impressionable version of me had done after being pressured by my parents and a booming housing market in the early 2000’s.  I never really wanted to buy a starter home.  I never really wanted to live in a condo.  But it happened, and I wasn’t about to let someone else’s ideas about home ownership influence me again.

I feel like this flies in the face of everything I’ve ever read about home ownership and personal finance.  The general idea is to buy a smaller home that suits your needs for the time, then trade up when you need more space.  Many personal finance people actually advise you to always live in a home well below your means, which is sound advice if you don’t mind the sacrifice.  And believe me, it is a sacrifice.

I chose a different tack, and not because I’m a snob (I do plenty of other snobbish things), or because I wanted to keep up with anyone.  I wanted a house I could grow into, rather than a house I would grow out of.  I had many reasons for this, and that’s the point of this article.

1. Moving sucks!  People say that moving is the second most stressful event next to the death of a family member.  It’s also an expensive venture.  There’s the costs of actually moving your belongings, and closing costs, and incidentals, and even the costs of cleaning and preparing both your old and new houses.  Where I live, selling, buying and moving can easily cost over $40k depending on the values of the homes and not including the down payment.  I would like to move as few times as possible in my life, so I prefer to buy a home that I can live in forever.
2. Decreasing cost of living.  When I bought my house, it was a stretch.  I was making enough to pay the bills, but not much more.  My wife had just changed careers and was trying to build an income base.  We had no kids, so cutting back was easy.  We stopped going out to bars, and cut costs where ever possible.  Long and short, we were house poor.  As we quickly matured in our careers, we were able to pay things down, build a healthy emergency fund and lower our monthly bills significantly.  I now have two kids and our goal is to have only our home, utilities and car insurance to pay at the end of each month.  We’re almost there.  We make significantly more money than when we moved, and we’ve drastically lowered our cost of living by paying things off.  Rather than looking to spend our money on a bigger house, we’re already living in it!
3. Getting stuck. I have a metric ton of friends who bought starter homes.  Many in the buildup to the housing crisis.  They found themselves under water to the tune of over $100k on homes where they now had a family of four in a two bedroom one bathroom.  Some found creative ways of moving on, others are still there, and still others wound up expanding to suit their needs.  The thought of feeling trapped in my own home is terrifying and not something I wanted to experience.  I’d already had a hard enough time selling a condo identical to six competing units, I wasn’t keen to repeat the experience.  Where I live, many starter homes are in densely packed neighborhoods, bad school districts, or on main roads, none of which are my ideal location to raise a family.  There are some great places to get a starter that isn’t a total gut job, but you’ll often wind up paying north of $12k in taxes for the privilege of ownership.
4. Change happens fast. When I moved into my house, I was newly married and it was just my wife and I.  In five short years I have a dog, two kids, and both my wife and I work from home full time.  I couldn’t do my job with the kids climbing over me all day.  Had we bought a starter, we would have been looking to move only four years after buying.  Unless we had moved to a red hot real estate market at the ideal time, this would have put us in a situation like #3 above.  Instead both of our kids have bedrooms of their own.  We have a dedicated office space that becomes a guest room when the grandparents come to visit.  We’ve had the luxury of focusing on the huge change of becoming parents instead of struggling to find a new home while managing our two kids and our jobs.
5. Equity.  I’ll preface this by saying I’m not a big believer in leveraging home equity.  To me, anything less than 50% equity is theoretical.  It’s vapor that can vanish out from under you at a moment’s notice.  But with bigger homes you’ll usually see bigger equity gains as homes appreciate in value (and bigger losses when the market tumbles).  At the height of the 2007 market, my $200k condo had “appreciated” in value by $60k.  In comparison, the owners of the house I later bought for $420k had listed for $630k.  For me, equity would only be used as a desperation safety net.  I bought my house at a decent price when the market was low.  I have 30% equity in the home now, and every payment I make just builds that safety net.

My reasons are clearly my own, but they may apply to you as well.  I never saw the benefit in buying a starter home and continuing to try to trade up.  I watched my parents try just that time and time again and never really make any headway.  With bigger houses come bigger expenses, which cuts into any perceived profit from the previous house.  There is far too much temptation to over-buy any time you buy a house, so why would you want to give yourself more opportunities to be tempted?

In time my life will change.  Any number of things both personal and professional may happen that influence my decision to stay in my home or move.  But one thing will never happen, I wont outgrow my home.