In May 2006, we sold our Chicago bungalow and went to live in England for Will’s ex-pat assignment through his work. Initially we were slightly concerned that we would not be able to sell our house quickly since we shared a driveway with our neighbor–an oddity of a few areas in Chicago neighborhoods which didn’t have alleyway garages. We were delighted when we received, after our first open house, an offer very close to the asking price. On the whole, our Chicago house brought us a decent profit after only six years of living in it.
We fear that this relatively successful housing experience might have produced too-rosy an impression on our minds about the prospect of home ownership. After all, it was the first home Will and I bought as a couple–right before we got married–and we were able to sell it without any of the hassle (well, ok, maybe just a little hassle) we expected would come along with the process of unloading a house right before moving abroad for a year. We were ecstatic to be free and in the clear, without a mortgage, without the responsibilities of home maintenance–and that constant yard work!
As the ex-pat assignment neared its conclusion, we started to shop around for another home. We came back to the Chicago area in February for a home-shopping trip, but, of course, we had no clue in Spring of 2007 what catastrophe was about to hit the housing market…
Suffice it to say that, given only a profitable experience with the housing market, we plunged right in and blithely purchased our second home together: a new construction mid-rise condominium in a suburb bordering Chicago. (Every single element of that description now would make us run screaming away from the housing market!)
To date, this purchase has been, by far, our worst financial mistake, one that we rue every single day!
In case others are contemplating a (rash) decision on a home purchase, here are a few items that we would suggest for (re-)consideration:
- Why are you buying that home? We realize that a growing family might need a house or at least a townhouse where you need not fear that your neighbors would complain about the noise your children make as they go about their daily business of growing up–playing, stomping, banging on pots and pans, etc. Maybe you have dogs that need to run around and need a back yard? But if you are buying that home because EVERYONE ELSE buys a home at your age/economic level/social circle, then you should re-examine whether you really NEED/WANT a major purchase that could possibly drag you down more than can be offset by whatever break you might get on your taxes from interest payments and property tax credit.
- “Real estate,” regardless of the fact that it IS tangible and concrete–ie, unlike stocks and bonds–does not necessarily produce a profit. Like they say about past success not being an indicator of future earnings, we’ve discovered that our profit from the first house now pales in comparison to the loss we’re taking on our second purchase. If we were to sell our condo right now, at the market price for it, we would we able to get only 55% of the price we paid for it. That’s up slightly from 1-2 years ago when we could only have gotten about 40-45% of our purchase price, but no one wants to buy a home and hold onto it for 10 years (we purchased in May 2007), so that we could sell it for 55% of what we paid for it, right? Which leads to…
- Buying a home can tie you down SO much more than renting. After we walked the Camino de Santiago in the summer of 2013, we realized that we were interested in pursuing a different sort of a lifestyle–less work, more travel, greater flexibility, etc. But, alas, we have a home that we cannot unload without a huge financial loss! Thus, we are stuck in limbo, wishing to be elsewhere (check out our “Retiring Abroad Series“) but also wanting to avoid a major fiscal mistake. Because, after all, if we are patient and hold on to the property, perhaps the market will turn around enough for us to take ONLY a 20-30% loss…? (In case you do not know, Chicago-area housing, especially for new construction condominiums, never really rebounded the way other housing markets elsewhere have.)
- But it’s also important to be clear-eyed about what you’re losing while hoping for housing prices to rise back up in your area. Part of the problem with our condo is that we have some structural problems left unfixed by our developers–who quickly absconded to another country once the housing crisis hit. With no other recourse to getting our problems fixed, our home owners’ association has been levying hefty special assessments for many years now (and will continue to do so for the foreseeable future)! So perhaps selling the condo a few years ago at 40-45% of our original purchasing price was possibly the wise option after all? In other words, it’s crucial that we recognize when there are apples-to-oranges comparisons of financial hits we’re taking.
The only thing that makes this home-ownership (slightly) less nightmarish is that we (mostly) enjoy living in our unit and in our town. If those positive factors also showed up in the negative column, we really should have left long ago, despite the steep costs of cutting our losses…