A House as a Home, Not as a Retirement Vehicle

A friend of mine recently moved away from the city and after visiting her in her new home, it got me to thinking about how things are changing (positively,m in my mind) as far as attitudes about home ownership. I have always been critical of the suburbs, the increasing size of homes and the infrastructure that relied on a dependency on cars.

I live in probably the most modest and lowest price home of all my homeowner friends and family. However, I do live on the waterfront -prime real estate in the largest city in Canada. However, because of the ownership structure, a co-ownership versus the more commonplace condominium structure, the price hasn't appreciated as much as the rest of the real estate market. On the other hand, the price hasn't fallen at all.

My purchase was based on two factors - firstly, it was priced well below other similar sized units in the city and secondly it was the cheapest place I could find in the best location (waterfront). I never bought it as a future retirement nest egg (which many of my friends have), but as a home. Conversely, I know people who have built the most expensive home in a not-that-great area. The argument that your home is your best investment currently rings hollow to many millions of Americans, and even Canadian memories are short after their last real estate bust in the late 1980's.

What real estate buyers also conveniently ignore are the carrying costs of holding this investment. Novice buyers become quickly horrified to find that after 10 years, the bulk of their mortgage payments have only gone to pay the interest portion of their loan, or that after the 25 years it will take to pay off their debt obligation that the amount of interest can sometimes be twice the amount of the purchase price of their property. Throw in annual maintenance costs, soaring property taxes and condominium maintenance/strata/HOA fees, and the equation doesn't always look good. Price appreciation? That is a pipe dream for millions of homeowners right now.

I'm not advocating that one doesn't buy real estate, but only that one does so, firstly as a place to live, and secondly, as part of a ddiversified investment portfolio. A number of my friends have sinced followed my lead, selling their large suburban homes to move into smaller, lower-priced homes. All are very happy with their decision, as they have now discovered that their mortgage carrying costs and debt obligations (not to mention their financial stress levels) have decreased, their utility bills for things like heat and electricity have declined, as have their property taxes and insurance costs. They have also discovered that they can live comfortably in smaller homes and that it's not the size of the space that counts, but how it is used. Not to mention the fewer hours it takes to clean a smaller house or less time on the garden in winter or shovelling snow in winter.

I hope that my small circle of friends is but a small slice of what is happening in society today, and if so, then I am happy in the direction it is going.