Home ownership – a bad idea?

I don’t know why, but Android keeps putting blog posts from Garth Turner in my Google cards. I’m only somewhat interested in his content, but this entry about household debt struck a chord. In that article Mr Turner explores a number of ideas, but the one that caught my attention is the proposal that home ownership isn’t necessarily a good idea. Instead, he uses the case study of some of his readers who are “liquid, diversified” and renting.

He summarizes their situation by saying they “have freedom, flexibility and mobility.” Something of a glowing assessment, I dare say. He goes on,

Tough to put your life on hold for months just to try and figure out what comes next. But a renter can move in a relative flash. No realtor. No listing. No open houses. No vultching buyers. No commission or mortgage discharge penalty. You just split.

You just split. Indeed. When the economy tanks people who are renting are not burdened down with mortgages they cannot pay (because of jobs they do not have) on houses nobody else wants to buy. Instead of sticking around, they can immediately pack up and relocate to where the job prospects are better.

Humility demands that I tread lightly on this subject. Mr Turner is obviously vastly more knowledgeable about real estate, economics, politics and the like than I am. And I would agree that he is technically right with respect to the financial argument, and I actually believe there is a case to be made that renting makes a lot more sense than home ownership in many circumstances. People are far too eager to tie themselves to a mortgage they can barely afford. Household debt is a serious issue as the article aptly describes.

But there’s another side to this. He goes on to describe real estate as an “anchor” but another way to look at it would be to see real estate as roots. When you buy a house you are in this for the long haul. You intend to invest yourself in your community, your city, your province and your country. You are taking a risk for the sake of contributing to civilization as a whole. You will work hard to improve not only your lot in life, but the circumstances of those around you. Indeed you have to, because if things go sour then you’re on the hook for a mortgage you likely haven’t paid off yet.

Most importantly, you will stick around. Just as a commitment to sticking around during the hard times is imperative for a healthy marriage, so a commitment to sticking around is important to a healthy community. When hard times come you will not run off to the next cash cow whether it’s another city, province or country; some place where the economy is booming. The rest of us know that you will stick around because selling your house during an economic downturn almost certainly means absorbing a pretty significant financial loss. You are risking your personal financial security for the sake of society as a whole. If the whole thing tanks you are not going to “just split.” You are going to work hard to help prevent it from tanking in the first place, and work hard to facilitate a recovery if it does tank.

[My wife, who is a teacher, also pointed out that children who come from “nomadic” families don’t tend to perform as well in school. They have to adjust to new schools, new communities and new friends on an inconveniently frequent basis which is generally not good for their academic performance. Poor academic performance could adversely impact their future life prospects. Planting roots and settling down is generally better for the little ones.]

This may not be a financially prudent way of thinking about home ownership, but it strikes me as a somewhat more noble approach. Thinking like this requires that one adopt a perspective much larger than me, myself and I. Many people have trouble with such a perspective in just about every area of life (gone are the days of cell phone contracts!). Like it or not, it is the people who think beyond their personal circumstances who make civilization as a whole possible. They are the roots of the tree while so many others are like the insects who merely feed off the tree until some other tree with juicier fruit pops up.

Maybe such nobility is probably not what most home owners have in mind when they buy a house. Most home owners are probably not thinking about “bettering humanity” or “contributing to civilization.” But perhaps they ought to. Perhaps we all ought to think beyond merely looking out for number one. That and, of course, we ought to think about financial responsibility. Look out for the interests of others but don’t forget to be responsible with your own circumstances at the same time. Noble is not the same as stupid, and one point that the article gets exactly right is just how stupid many Canadians have been with their finances. Whether you own or rent, this economic downturn should serve as a wake-up call.