First Person: I Couldn't Put 20% Down on a House Today

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I honestly do not know how people afford houses in today's market. Granted, I say that from the perspective of someone who lives in Southern California, where housing is not exactly cheap. As the housing market continues to rise and fall, there is the ongoing suggestion from government regulators that borrowers should put down 20% when they buy a house. That is a good thought, but it makes me glad that I bought my house when I did. I don't think I could come up with 20% today.


We bought our house in the late 1990s, and at the time we thought it was a lot of money. Granted, it was a lot of money for us but we had no idea how much the house was going to appreciate. At the time, we did put 20% down to avoid PMI. The housing market then went crazy in our area for a few years, and after peaking started to decline down to its current point. Had we known how the market would rise and fall, we would have sold our house and re-bought it later. Of course, everyone can say that, right?

The down payment

It's not polite to talk about how much you paid for your house. However, let's just say that I conservatively estimate that my house has increased approximately 225% in value since I originally bought it. I wish I could say that I forecasted this growth, but that would be a lie. Today, could I come up with a down payment that is 225% of what I originally put down? Probably not. Granted, if I were to buy another house today I would have some equity, but I sure didn't back then. Besides, equity does not do me a lot of good until I am ready to sell. In addition, there is little incentive to move laterally in Southern California because property tax is a fixed rate. Therefore, if we moved to a similar-sized house, property tax would jump by several thousand dollars per year. How are first-time homeowners supposed to do this? We saved for a number of years before coming up with that down payment and we made a lot of sacrifices.

Should we rethink our priorities?

Owning a house is very satisfying, particularly since I know that every mortgage payment is putting more equity into my home. However, it is interesting that this continues to be a goal in the United States. Would we do better if we adopted the culture of some European countries and did a lot more renting? On occasion I miss the simpler days of renting a place, but owning a house is so entrenched in the American lifestyle. It is easy for me to sit back and agree with the regulations that require 20%. However, I have to admit that I have lost some of the perspective that is felt by today's home-buyer. If the 20% becomes a more widespread rule for lenders, it could impact me over time. I could foresee less people buying houses, which might make my house eventually drop in value as more individuals decided to rent.

I want people to make good decisions when they buy a house, but I eventually want to sell my domicile. The ebbs and flows of the housing market do not impact me in the short term, but slowly shifting the culture of buying houses will eventually change the value of my greatest financial asset.

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