A recent MSN Money article noted that "When former President George W. Bush was in the White House, he pushed homeownership to Americans, noting that "part of economic security is owning your own home."
It goes on to say, "While his economic policies helped boost homeownership to a record high of 69.2% in 2004, many people also pointed to the push as feeding the housing bubble."
I don't blame George Bush for the housing market bubble as the MSN Money article seems to, preferring to look toward overzealous and underfinanced buyers who thought rising home prices was a sure thing. And in our own situation, while we weren't expecting to make money on our home, and certainly went into the deal with the right finances in place, I blame poor decision making with a housing market collapse we just never saw coming.
Price appreciation isn't a guarantee
We didn't expect much when it came to home value appreciation, but we'd heard that in "normal" market conditions, homes tend to appreciate at around 2 to 3 percent a year. I went for the lower of that range when it came to our hopes for home appreciation. What we got instead though was a decline in home value of 22 percent in the three years we were in our home. And according to Zillow statistics, the home values in the area in which we owned have continued to decline in the several years since we sold.
Therefore, kind of like the stock market, while long-term averages might say one thing, often smoothing over the hills and valleys of the market over time, this doesn't necessarily mean that this is what will happen in the short term. And it's important to consider what will happen should appreciation suddenly become depreciation.
There is more than just a mortgage payment to contend with
Many potential home buyers look to the size of the mortgage payment as an indication of what it costs to be a homeowner; however, there can be much more than just the cost of homeownership…much more.
Sure, a mortgage payment might make up a large portion of homeownership costs; however, there can also be additional thousands or even tens of thousands of dollars in property taxes, property insurance, utility costs, home repairs, and maintenance that go along with owning a home. While we outlined these costs in advance to buying our home, rising property tax rates (increasing from about $3,300 to over $4,800 in just a year) and insurance costs were largely outside our control. And while we budgeted for home repairs, again, sometimes unexpected events like a blown sump pump, a torn porch awning, a broken oven, and similar costs push budget estimates even higher than planned.
Selling is a process in itself
Selling our home -- in addition to the $65,000 in home price reduction -- cost us about another $20,000 in taxes and fees. With real estate agent commission, property taxes due, requests and credits to the buyers, and closing costs, the expenses mounted rapidly.
However, it's not just the costs of closing on a home but of the home-sale process itself that can add up. Beyond just the time, trouble and stress that can accompany cleaning and preparing a home for sale, there can be plenty of costs involved in the process as well. Finding ways to get the family out of the house and entertain them during showings and open houses in the midst of winter or on a sweltering summer day can add up. And all those costs for cleaning supplies and the items necessary to stage a home - new curtains, blinds, fresh bedding, flowers, paint, and repairs -- can add hundreds or even thousands of dollars to the home-sale process.
Therefore, bearing all these additional homeownership costs in mind before ever buying can help keep some of the budget surprises to a minimum and help prospective buyers take a more realistic approach to the role of homeowner.
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The author is not a licensed financial, mortgage or real estate professional. The information provided in this article is for informational purposes only and does not constitute advice of any kind. Calculations have not been verified by a professional. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.
- Real Estate