The biggest lie

I've decided that the biggest lie that has ever been told to me is this:

"Real estate is always a good investment - you are building equity - rent is just throwing money out the door"

If you say this to someone, or something similar you are a Big. Fat. LIAR.  Even if you believe this to be true - or by some miracle it was true for you - it is a LIE. 

7 years ago we ventured into the realm of homeownership under this seriously misguided notion.  The rent was going up, we were less and less happy with our landlords,  interest rates were low, housing prices were reasonable.  The conventional wisdom was that with 20% down you needed to stay in a home for ~3 years to balance it out and we were planning to stay in the area for at least 4 more years so it all made sense.  I calculated it all out, we looked at a lot of houses and finally we went to the bank and gave them everything we had (and some we didn't) for the down-payment on a cute, little bungalow.  Yea! - We were grownups! - Living the American dream.  And if I'm going to be completely honest I loved that house - loved everything about it - it's old house quirks and tiny spaces - it was our home and it felt great to know that every penny I had saved during my working life was safely over our heads.

That is what you do. This is what we condition people to believe they are supposed to do.  You by a "starter home" and "start" your life.  "Real estate is always a good investment - you're building equity and not just giving you money away to some landlord"

5 years later, two PhDs in hand, we had to move, and we put our house on the market.  About 30 nanoseconds later the news broke that there was a "global financial crisis" created by some a-holes somewhere.  Turns out real estate was not a good investment - prices were down - way down.  But we were so stupid that we just kept believing the lies the world kept feeding to us.  Over the next 9 months we heard it all:

"starter homes are keeping their value" - LIE.
"small homes are still selling" - LIE
"it's picking up this month" - LIE

And so, still being brainwashed by that mantra "rent is a waste - your building equity" and believing the lies,  we did what was quite possibly the stupidest thing ever and bought another house.  The house we were going to live in forever - I was going to get tenure - we were going to have a baby - it had a spare bedroom for people to come visit.   We were making this move in good faith and thought that we were on our way.  It seemed important on many levels to have a real home - rent was more than the mortgage payment unless we wanted to live in a ghetto and the people at the bank gladly gave us the mortgage - "oh you're small house will sell soon - that part of the market is doing fine - you have so much equity in it that it's no problem"


Six months in, two mortgage payments became a burden, and this was turning out to be a giant disaster.  These were the worst times of my life.  The stress was unbelievable and somehow people just kept telling us this was our fault.  Our fault - we did what we were supposed to do - we had 20% down - we made all of our payments - we weren't flipflopped - but if you were having housing trouble somehow you were part of the problem and not just a victim. Turns out the world really does love to lie to you. 

Finally, we threw in the towel and reluctantly became landlords - we kept "building more equity" - in both our homes.  Since we were still just starting out, equity in our multiple houses was really all we had, savings were quite limited and we were contending with that damn two-body thing so they weren't growing at any rate to speak of.  But it was ok, we were building equity in real estate!  I was optimistic that it would all work out.  We were just investing our money someplace else, some people invest in stocks and bonds and mutual funds.  We were investing in real estate (reluctantly) but "real estate is always a good investment", "real estate is how all the rich people got rich" LIES! LIES! LIES! They are all lies.

So here we are - 6.5 years after buying our first home.   We own two houses - we don't live in either of them - in fact we are living in someone else's house -essentially we are squatters.  We are two people who are addressed as Doctor on a regular basis and we don't even have a home of our own. 

For most of you this is not really news, so why am I bitching about it.  Well, our renters are leaving, so we're putting the first house back on the market and trying to find a renter for the second house and to be honest,  I am officially out of optimism. I'm no longer beleiving the lies, and you shouldn't either.    Real estate is not a good investment - we were not building equity - and I've run the numbers - 6 years of rent just about equals what we stand to lose by selling our two homes at "fair" market value.  That is if we can find someone to offer us "fair" market value.  If we took the last offer we would lose even more because it was so low we wouldn't even be able to pay of the mortgage - it would cost us MORE money.  Building equity my butt.  Yup you read that right.  I would have more money in the bank if I had just "thrown it all away" to rent. 

Many of my older acquaintances have said - well that just the way it is - cut your loses and run.  Which is likely what we'll end up doing.  That, however,  is a very hard thing to swallow.  I know that everyone is losing money - investments are shrinking - retirements are being delayed.  But here's the thing - we made our "start" by giving it all we had.  We're not talking about losing some money on paper - or retiring a year later - or not taking a vacation. We're talking about losing everything we have.  We'll be better off then some, I know that and I'm grateful. We'll find another roof to put over our heads - likely an apartment smaller than the one we started off in years ago - We'll put food on the table - and we'll start all over and save every penny so that in a year or two - in our mid-30s we can buy another starter home. Maybe.  Right now the only benefit I see to home ownership is that you can paint the walls - so I'm not so sure I want to do it again.

But one thing is for sure  - I'll never ever again believe that "real estate is always a good investment - that we're building equity or that rent is just throwing away money". 

Maybe our luck will change - maybe in 6 months I'll be doing what I'd like to be doing and settling into a home - a home were we can think about having a kid and living our life and growing old.  But for now all of those things are on hold.  So, I think the whole world should do the next generation a favor and JUST STOP LYING.  I know I not singing that song anymore.

I don't regret my choices, I made them in good faith and I believed at the time that I was making the right ones.  I'm just hoping that someday I'll no longer be haunted by them.


ETA:  I almost forgot the best part - a few weeks ago it looked like we were going to have renters in both houses - so just out of curiousity we called a bank to see what the possibility of getting a third mortgage would be given the other two essentially become investments.  The kind lady told us they would approve us for a loan up to.  Wait for it. 

$400,000.  That, my friends, is more then we paid for the other two houses - combined?!  A loan of that value - the purchase price would be higher.  So all that BS you hear about no one giving mortgages and that's killing the housing market...it's a lie too.