Friday, April 10, 2009

You Don't Get Something For Nothing

My family and I are in the process of buying a home in the twin cities area. This is an uncomfortable process, to put it mildly, even for those of us lucky enough to be solidly employed and in good financial standing. We are also fortunate in that we are able to buy a home without trying to sell another. A significant advantage. Although the process for us is more straight forward than it is for some in the market, I have noticed something about today's real estate market: you can't get something for nothing.

Being inspired by the record number of available properties and many anecdotal stories of people getting five bedroom estates for a hundred and fifty thousand, we stepped eagerly into the market. However, we have not seen these stories to be accurate. There are incredibly good deals on newer homes in our area, but these homes are in suburbs built up thirty or more miles out of the cities. Living in these far flung fifth and sixth tiered suburbs would significantly increase our already considerable commute. Long commutes take away from our own well being, that of our children, and require a significant use of economic and environmentally-degrading resources. A low mortgage does not equate with reduced individual, family, and environmental stress.

So closer to our workplace and schools we go looking for homes. In the well-established working class and middle class neighborhoods, there are some very good deals. Banks are getting more efficient at pushing through paperwork for liquidating their repossessed properties. The past headaches associated with buying foreclosed-upon properties are lessened, and in some instances are far less painful than dealing with a private seller!! But these properties are often abused and neglected. The money needed to get them into good shape would likely bring the price tag up to something closer to a traditional-seller situation. For the perennial fix-er upper type, these could be a good deal, but not so for the rest of us.

So what our family is left with is looking at well-maintained properties for sale by the owners, for the most part. Prices have been pulled down on these properties as well. But the prices are nothing close to the pre-bubble levels a few years ago, and I don't think they will ever return to those levels. Real wages have continued their downward momentum over the years and this isn't even factoring in unemployment rates and the life situations for families facing that difficulty. My question is this: why should housing prices be many, many times that of the average yearly income? How is it good for the economy to force working families into a form of indentured servitude to get into a home? Those top-market prices were entirely absurd and should not have been allowed to rise to those levels.

I am aware that if my family had been looking for a home only a couple years ago, we would have been stretching to afford a home that needed significant work and was the size of a large shoe box. And we would have gone for it! It is only through luck that we didn't find ourselves hugely upside down in our mortgage because of being in the wrong market at the wrong time. For those families, especially the ones with small children, I feel deep sympathy.

What many of those families can do is refinance their debt at much, much lower interests rates. The President was on TV advocating for this approach yesterday. Although this will not solve the big ass housing and personal finance problems faced by millions, it may help many families eek by until a more prosperous day breaks. And it is coming, that brighter day is coming.