The following is a guest post from Greg McFarlane, author of “Control Your Cash: Making Money Make Sense“, a financial primer for people in their 20s and 30s who know nothing about money.
The housekeeper comes every second Thursday (it used to be every Thursday. We’re all hurting here.) She’s thorough, but methodical, which means if I want to get any work done I have to get out of the house.
Thus to The Coffee Bean & Tea Leaf, which beats Starbucks by virtue of having free internet for all customers – not just those with AT&T accounts. Nurse a $1.50 decaf for a couple of hours and no one bothers you. How CB&TL makes money under this arrangement is not this writer’s concern.
I sat at a table for 4. A few minutes later, a couple came in and asked to sit across (or as we say in the Intermountain West, “acrost”.) There were other tables available, but that didn’t seem worth mentioning. She was loud, and barked orders at an obsequious husband and, via the phone, what sounded like a realtor. The woman was so self-unconscious during her phone conversations that she recited her phone number and full name several times. This being 2010, that made it easy to determine where they’d moved from and even get a hazy idea of where the husband would be working.
They were shopping for apartments. In Las Vegas. A city with more foreclosures and bank-owned properties per capita than anywhere else in the country. As an advocate of better living through 30-year (and these days, 15-year) fixed-rate mortgages with 20% down, I groaned, thought better of opening my mouth, and waited for the wife to get up and locate something to eat.
I needed an icebreaker, so I asked the husband what attracted him to Nevada. Was it the 15% unemployment? How about the negative net migration? To his credit, the first thing he mentioned was the lack of a state income tax.
Regardless, why would an upwardly mobile couple rent an apartment when they can practically name their price for a house? The husband had 4 reasons, none of which made sense:
1. “We’re not sure which area we’re going to stay in.”
Then why would you hire a realtor? Who, by the way, has far less incentive get you into an apartment for a measly kickback from a property manager than she’d have to earn a commission for selling you a house.
Hiring a realtor costs you nothing out-of-pocket if you’re buying: the seller pays the realtor’s commission out of the sales price. Part of her job is to find you a neighborhood you’ll like living in, which means you don’t want a realtor who moved to town a month before you did.
2. “We have a 2-month-old.”
The logic being that when the 2-month-old becomes a 13-month-old, the family will require a larger house.
I should have asked for clarification. Perhaps the 2-month-old is a Siberian tiger. But assuming it’s a human, how much larger of a house do you need? We might be a throwaway society, but hopefully not to the point where we discard houses after a year or two of use for so capricious a reason.
Obviously, this objection wasn’t a real one. It was a public stand-in for “I suck at commitment. If you don’t believe me, look at the wife I settled for and am having second thoughts about.”
3. “We’ve got family staying in our house back in North Carolina.”
By all means then, live your life for them. Especially from 2000 miles away. If the family members are able-bodied, they can find somewhere else to live. If not, then you’re paying for care anyway, right?
Upon further prodding, my new friend admitted that he was renting his house to a cousin who’s attending college and paying $0 in rent. Impoverishing yourself to benefit a family member is one thing. But when that family member is a college student – i.e., at that one stage of life where it’s perfectly normal and maybe even a little humorous or romantic to be poor – there’s no excuse for it.
4. “I only have a 2-year contract at my job.”
It was at this point that I unscrewed a table leg, reached over my laptop and beat the man into unconsciousness. (Editor’s note: figuratively speaking of course!)
I wanted to ask how short a contract he’d need to agree to buy a house. 30 years was the upper bound, sure, but could he go lower than that?
Home prices are historically low. Interest rates are, too. They’ve never been this low in concert, ever. Unless your credit is atrocious, there’s a house out there for you somewhere: an asset selling for a subterranean price.
The same people who palpitate when Best Buy or Macy’s has a 30% off sale will stand inertial when houses do the same. Why? Maybe because even at or near the nadir of the housing market, the prices remain in the psychologically treacherous high 5/low 6-digit range. Or perhaps because there’s so much of that tedious paperwork involved.
Whichever excuse fits best, there’s never been a better time to buy a house. The IRS brain trust still allows big mortgage deductions, for now. The nation’s population is still increasing, as is the concomitant demand for shelter. Yet for those renters committed to being noncommittal, no market conditions will convince them to seize a glaring opportunity.
The couple seemed clean and responsible. The husband clearly has a regular job. They’ll help make some landlord very happy, and very rich.