About a year after my husband and I had been married, we started looking for a house to buy. We had the money for a down payment, and we could afford the monthly payments. We even planned ahead and bought a lower-priced house so I could stay home with any future children we might have and we'd still be able to afford the monthly payments.
We were under the impression that buying a house was a good investment. As long as we lived there for several years, we would at least recoup any fees we'd incur from moving (like the realtor's fee and any transfer tax) just from the increase in the sale price.
We bought a house in 2001, and we were even able to refinance in 2003 when the value increased 15% both to lower the interest rate and to drop PMI payments. And then 2008 hit!
The housing market in Michigan plummeted and our house was now worth 40% less than what we paid for it. No big deal if you plan on staying in your house. Just like the stock market, you don't lose or gain money until you sell.
However, my husband's job got transferred in 2012, when the market was at its lowest point. We ended up selling our house for 40% less than what we paid for it. It was pretty painful to empty our savings and bring a check for about $22,000 to the table at closing! I'm just thankful that we were able to pay cash to get out of our home - there are many that were not so lucky and ended up in foreclosure.
What did the Housing Market Crash teach us?
You can't count on your home as a growing investment.
However, we didn't completely lose faith in owning a home. We did end up buying a home in Texas where we moved. Because we sold at such a loss, we were able to also buy when the market was down (although not quite the extent that it was in Michigan), and we got a mortgage with a low interest rate.
Since we moved into our current house, it has appreciated about 20%, but we don't get excited about that like others around us, since we know it can all be gone tomorrow.
So why buy a house?
Despite our cynicism about our home as an investment, we do enjoy owning our home for several reasons:
- We have stability: We don't need to worry about whether our landlord will decide to sell the house out from under us, forcing us to move quickly. We know we'll be living in the same place for quite awhile.
- We're protected against rent increases: No matter what the market is doing, we pay the same amount on our mortgage each month. We do need to be aware of potential property tax increases as the value increases, though.
- We can do what we want to the house: there's no landlord to consult if we want to make changes. We just need to be able to pay for them.
- It's a tax deduction: While I'd rather have no mortgage (and thus no tax deduction), while I do have a mortgage at least I can deduct the mortgage interest rate on my taxes. And I can always deduct the property taxes too (as long as I itemize my deductions).
What about you? Were you affected by the housing market crash in 2008? How do you feel about owning a home?