Monday, September 5, 2011

Monuments to Themselves

People no longer want homes, one Real Estate Agent told me, they want to build monuments to themselves.

About 15 years ago, we looked at a home in Harper's Ferry, West Virginia.  At the time, I was making "good money" at the fabled "dream job" and the fantasy of having a weekend retreat in West Virginia seemed appealing - after all, it was only a train ride away from Union Station in Washington DC.

And we looked at a place on 10 acres.  It was an old stone house that needed a complete overhaul.  And even at $200,000, it was a lot of money back then - for a second home.   I realized back then that owning two homes was not a good idea, as they were both expenses, not income producers like rental properties.  So I walked away.  I should have remembered that lesson later in life!

The Real Estate Agent we talked to noted a number of the mini-mansions that were being built in the area and we talked about these.  Her comment nearly made me spit up.  "People are building monuments to themselves" she said.  And she was right.

The entire "look at me!" home trend of the last two decades was an ego trip, to be sure.   To own an "impressive" home that would intimidate your friends and make people think you were rich, was considered to be the best possible thing you could do.  And since all your friends were doing it, you had to, too, and get caught up in an arms race of granite counter tops, stainless steel appliances, whirlpool tubs, man-cave garages, and the like.

Most, if not all of this was useless garbage.  Gourmet kitchens for people who can't cook.  Whirlpool tubs that become oversized laundry hampers and dust attractants.  Man-Cave garages with diamond tread toolboxes for men too busy to work on cars, even if they were inclined to, or had the skills.  It was a show - a Broadway production - of a lifestyle that usually neither spouse wanted or actually lived.  But it was  a show that was put on to impress an audience of unidentified "others" who would be impressed - or so we thought.

Were we really that insecure - individually and as a nation?  In retrospect, it all seems so odd.

As I have noted before here, if you do the math and add up the costs and benefits of home ownership, if you buy a lot of home, you have a lot of home - and a lot of cash-flow requirements.  You don't make money from the home you own, so buying more of it doesn't make you more money.   At best, you might get back - after 10, 20, or even 30 years - all that money you spent on mortgage payments, interest, taxes, utilities, repairs, and like - if you are lucky.   But you don't make money.

So buying an expensive "Look at me!" house just stresses you financially, leaves you broke all the time (house poor) and  unable to put aside money to fund your retirement.  And if the market crashes - as it did - or if you lose your job - as many did - well then, you are really screwed.  And many of us were and are.  I was fairly lucky, myself.

Owning a lot of "stuff" is fine and all - if you are really rich.  The temptation is, in our credit-based society (and don't kid yourself, despite what the naysayers say, it is still ridiculously easy to go into debt in this country - there is plenty of credit to be had, particularly on onerous terms) to have more NOW and pay later, and kid ourselves that this is real wealth and moreover is smart financial thinking.

But you have to ask yourself, are you getting something you really need in life, or just building a monument to yourself?  And is real happiness to be found in a never-ending stream of onerous mortgage payments, credit card bills, and car payments?  Or in something else?

Is it better to have a mortgaged mini-mansion or a paid-for bungalow?