An overly personal rant: I Don't Want to Buy A House Right Now

I'm going to rant a bit about something that's only vaguely related to this blog (the perils of buying a home), so if you're not interested in that, don't click on the jump. I'll understand. (This isn't going to be a regular thing at all, it's just been something on my mind.)


Good news for manufacturing chemists in the housing front, possibly, from Ben Walsh (who works with Felix Salmon, the economics blogger for Reuters):

...There is, however, a bit of good news coming from the housing market, as the WSJ’s Nick Timiraos reports: 

Prices rose by their largest percentage in at least seven years during the second quarter, propelled by low inventories of properties for sale and high demand for bargain-priced foreclosures… Prices rose by 2.5% in June from a year ago, and by 6% from the previous quarter, said CoreLogic Inc., a Santa Ana, Calif., data firm. The quarterly jump was the largest since 2005… Separately, Freddie Mac, which uses a different methodology, said home prices during the second quarter jumped by 4.8% from the previous quarter. That was the largest jump since 2004. 

It’s been long enough since we last saw this kind of rise in home prices that Bill McBride of Calculated Risk thinks it’s worth remembering the economic effects even modest gains in home prices can have. There’s increased profitability at Fannie and Freddie, fewer homeowners with negative equity, lower mortgage delinquency rates, fewer fear-driven sellers adding to excess inventory, and increased private residential investment. That last data point, McBride says, is the “the best leading indicator for the economy”. 

Still, that doesn’t mean that younger Americans are going to become home buyers en masse anytime soon. Not only does student debt loom over many first time buyers, but as Bloomberg’s Caroline Fairchild notes, median wages for college graduates fell 10% from 2009-2011 compared to 2007. As a result of this decreased cash flow, the workforce’s newest entrants prefer to rent; they’re delaying making other large purchasing decisions like cars, too. (emphasis CJ's) 

That isn’t necessarily a bad thing. A less-indebted and more mobile population should be a source of economic strength. But if, as Felix thinks it will, the housing crisis lasts a full decade, those benefits will largely be wasted in a sputtering economy. We really need a housing recovery: let’s hope Calculated Risk is right, and Felix is wrong. – Ben Walsh

Not that the readers of this blog need any reminder, of course, but the housing sector is rather important to the overall American economy. In addition, many chemists are employed by the different companies that are involved in making the materials in the modern home and household (and the modern car, for that matter.) Good news all around.

I find myself reflected in the bolded statement above. While we are terribly fortunate not to have a student loan debt overhang, we find ourselves renting. (Terrible people, renters (that's a joke, folks.)) We have not purchased a home, even though I've been working in the "real world" for basically the life of this blog.

When I tell people this, they look at me a little weirdly. My parents, God bless them, have wasted a lot of time attempting to get me to think about purchasing a home. (We happen to live in the same area as them, something that was really not planned.) For my parents (and much of their generation), home purchases have worked out really well for them. They've been able to make a little money selling an older home, and they've been prudent with their finances and built, financed and purchased their "dream home" (long before any of the current real estate ridiculousness, I might add.) But just because it's worked out fine for them, doesn't mean it will work out for us.

[Let us stop here and consider the many millions of people in the last ten years for whom housing costs have most certainly not worked out for them. How many people do you know who cannot take another job in chemistry because they're locked into their house?]

When they talk to me about it, the conversation is never about dollars and cents. It's all about "stability" and "owning a piece of land of your own" or "making your mother happy about seeing her grandchildren regularly." While this is all well and good, I see things in a much colder light, courtesy of the New York Times rent/buy calculator:

For the size of home that I wish to buy (not very large, but still above the median home price for the country), it doesn't make sense to buy for a very long time. Will I still be working at my current company in 7 years? Gee, I hope so, but I don't know. Are there any chemists who have worked for the same company for 7 years in these times? Probably, but I'm going to guess that they're a bare majority.

[And there's the matter of the down payment! I am a big, big, big fan of saving. But a down payment is a huge sum of money. What seems more prudent for a chemist these days? Saving for a down payment, or socking away cash for the near-inevitability of job loss?]

For those who have started in the chemical or pharmaceutical industry since 2009 (as I have), I suspect that, as Mr. Walsh has said above, we have delayed the major decisions and purchases of life (marriage, babies, cars and homes.) That's a problem for the country, certainly, but it affects our lives, too. While delaying all of these decisions from 18-22 to 26-29 seems prudent, delaying these issues until people are 34-37 would seem to be a tradeoff that involves real costs.

Readers, I'm sure I'm reacting just as emotionally as my parents, who never cease to inform me of the miraculous benefits of the mortgage interest deduction. Where am I wrong?