We humans have a strange habit of changing our perception of the world to match the way we want it to be, whether or not it really is the way we say it is. We justify things to ourselves that we know are against our best interest by taking extremely optimistic views of a situation when we'd often be better off taking an equally pessimistic view and restraining ourselves instead. These justifications are difficult to listen to from the receiving end because you know that an injection of reality will put at least a small tear in the relationship. And it's even worse now that we live in an era of
Facebook friends and reality TV, where people prefer to watch things that they could imagine being able to do themselves and befriend people whose capabilities they could easily see themselves taking on if they wanted to. We're not impressed by expertise anymore and we don't want to have our easily-mined wisdom threatened.
But, that's a small digression. There are two things that I want to mention -- one personal and one not -- that are strange perversions of objective reality:
My vegetable garden should be a source of energy, not a means to dispose of itLast weekend, I was digging out another vegetable bed in the back garden. The places where I'm digging these beds is an old foundation and mostly consists of limestone chips and sand, so it's quite a tedious job. Strangely, though, one of the attractive features of this job was the amount of exercise I'd see myself getting out of it. I resisted the temptation to seriously consider the number of calories
that'd be burned, but I was heading in that direction. And there's a strange inconsistency here because here I am, digging a vegetable garden which will hopefully one day produce food that I can eat -- food that I'll eat to produce energy -- and I'm worrying in advance about how much energy I can dispose of digging out the beds.
If I was gardening as if it counted -- as if I needed to have a productive garden in order to survive, as many populations have in the past before oil came along about 150 years ago -- I'd be far more worried about how to expend as little energy as possible in getting the beds dug. I'd be interested in using less energy to maintain the garden than I was getting from the food that it produced. A valid concern, I think. But it's not that way anymore, is it? For anyone interested in keeping their weight down, it's about how we can go about eating what we like, when we like, and then how we can burn off the calories that we don't need afterwards.
My house is not an investmentAt some point in the past 10-20 years, we started to look at the purchase of a house as an investment. I never really did, except in the most rudimentary sense of it being sensible to fix the roof over your head in place if at all possible, rather than paying someone else to hold it there for you. Beyond that, though, I bought somewhere to live and, beyond that place not being a bad value for money, I didn't give much thought to the investment angle. This is how I believe most people should buy a house because, as above, too many people become far too optimistic about potential returns on their investments when they kick themselves into storytelling mode. These days, it's hard to enter into a chat with someone about their house without the topic coming up of how much they paid for it and how much they believe it's now worth (usually based, as it should be, on how much someone else paid for a similar house in their area -- the value of real estate, after all, has nothing to do with how much
you think it's worth). A lot of these people seem to calculate themselves quite clever, for some reason, even though, during a real estate boom, pretty much
anyone's house in the target area will go up in value by an unreasonable amount of money. So, seeing your house as an investment is silly to me. Live in it; enjoy it; buy it according to those two measures, and anything else is a bonus.
But it has occurred to me that, with the amount of money people are now paying for the houses that they have to have, and with the lifelong
saddlement of debt that they're taking on in order to do it, that they really have no other choice but to see the house as an investment. Any other point-of-view makes the whole deal unjustifiable. If you decide to finally get on with a house purchase after the age of 30, and if you're putting down 5% on a $400,000 house that you just can't do without and amortizing the other $380,000 over 40 years (the most popular mortgage option for first-time buyers), it essentially means that you will not own the home for any significant portion of your life. You'll end up paying more than the price of the house in interest before it's paid off, and for many years, most of the hard work behind your mortgage payments will be going to interest and not to moving you closer to actual ownership of the house.
So, of course you're going to look at it as an investment. We're told to wear the same glasses when faced with the skyrocketing cost of education, too -- that, stood at the price tag presenting a questionable value proposition, we shouldn't believe our lying eyes and should instead consider the possibilities of future income potential; that the return on the investment in our education makes it worthwhile. Sometimes, it can make sense.
But, it's dangerous, too, isn't it? Because when your perception of the value of a house is based more on your perception of return on your investment than of how you'll enjoy living there, you will pay more for something that you don't like living in as much as what you paid suggested you will. And when you're in the investment mindset, you're susceptible to all kinds of marketing that appeals to the real estate investor. You start thinking that, yes, maybe it's worth it to upgrade that bathroom because of the prospects for return on investment that real estate literature is full of. Or maybe granite
countertops will make the investment that much more valuable. And a triple-car garage is such a unique feature that it'll pay for itself, even if you only have one car that you don't enjoy driving that much.
And then we hit an economic downturn and buyers can't knock down the mental barrier of skepticism about the value of a big house anymore. Or, we get an environmental conscience and people aren't interested in maintaining the carbon-flatulating excess of a big house anymore. Or, we see rapidly increasing energy prices and aren't interested in heating big houses anymore. Or, maybe we start to spend so much time on the congested roads that we begin to value our time with family a whole lot more and we're not interested in spending time cleaning big houses anymore. Worse yet, maybe it's multiple choice (E): all of the above.
And then, by some streak of luck, our culture shifts and we just don't want our worries about carrying such a large facility to be like the elephant in the room of our headspace that they so ever-presently are. And our concept of value shifts and vapourizes a large chunk of your equity when nobody values what you have anymore, and you're stuck. At this point, the best you hope for is that you don't owe more than your house is now worth.
You then realize that you were lied to by a bunch of real estate cowboys (and girls --
cowpeople?
bullpeople? Cowgirls and
bullboys?) and their co-conspirators in the racket that ended up in real estate because they couldn't make a career in anything else that required truth, integrity, and verifiable claim. But they've already made their money, and you're left holding a house-sized bag.
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