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Monday, October 30, 2006

Beware the Hidden Costs

Here's a bit of balance for you after that rental horror story. Astoundingly, today's "home buying isn't always a walk in the park" story comes to you courtesy of the Seattle Times (but not E. Rhodes of course).

Katherine and Robert McCartney thought they'd found the perfect first home in a 1,400-square-foot 1950s rambler in Boise, Idaho, a few years back. They thought they were getting a deal.

They actually were getting in way over their heads.

A few months after they bought the house, the couple had to move to Washington for work. But before they put the house on the market again, they spent thousands of dollars on a new roof, garbage disposal, paint job, window screens and sand for the oil furnace.
...
In the process of buying and reselling quickly, they discovered one of the cardinal rules of homeownership: That cool condo or cozy craftsman likely will cost thousands more than you paid for it, most notably for maintenance and repairs, furniture and fixtures — expenses that buyers should plan on but don't.
Which is one of the many reasons that stretching your budget to buy a home is never a good idea. You never know what will come up, and you are pretty much guaranteed that there will be something that you didn't expect. The "rule" that you shouldn't spend more than 30% of your gross income on housing wasn't just pulled out of thin air. If you don't leave a financial buffer in your budget, you're setting yourself up for problems down the road.

Home ownership is great, and I'm all for people buying houses—as long as they can actually afford to. There's more to "affording" a house than the simple [INCOME] > [MONTHLY PAYMENT] equation.

(Heather Rae Darval, Seattle Times, 10.28.2006)

6 comments:

redmondjp said...

OH - MAH - GAWSH! They bought an old house and (gasp!) had to spend 100 bucks on a new garbage disposal? Dammit people, don't you know that you're only supposed to buy new? What were you thinking?

I read this article in yesterday's paper and couldn't stop laughing. Wow. They were out a few hundred bucks on normal maintenance items (what??? no screens on the windows? E-gads!) and were whining about it . . . If they had purchased a new condo, their monthly dues for a year would have easily eclipsed what they (sniff) didn't expect to have to pay for a few minor items.

And then in the same section was that article we've already seen about how rents are rapidly rising, and open houses at rentals (huh?) are crammed with willing potential renters and it's just impossible to get a place--you better buy a house, did you hear me, buy buy buy! You're not going to be able to rent anything, so might as well buy, we're in the trough now.

So the Sunday RE section basically had two messages in it:

1) Buy a new house from a builder, not one of those worn-out, used houses, and . . .

2) Don't rent because a) it's too expensive and b) you can't find a place anyways, so you better just go ahead and buy something right now . . .

Anybody smell the fear?

Maybe Karl Rove is consulting for the RE industry now.

PugetHouse said...

Well, U.S. papers aim for the 8th-grade reading level. I could well imagine an 8th-grader needing maintenance costs explained to him.

Otherwise, I haven't met many would-be buyers who were so desperately ignorant to miss the principle of maintenance costs. Generally, they just flat can't afford anything in the neighborhoods that make sense to them, and they start entertaining drastic schemes of 50-mile commutes.

This looks like a non-story that they used as filler, so they could feel good about their corporate citizenship. I wouldn't ascribe any darker motives to it.

seattle long term owner said...

I spent more in furniture/furnishing after moving in that I saved up for to make closing costs...

I never knew window treatments could rack up to a few hundred dollars per window....

Then again I never bought a house till recently...

Richard said...

seattle long term owner said...

Then again I never bought a house till recently...

Misleading handle there, no?

The Tim said...

Only if your viewpoint is fixed on the past. "Long Term" can also be referring to the future, e.g. - "China is going to be an economic force to be reckoned with for the long term."

seattle long term owner said...

Richard,

I actually started with the handle, seattle long term buyer... then switched a few mos ago to ... owner... since I already bought...

sorry for the confusion...

I bought at the peak of the market, my house has probably lost 10K so far and I don't care since I'm not moving for at least 7 years when my ARM resets and I'm making nearly twice what I'm making now... and I can move into a McMansion...

I like to stay around the blog as a testament that not everybody who believed in the bubble coming were renters... I own and I believe...