Sunday, September 18, 2005

 

my mathematical mind

Periodically we are told to buy property. We’re supposed to do this to build equity, which is a capitalist’s euphemistic way of saying that buying a house qualifies us to participate more fully in mainstream American life. We are taught to feel bad about giving money to a landlord; this is money, we are told, that we are flushing down the drain. Instead, by purchasing property and paying into a mortgage, we are putting the money to work for us.

I admit I’ve never understood the argument. Well, I understand it, intellectually; the money we give to our landlord is unrecoverable. But so is the money we pay for food. When we go to the grocery store, I don’t feel like we are flushing dollars down the drain: I feel like we are paying to purchase something that satisfies immediate needs, something we want right now. Often it is a piece of fish or fruit. We take it home, we eat it, and it’s gone. We don’t beat ourselves up about not planting our own replenishable garden with the seeds. Nobody tries to convince us that it is a moral failing of ours that we aren’t subsistence farmers.

When we write a check to our landlord each month, we’re paying to satisfy similar desires. We can’t afford to purchase the kind of property we want in Downtown Jersey City, but we still want to be here: we like being near the PATH train and the turnpike extension, restaurants we dig, and neighborhoods that are interesting to look at and to walk around. For many years, we didn't have any of that. Now that we do, it's hard to imagine retreating to where we once were, even if we were promised the security of home ownership.

If the house we now live in were to go condo, and we suddenly went berserk and decided we’d buy it, our monthly rent bill would morph into a multi-headed monster: mortgage payments, insurance payments, maintenance fees and especially property taxes. Call me a Jersey libertarian if you must, but I feel better about handing money directly to a person I know than I do about sending a check for the same amount to the municipal government. I understand that the screwed-up New Jersey finance structure forces all school costs to be paid out of property taxes, and that my disinclination to shoulder that burden could be perceived as an unwillingness to help the kids. But my landlord has four kids of his own. His are kids I like personally. I’m satisfied he treats them decently. Let our money go straight to him, and he can use it to acculturate and educate his children however he sees fit.

I’m here all day. I wake up in the morning and go straight to the computer. Sometimes I don’t stop writing until night has fallen and it’s time to head to Brooklyn for practice. My life happens at home. So my apartment can never be an investment or an equity builder – it must first be a pleasure. And there is no way that I could ever find a condominium that would be as pleasing to me as a rental: not for anywhere near a comparable cost.

Housing prices in Hudson County have gone totally apeshit during the past decade. You can’t feed a duck on the waterfront these days without getting crumbs all over a real estate speculator. If in ’94 we’d somehow scratched the dough together to buy a crappy brownstone near Van Vorst Park and fixed it up, we’d now be sitting on a million dollar property. Yet before I start counting my regrets over the imaginary money that could have been ours, I have to remind myself: all of the other lots around here have appreciated like crazy, too. Let’s say I cashed out and took the profit. I can’t just put that money in the bank; I’ve got to live somewhere. So what do I do? Well, chances are I end up taking that money and moving it to another mortgage around the corner. Meanwhile, the enormous down payment, taxes, transaction fees, real estate and insurance costs have taken away our liquidity, and with it, the flexibility of our daily lives. The house has become a safe, and the money is locked up within its walls.

It seems to me to be a psychologically unhealthy way to think about home. A residence isn’t a patriot bond, or a Sammy Sosa rookie card. It’s an investment, sure, but a second-order one: first, it's a place where we have to exist. I’m not a broker with a Manhattan penthouse, buying and selling deeds every time I pass Go. Should I ever “flip” property, it means a major interruption in my life, an epochal change, and a complete alteration in my experience of the world. That's much higher stakes than any equities trade. If I ever feel speculative, I’ll get some old X-Men comics and cover them in plastic.


Comments:
Simply put, that was awesome.

I don't know how interested you are in the northern 'burbs, especially Bergen County, but apparently there's been A LOT of backlash regarding the recent property appraisals for property taxes. I was just curious if you'd heard anything about it.
 
That's as artful and elegant a rationalization as I've heard.

One thing in your favor. If Healy is blowing smoke about the possibilities of a revaluation in the near future you are going to be looking very, very wise.
 
Revaluation is the law. It has to happen every ten years (although they get flexible... sometimes twelve years go by). Hoboken is overdue right now. When (not if) it happens many people will pay more. Revaluations tend to be politically unpopular.

The payments you make in terms of mortgage interest and property taxes are tax deductable. The money you pay in rent is (usually) not so. Property appreciation (assuming that happens - it has historically but nothing is guaranteed) is an asset you can borrow against for other purposes.

That's why you are told to buy property. Probably you know most or all of this. What's rarely said is the alternative: You wake up at 60 and have no assets.
 
i just hope i wake up at sixty, period.
 
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