The American Dream is not an Investment

I have written in the past how the American Dream is not an investment. I purchased my first house in the 90's - a first home fixer upper. I lived in the house for two years before job changes required us to move closer to the city, so, I put the house on the market and rented an apartment. It took two years to sell the house (so I owned the house for four years). During those two years I was paying a mortgage, taxes, and maintenance on a vacated house. When the house finally sold, I did the math and determined I had lost $28,000. All the work, time investment, and everything I had done to the house was rewarded with difficulty selling it and ultimately a huge loss.

Because I had been burned, I wasn't a fan of home ownership. We rented for five years, during which time our family grew and outgrew the apartment we were renting. My wife had the american dream in her heart. But this second house would be different: new construction instead of a fixer-upper. We wanted to settle in a house where we weren't starting off behind the 8-ball with an impossible amount of work.

We have been in our current house for eleven years. Home ownership has a lot of benefits. But financial benefit really isn't one of them. In these eleven years, we have payed over $70,000 in property taxes, over $70,000 in mortgage interest, and over $10,000 in PMI. That is $150,000 that I will never get back. The likelihood we could ever sell our house and regain that $150,000 is very unlikely.

In the past 11 years, we have put a lot of money into the house: landscaping, finishing the basement, adding a deck and a patio, and more. There has also been (and will be) maintenance done on the house and property. The best I could hope for when selling the house someday would be to recoup some of the investments we have made.

Home ownership makes people rich. Not the homeowner. The banker, politician, lawyers, hardware store, insurance companies, and contractors. But not the home owner.

The financial benefit to home ownership is the tax write-off on interest paid. Also, if I weren't paying a mortgage, I would be paying rent. That taken into account, I estimate the total cost of ownership roughly twice the cost to rent a suitable house or apartment for me. So why do we, as Americans, do it? Because home ownership is the American Dream.