Mar262018

Is homeownership the key to happiness?

I am perhaps the most widely known renter in Orange County. I’ve been writing under the moniker Irvine Renter for over ten years now. Are renters like me less happy that those who bought homes?

Repost from OC Housing News 2011-2016

First, I want to point out I was not always a renter. Like many others, I bought a house (actually I designed and built it). I know the emotional satisfaction that can come from having a house to call my own. In my opinion and experience, there is an emotional quality to owning a house that is not replicated in a rental.

For example, when I owned my house, I spent hours tinkering in the yard with landscaping, and my house plants looked like a greenhouse. Since I became a renter, I’ve killed so many house plants that I quit buying them several years ago. The house plants for me were the manifestation of my spiritual connection to the property — a connection I haven’t had that since 2000.

So do I regret renting? Not for a moment. I’ve greatly enjoyed the freedom renting provides, and given the realities of the housing bubble and bust, I enjoyed a higher quality of life as a renter than I would have endured as a loanowner — and by the time I was ready to buy again financially in 2004, I would have become a loanowner. The drain on my income to support a house payment would not have been worth what I would have given up. And without the compensation from appreciation, it would not have been worthwhile.

Of course, people in California came to realize they could have it all. Through mortgage equity withdrawal, they could have the nice, expensive house that they couldn’t really afford, and they could have all the trips, cars, and consumer goods they would ordinarily have to give up in order to make their house payments.

HELOC abuse and Ponzi living is a very seductive mistress. It offers the lure of the expensive house, and it promises the spending money to enjoy the house and the rest of your life. Further, you don’t have to pay for it because the house pays for it all. It shouldn’t be too surprising many people fell into this trap. Unfortunately, since it is a Ponzi scheme, it inevitably collapses, the borrower loses everything, and they must endure an unceremonious fall from entitlement.

Now that the Ponzi borrowing lifestyle is gone, people must make trade-offs. Many will still blithely assume home equity solves all problems, but as I pointed out in Will HELOC abuse be as prevalent this time around?, the rising cost of HELOC abuse caused by rising interest rates will make it far less desirable, and those that go Ponzi won’t last near as long before they implode.

People still view housing as a central component of happiness and a critical aspect of the American dream, but there is little research to support that.

It got so silly here in California during the housing boom that renters were actually looked down on as lesser people and lower class citizens. Perhaps there was a time prior to the housing bubble when becoming a homeowner required character and the discipline of saving, but all that was eliminated during the housing boom when anyone with a pulse could borrow as much as they wanted to get any house they chose.

My family lived in more than a dozen rental properties over the years. I believe that it’s how you spend your time that’s much more important than anything else. If I have a room I can set up as a home office, and if my wife and son are comfortable, I don’t care whether the property has high-end finishes or not. For most of the time I’ve lived in California, to enjoy the same quality of housing I was renting would require me to move to an undesirable location or pay a lot more money, which would cause me to give up other things. I was never willing to do that.

I chose to pay the large rental premium to live in Irvine because it’s close to everything I want, the shopping centers are first-rate, and the landscaping is beautiful. I never have to drive far, and anytime I leave my house to run errands, I am surrounded by beauty, and I enjoy safety and pleasant public interactions. And none of this requires me to own anything.

No matter how nice a property is, over time, people come to take it for granted. We have friends who own a beautiful 3,000+ SF home in Oak Creek. As their financial condition improved and they could afford a nicer property, they actually began to dislike the house they were in. Perhaps it was their way of pushing themselves out of the nest, but I was astonished by how they were dissatisfied with what for most people would be an unattainable dream home. Happiness comes from being grateful for what you have, no matter your circumstances.

Buying a home is still considered an important step on the ladder to personal fulfillment, but I’m convinced ownership is all it’s cracked up to be. People justify their own choices. Very few admit they spent hundreds of thousands of dollars in a way not optimal for their happiness.

Many of the commenters back at the Irvine Housing Blog in the early days were clearly happy about the illusion of wealth created by inflated prices. As prices turned south, the few of those early commenters who remained started talking more about having a place for their family and the other benefits of home ownership. Despite the obvious fact they bought the house for appreciation, they could never admit to themselves they made a mistake. Instead, they focused on the other benefits of ownership as solace for their poor decision.

There is nothing about home ownership that makes homeowners intrinsically happier. Ask any loanowner, and the ones who will be truthful with you and themselves, will admit that loanownership did not make them very happy. That being said, true homeowners, the ones who actually do own their homes with no debt, they get a special piece of mind that does bring additional happiness. That’s a goal to aspire to.