Once upon a time, no American male was deemed a “man” until he had a mortgage and a house and a lawn that he doggedly mowed, nodding curtly to his neighbor, who was doing the same.
But the 2008 financial crisis, and the housing bubble that led to it, has left many a young’un wary of going that route. Homeownership among under-35s (including, probably, you) is now a feeble 34%— just half the national average, the lowest in a half-century.
What are you missing out on, if anything, by not buying a house? And if you do decide to go for it, what’s the easiest, safest way to do so?
Here, your questions answered.
1. Why buy and not rent?
Well, you have to live somewhere, broham, and—depending on a slew of financial variables—buying a place often works out to be cheaper in the long run than renting.
For most homebuyers, though, it’s more about the sense of ownership. When it’s your name on the deed, you can do what you want to the place: knock down walls, install knee-deep shag carpeting, dig a survival bunker. Even if all you do is change a light bulb, the old cliché is true: A house feels different from a home, and buying can help turn the former into the latter.
2. Is property a good investment?
Less so than you might have heard. Over time, real estate does tend to increase in value; everybody knows someone who bought a shoebox in San Francisco 10 years ago and flipped it for five times what he paid. In the past century, though, real estate increased in value by only 0.6% per year, on average, compared with 7% for money in the stock market.
If your friend in SF really had prophetic gifts, he’d have been far, far better off buying shares in some Silicon Valley company than purchasing that one-bedroom with a Bay view. That said, if owning property is what you care about the most, this is about as good a time as any.
“It’s a buyer’s market right now, and interest rates have nowhere to go but up,” says Paris Hampton, a New York City real estate broker with the Level Group. “If you’re thinking of buying, you should grab those rates while you can.”
3. How do I get started?
First, figure out what you can afford. The two key factors are 1) the amount of cash you can raise up front to use as a down payment, and 2) your income/credit score, which will determine how much a bank or mortgage company will be willing to lend you.
Also, make sure to set aside cash for “closing costs,” the inevitable blizzard of administrative fees that go to lawyers, credit agencies, and property surveyors, among others. These can add up to as much as 5% of the total purchase price—though, with the market as “soft” as it is right now, some sellers may be willing to cover a portion of closing costs to help close the deal.
It’s always worth trying to negotiate, Hampton says. “Every transaction is as unique as the humans involved, especially these days.”
4. How do I find my dream house?
The more specific you can be about what you want and need—number of bedrooms, garden, pool, and so on—the less time you’ll spend searching for your ideal home.
Cruising online listings and attending open houses can give you a good idea of what’s out there, but local agents, brokers, and realtors will have more up-to-date information on what’s available than you can glean off the Internet. A good agent can also help you strike a deal once you’ve identified your target property.
Best of all, in most states, brokers and agents working for the buyer are paid a commission by the seller. For you, the buyer, “it’s essentially a free service,” Hampton says. “I can’t imagine someone not wanting to take advantage of that.”
5. What do I do once I find the home I want?
First, make absolutely sure it isn’t a nightmare in disguise. (You’ve seen The Money Pit and Holmes on Homes, right?) Qualified inspectors and surveyors can ensure the place has safe wiring, is asbestos- and termite-free, and, crucially, has a solid foundation that wasn’t built on flood-prone land or, say, an ancient graveyard. (The last thing you want to be hearing at 3 a.m. is your 5-year-old crooning, “They’re here...!”)
Those fears allayed, make the seller an offer (usually via your agent or realtor), and after some high-stakes dickering, it’ll be time for “the closing,” an actual event—almost a ceremony—that is commonly held in the seller’s lawyer’s office and may involve pastries.
You’ll sign and initial documents till your hand is a hideous claw, after which you’ll receive the keys to your new property and stagger out, blinking, into the sun—a newly minted homeowner and stakeholding partner in what was once, and may one day be again, the American dream.