Friday, May 9, 2014

The cost of renting/owning a home

I now live a self-imposed somewhat sheltered life.  I do the sheltering.  A news story on WCSH6-TV the other day really caught my "Wow.  Times have certainly changed" attention.  The story concerned an "affordable" housing project near Downtown Portland.  This concerns an older man now living in the past.  There's a name for that when one gets to my age, isn't there?

Ground has been broken for construction of a 39 unit apartment complex.  When completed, the condo-quality apartments will rent for $1300 to $2200 per month.  Holy smokes!  This story has pointed just how far in the past I'm living these days.  I can't imagine throwing away $2000 a month for rent.  I call it "throwing away" simply because when one leaves a rental unit, all one has to show for it is a stack of rent receipts.  That's a potential of more than $25000/year with only a little stack of paper to show for it.

It's been 20 years since I've been in the housing market, but even then when my wife and I ended up buying our current home, I couldn't imaging spending that much money, or comparably economically for the times.  My realtor friend, also my Fearless Friend,  who helped us find a suitable home spent more than a year getting me to visit some suitable homes for sale at that time.  He tried his darndest to find a place within the range we had said we wanted.  Actually, that range was, to us, outrageous.  He also found our range outrageous, too, but in the other direction.

When Sandra and I were married over a half century ago, we did live in an apartment for a while.  It cost us $50 per month.  Of course income was more in line with that amount at the time but it was probably at the limit of what we could afford on my $3700/year salary.

A year later, our landlord, who was a super person and great landlord, had to raise the monthly figure to $55/month.  Sandra and I, probably more specifically "I," was outraged.  We had to pay an additional $60/year just for an apartment we didn't own.  He had to go up another $5 as the third year rolled around.  That was it.  That was the limit we would be willing to pay for rent.  We decided that if the following year rent were raised again, we were "outa there."  It was and we immediately began looking for our first house.

At 1964 prices we figured we could easily buy a $10,000 house.  Yes, houses for that price were on the market back then.  After looking at three or four places, we knew our apartment was still a much better deal.  Nevertheless, we went to a loan officer at the then Maine Savings Bank to see what a truly reasonable monthly pay on a house loan would be.  When he told us that, considering our earning potential over the years since I had a very stable job, we could easily afford more than what we thought.  We had told him not to consider Sandra's income as our plans were for her to become the traditional at the time stay-at-home Mom to raise the children we planned.

With the new figure and a loan virtually in hand, we continued our search with a more reasonable price expectation.  Our first house was in the North Deering-Lunt's Corner corridor of Portland.  Our monthly "rent" went from $65/month to an outrageous $82/month plus escrow for city taxes and insurance.  But we owned a house and had something that was ours to show for the expenditure.  We stayed in that house for more than 25 years.  The last ten years or so it was totally ours.

An unfortunate circumstance with Sandra's widowed mother caused us to examine our future and we decided we needed a new home with everything on one floor.  We asked our Fearless Friend, the realtor, to help us find such a home.  Of course he pointed out he would be the seller's agent and not ours, but he did agree to steer us to homes and make arrangements to tour some.  I think he began to question our sincerity as after more than a year, we had rejected every place he had found for us.

He then gave me basically the same lecture that banker had given us earlier about being able to afford more than what we were wanting to pay.  Finally, after doing some math we gave in to his efforts and raised our expectations.  He wasted zero time, in fact told us later he had picked out the house several months earlier that he knew we'd like.  He told us he had the house and took us to see it.  It was a few dollars more than we wanted to pay, but his estimate of what we wanted was straight on.

After "the walk through," and we prepared to leave the home, FF had gotten into his car and we ours and were alone when Sandra looked at me, "I want that house!" was all she said.  It seemed like an hour later, but actually it was a few weeks, when we sold our Portland home and moved in to our new one in Scarborough.  That was, believe it or not, 20 years ago this month.  Sadly, it was only a day after we laid her mother, the woman who's plight started the quest, to rest. 

The point of this way too long story is when one buys thus owns his own home, he is building equity.  It was the equity gained from the sale of our old home that allowed us to have sufficient money for a down payment on our much nicer, better, and bigger home.  It was paid off early so we've owned it outright for several years.  If we had to sell it today, we have a lot more equity, possibly enough to pay for a year of nursing home care.  Naturally we're hoping we never come to that.

It also brings me back to that news story on Channel Six.  I would make all kinds of sacrifices before I'd spend up to $2200/month on rent, condo quality or not.  But the developer would tell me I'm living in a fantasy world; that's a "market price" in that section of Portland in today's world.  No wonder the cost of living is so high.


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