How to Know if You Should Or Shouldn’t Buy a House

Buying a house is the American Dream- everyone should own a home! But the truth is, this isn’t always true. Some people should buy a home and some people should not. Before you decide you must buy a house (because society or someone told you it was the thing to do), use these questions to help you determine if you’re suited for homeownership.

Do you live someplace you’ll always call home?

Plenty of travel lovers own homes. Even people who travel extensively for work still own homes. And for many of those people, it works just fine because they cherish their home base. Others are forever wanderers. They may only stay in one place for a few years before restlessness sets in. For some (I’ll call them vegabonds), no one city or state could ever truly be called home. If this sounds like you, perhaps owning a home isn’t the right decision. I can’t imagine traveling the world with the weight of home-maintenance stressors on my shoulders. Yuck, what a heavy anchor. This isn’t to say that an investment property isn’t for you either… it could be, but tread very carefully and find yourself a property manager you’d trust with your life.

On the flip side, if you do indeed consider one place home, and you have a steady job and you would never consider moving, you absolutely should consider buying a home. 

Is it cheaper to buy a house or to rent?

If you live somewhere where the average home is more than a million dollars, then you may not be able to buy a home. If that’s the case, it’s totally okay! Just fucking move! (just kidding- sorta)

Not all areas are places where you could or should be buying a home. A quick google search shows me the average rent in Encinitas, Ca is $2867. The average cost to purchase a home in Encinitas, CA is 1.8 million dollars. Even if you bought a home for 1 million, taxes are .7 percent and insurance is 2000/yr, your monthly payment will be about $5,546 if you have a 30 year loan with a 6 percent interest rate. After you buy that home, the maintenance costs will be on your shoulders as well. So will the outrageous California permit costs, labor costs, material costs, and sunk-time costs for any future renovations or changes. Does it make sense to buy a home where it is so much cheaper to rent? Perhaps not…

Can you afford it?

In the book, I Will Teach You To Be Rich, Ramit Sethi says, “First and foremost, you should buy a house only if it makes financial sense.”

Stricter yet, Derek Sivers thinks you should wait to buy a house till your net worth is 4x the value of the home you’re buying…

I don’t think everyone needs to be as extreme as Derek, but please- don’t over-extend yourself!

This blog is not about how to finance a home or any of the old “sayings” or “equations” people present as rules for how much house you can comfortably afford. That said, make sure you can easily afford your projected house payment (including taxes and insurance). It shouldn’t exceed more than 30 percent of your total income (and ideally it’s way less). The lower the payment is relative to your income, the happier you will be.

I know it’s a hard pill to swallow. For many locations, the old standard “affordability” advice is admittedly laughable. But if you do live somewhere unpopular enough where that classic advice still applies, you’d better consider taking advantage of it before the corporate institutional investors swoop in.

Where is your potential home located?

Really consider if owning a home in, say, the swamps of St. Augustine, Florida is such a great idea. Or in that California town that’s had multiple wildfires. Even if you don’t care if you’re in a nearly uninsurable location, some day you may want to sell and potential buyers will care. Unless you can throw money away, avoid buying in catastrophe-prone places.

Are you handy?

You don’t have to be handy to buy a home, but it sure does help! You will save thousands of dollars in maintenance and renovations if you can paint, do basic landscaping, install faucets, light fixtures, or use basic power tools to replace stair railings or install your own shelves. The more you can do, the more money you will save (and the more skills you’ll build, the more you’ll create, the more satisfaction you’ll gain). If you need to call a handy person for the most basic tasks, not only will it cost you a lot of money, but you’ll also have a more difficult time finding someone to do the work.

Many carpenters don’t want to take on small, odd jobs. In fact, I once saw woman ask the contractor working next door, “Do you do odd jobs?” He quipped, “Nope! Just normal ones!” and he sauntered off, leaving her in a haze of sawdust.

Also, if you are relying on a handy person for everything, you’re going to be at their whim. Waiting. Just “A Couple More Days.”[1]

How are interest rates?

When you’re first starting out, interest rates don’t feel like a big deal. 3 percent, 4 percent, what’s the difference, right? Well… it’s a really big difference. Big enough to determine the entire housing market. When rates are high, less people buy. When rates are low, housing will flow… quickly. Competition and market health are highly dependent on interest rates. Probably more than nearly any other industry. So pay attention. Now, I’m not saying if rates are high that you absolutely shouldn’t buy a house. Just be more careful and try to insulate yourself in case prices come down. You can do that either by waiting for a super fantastic deal or by keeping the house for a really long time (while refinancing when rates are lower).

Will you be a single/sole homeowner or a joint owner?

Of course single people can buy homes. You don’t need a partner. But if you are single, it might be little harder to save money, harder to get the financing, a hair more stressful when things go wrong, etc. Just be honest with yourself. I wouldn’t be cut out for sole ownership (yet. for most homes, anyway). Maybe you’re different, I don’t know. But it’s best to be self-aware. The upside of sole ownership is you’ll never have someone disagreeing with you about which house is the right house or how to furnish and arrange it.

How dramatic are you?

Will a water leak provoke a complete freak out? Could needing a new furnace be the end of the world? Will your neighbors have the power to “ruin your life”? Maybe this question is pretty stupid… but sometimes I do wonder if over-reactors are better suited to being renters. Or– perhaps the complete opposite is true. Know thyself because you may lean hard one way or the other.

Buying a house is complex. Our relationships to house and home are complex relationships. What will be the right house for one person could be a disastrous purchase for somebody else.

Have I missed anything? Any questions to add?

Thanks for reading,

HouseRat Zero

[1] “Couple More Days Construction” YouTube video by Dude Dad.

[2] Sethi, Ramit, I Will Teach You To Be Rich. 322. Ramit Sethi 2009,2019. Workman Publishing Co., Inc. New York, NY.

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