Wouldn't it be great if we could decouple our experience of happiness with our homes from their values, freeing ourselves up to simply enjoy them and be happy no matter what's going on in the market? What if we can make our experience of homeownership recession-resistant, even if we can't recession-proof the market itself?
Well, I know some
such happy homeowners -- people who remained free of the angst and
teeth-gnashing that seemed to become the near-universal sentiment among
homeowners during the housing recession. And they also remained free
of the euphoric rush and frenzied decision failures of homeowners at
the top of the market.
Here are a few of the traits and behaviors that I've noticed in these happy homeowners:
1. Smart, proactive money managers.
This does not mean these people are day traders or sit around the
computer tracking every cent they spend. What it does mean is that
these people are assertive about their financial planning, understand
their income and expenses, save and invest for the present and the
future, and live well within their means. This empowers them to weather
occasional financial storms like illnesses, layoffs, and market
downturns without excessive panic and fear about what their home is
worth at any moment in time.
I once heard a happy homeowner
express his belief that there should never be a need to tap into an
emergency fund, because so-called "emergencies" like car repairs and
roof leaks are just inevitabilities of life. So, instead of having an
emergency fund set aside, he has structured his income and savings and
expenses so that he saves upwards of 20 percent of what he makes every
month, no matter what, and is always in a state of financial
preparedness for the curve balls that life can throw.
2. Optimistic about their long-term future -- and that of the market.
I've been fascinated lately to see all the talk of how much better
mutual funds perform over the long term if they are simply invested in
every stock on an exchange and parked there for decades, versus being
actively traded by even the most expert of Wall Street wizards.I
find that so compelling because it mirrors my experience of real
estate: One of my first clients was a 70-year-old man whose home I sold
for $550,000; he told me he had paid less than $20,000 for it 30 years
earlier. Homeowners who have an optimism that the value of their
home will increase over the very, very long term tend to be less hung
up on and stressed out by the cyclical ups and downs in the real estate
3. Conservative mortgage holders. These folks
often put a lot of money down, make extra payments, invest in
improvements that bring up the value of their home, or make some
combination of these and other relatively conservative mortgage moves.
They might refinance if interest rates drop so low the costs of
refinancing pale by comparison with the savings. But these folks are
generally inclined against taking short-term or aggressively adjustable
loans, and they tend to disfavor frequent refinancing or excessive
borrowing against their homes.As a result, even if they didn't
put a huge down payment on the home at the time they bought it, they do
tend to get and stay in a relatively strong equity position compared
to their peers.
4. Relatively stable and committed to their homes for the long term.
People who own homes that work well for them and their families -- and
will work well for years and years to come -- tend to be less
emotionally yanked around by market vagaries.
note: Happy homeowners tend to be people whose homes have ample space,
are in good condition, and are in neighborhoods where they feel safe
and comfortable; if you can position yourself well with respect to as
many of these criteria out of the gate by being smart about the home
you choose, you'll be that much closer to membership in this select
club.These people are aware of what's going on in the market;
they're just not obsessed with it, because they don't plan to move in
Often times, a happy homeowner's commitments to his
home mirrors a commitment to his job or career or line of business, if
he's self-employed, which allows him to take the stance that as long as
he can make the payment, he's planning to stay put for a very, very
long time. And that, in turn allows him to opt out of the "freak
out"-engendering fixation on real estate headlines and market data that
in a down market causes so many unhappy homeowners to make panicked,
poor real estate decisions.
Nelson author of "The Savvy Woman's Homebuying Handbook" and
"Trillion Dollar Women: Use Your Power to Make Buying and Remodeling