Encore: getting it about starter homes
Scott's entry yesterday about starter homes inspired me to repeat an entry I posted last winter. I think true starter homes are a big mistake for buyers. Only in times when prices are inflating rapidly can a buyer get ahead by choosing a starter home. This is not one of those times.
You probably know someone who married too young or too impulsively because it was “what you are supposed to do.” In some cases this works out great, as the couple grows along parallel courses, Many times it is an emotional, financial, and legal mess. The same is true of a starter home.
John Perkins, in The Globe article I mentioned yesterday, (August, 2008) did a great job of outlining the costs of a real estate transaction to show the young couple that buying for the short term was not a good idea.
Short-term ownership does not pay. Well, actually, it does pay... It pays the mortgage broker, the real estate broker, and the real estate attorney, and the seller. It is just a bad idea for the buyer.
This leads to a thesis I state regularly:
Starter homes make as much sense as “starter marriages.” Unless you have a good idea that you will grow into your property, you are hurting yourself financially by getting legally entangled with a short-term one. It is better to rent until you know where you want to settle.
What’s your starter home experience? Did you buy one? Where you talked out of one?
One Sunday, (August 2008) I was condo-shopping with a single woman who is looking for two-bedroom condo to live in. We were near Harvard Square. Our fellow open house attendees were mostly parents of college students (with the students in tow) and young adults who looked the age of grad students. These buyers were from all over the world.
Why haven’t they gotten the news that our market is going down, that closing on a condo is an expensive activity and that it is cheaper to rent?
