The Rembis Report And Other Fascinating Topics - Volume CXXII

As we head into the American “Holiday Shopping Season” this newsletter is the fourth of six weekly editions in a series about the cost of everything, overspending, corporate profits, and general wastefulness. I am looking at what we do to save money while companies try to get us to spend more and will examine why cars and houses cost so much. Is the price of food fair? What about everything else? Is there anything we can absolutely do without? Who can afford to buy anything, really? To get caught up, click the links below.

• If It Ain't Broke, Don't Fix It - Part I

• If It Ain't Broke, Don't Fix It - Part II

• If It Ain’t Broke, Don’t Fix It - Part III

Housing prices are weird.

I am not sure there is any other way to describe it. They cost what they cost because somebody is willing to pay that price. And prices are pretty high.

But what if nobody was willing to pay the high price of housing?

They would live with their parents for a really long time, Mike.

You are right about that. That strategy can work out for a while, up to a point. The point where Mom finally kicks you out. This is what happened to a couple of baby-men in Italy a while back. Mom had enough of supporting her two sons who were leeching off of her, so she didn’t take the law into her own hands, she took them to court. Good for her.

I moved out of my parents house when I was 18 and never looked back. Got a little down and out with the finances a couple years later, so my lovely Grandma Brown took me in for six months. She only charged me $10 a week for rent until I got back on my feet. When I did, I moved out of state, and never returned. Thanks Grandma!

It is tough for me to imagine anyone wanting to live at home for an extended period of adulthood because I never wanted to. I was eager to be out on my own for years before I graduated high school. Two months after I snagged that diploma, I turned 18, and two months after that, I left for Florida. And I always imagined that everyone else wanted to live away from their parents, too. But over the years, I saw more and more people not moving out. Some staying in the home they grew up in, in the room they grew up in, well into their 20’s and sometimes 30’s. I can’t relate.

It is the same with housing prices. I can’t relate.

In the 1980’s my rent was anywhere from $180/month to somewhere around $325 by the end of the decade. In the 1990’s it ranged from $210 to $895 (of course, it varied by location and what we were renting), but averaged somewhere around $550 most of the time. In 2000 we bought our first house. I think it gave me a heart attack. Not one that was officially diagnosed, but I certainly felt that way. Getting into a mortgage that was over $1,000 was not something the renter in me was prepared for. We have owned a house ever since, so now I am accustomed to it. It just takes a while to get used to.

But I still don’t like paying a mortgage. It is not a particularly fun thing to do. A mortgage is basically a deal you make with a bank to pay them rent while you take care of the house they own by paying to fix everything that breaks. Miss a few payments and they kick you out and they keep the house. Thus, the incentive remains for you to keep paying, especially if you care about your credit score, and don’t want to find another place to live.

Over the years, we bought and sold four houses and now live in our fifth one. I could not foresee that I would have done this forty years ago, but I have.

What amazes me though, is the equity. This house, according to Zillow, is worth more than twice what we paid for it, almost three times as much, in fact. That is crazy!

I wouldn’t pay that much for this house. I didn’t want to pay what we paid for this house. As you already know, I think everything costs too much to begin with, so when we start talking about the highest dollar item most people ever purchase in their lives, you can see why I feel like I am having a heart attack every time I write a check to the bank for the mortgage. I am sure some of you must feel the same way.

Just for kicks, and I am guessing so that I don’t feel so bad about having equity in our own home, my dear, sweet wife Ellen keeps up on housing prices in our neighborhood, and in general. She watches all the HGTV shows about fixer uppers and house flipping and house hunting here and abroad. This is one of her hobbies. I sometimes watch, too, although I am not a diligent fan.

Ellen brings to my attention homes for sale in our neighborhood as she keeps up on market prices. She likes it when prices go up. It is good for the neighborhood. Around the corner from us there was a house that sold for $430,000. I thought that was a lot. The house is a lot like ours. Then, in a mere four months to the day, it was listed again by the flipper who bought it for $520,000.

This is great for the home value in our neighborhood, but my question is - who can afford that? I am not doing much better than I was fourteen years ago when we bought the house we are in. If I tried to buy this same house we are in today for what it is worth now there is no way I would qualify.

This is one of those things I really have trouble wrapping my mind around. When I do happen to sit down for an episode of House Hunters, a show made bearable by the soothing timbre of narrator Andromeda Dunker’s voice, I undoubtedly see something shocking, that I find hard to believe. Whether they are renting or buying, to me, the prices are always too high. I am just a low budget kind of guy, I guess.

It amazes me what people are willing to pay. Somehow, our house falls into a bracket that is just above the average home price in the U.S.

Sometimes I get rooked into watching an episode of House Hunters International. Prices are nuts all over the world for the most part (in my humble opinion), and I may come back to that. For now, let’s focus on prices in the U.S. for a while first, because that is where I am from, and what I am most familiar with. I have lived all over the country and rented, and bought, and sold, in many places.

Yes, there are places that cost less. If you are looking for a steal and want to shack up in Redding, California, you can get this little zero bedroom, one bath number for only $100 a month. If you prefer a place with windows and need a little more space, and living in a commercial storefront is your thing, you can get this place in Eldora, Iowa for the same price.

Prices range all over the country, for both rentals, and homes for sale. I get the greatest sticker shock from what I see in Los Angeles. If you decided to move into Fred G. Sanford’s neighborhood in Watts, you could rent this nice 3BR/2BA house right down the street from his junkyard for only $3,200 a month. That is the going rate for this neighborhood. But if your rental days are behind you, and you want to own your place, this 720 square feet of paradise on El Segundo Blvd. can be yours for only $195,000.

Know what? That actually makes sense to me. I mean, if I wanted to live in a trailer park in L.A. and not mow a lawn, that would be perfect.

Are you kidding, Mike? $195,000 for that? No way!

I can see you prefer to be more thrifty. So, I put a little extra effort into my search and found you this tiny home over on Western Avenue. Only 280 square feet, so it would be a snap to clean. Priced to sell, so hurry. Do yourself a favor and take a tour. Look at the pictures. Close to the bus line. Zoned for dog walking. You will love it.

Did some body get killed in there? Maybe. Probably. Will you get killed in there? Let’s hope not. Only one way to find out.

Mike, that is ridiculous. The lot rent is $1,125 a month! I may as well buy a real house for that price. What can I get for a million dollars?

Oh, big spender. Well, let’s see. If you don’t mind a bit of a drive or connecting bus routes over to the junkyard, you can get this 4BR/3BA with attached garage in Torrance for $1,000,000. It’s not too shabby. The back yard is a little shabby, but not too shabby. I mean, California is in a drought, so, probably better to conserve water anyway.

The place in Torrance actually looks pretty nice for what it is, but I wouldn’t pay a million dollars for it. I wouldn’t pay half a million for it, especially when I could get one just like almost anywhere in the country for about half as much. I might pay $200K for it, but nobody would sell it that cheap. I have seen more House Hunters episodes than I care to admit. With a photographic memory like mine a lot of them are hard to forget. Some episodes featured really outrageous houses for sale around L.A. for over a million that required tons and tons of work, which looked much worse than what you can get for $45K on Western Avenue. The last thing I want to do when I move into anywhere is fix anything. I don’t even want to fix things when I already live there, but I do, because the bank certainly isn’t rushing over to help.

Some folks like fixing things. Tearing out walls, remodeling, making a house their own, so to speak. That is not for everyone. House flippers know this, so their turnkey stylings will endure.

There is no end in sight to rising prices and the housing market is not expected to crash. Housing will become scarcer as populations increase and more young adults leave their childhood nests.

Add to that increasingly severe weather, earthquakes, wildfires, and rising sea levels. Houses get demolished all the time. Sea levels probably won’t affect the U.S. housing market in the near term. They are only expected to be a little over 5 feet higher than they are now by the year 2100. Every disaster creates a need for more housing, and they always rebuild, no matter what.

Then there is war. Many people get displaced. They need houses, too, and can’t afford them. They become homeless, and enter another sector of society who need help.

If you live in a house that is safe and not under threat, count yourself lucky. Even if you feel like it is costing you an arm and a leg to be financially afloat and keep a roof over your head, no matter how bad you think it is, you still have it way better than many others out there. Remember that.

Thanks for reading.

Click here to read: If It Ain’t Broke, Don’t Fix It - Part V

If you are new to the Rembis Report and would like to read any of the previous issues, PLEASE CLICK HERE to access the archives. To read it from the beginning, PLEASE GET A COPY of The Rembis Report: An Observation.