Meaningful Returns

This is a term which I can only assume has entered the lexicon through the lobbying efforts of savvy real estate agents. Primarily targeted at couples under 40 with young children, the idea of a “forever home” is often a tactic aimed at getting the couple to buy a house way outside what would be a reasonable budget.

Here is the reasoning [“reasoning”] that is often given for these purchases: “This is a home you and the kids can grow into together for years and years to come, so it’s worth the investment.”

Now, I’m here to prevent artificial poverty, and over-budget home purchases are a primary cause of just that, so let me deconstruct the reasoning [“reasoning”] behind forever homes.

1. “Grow into.” This just means the home is too big. There’s an extra room for the hypothetical third child, and the guests that are constantly staying the night in your home will of course have their choice of Guest Room 1 or 2. This is in basic violation of the “best and most common use” rule which would recommend buying a home that fits the purpose of 97% of the year rather than buying one that fits the purpose of Thanksgiving and an imaginary child.
2. “Years and years.” Probably 15 years max, thus rendering the word “forever” entirely meaningless.
3. “Worth the investment.” A few things here: 1) This is a euphemism for “this is at least $100k over budget.” 2) This is also shorthand for, “worth a lot of cheddar for the real estate agent who gets paid a commission.” 3) A home that you live in makes a pretty mediocre financial investment in the best of cases, and of course it’s pretty much never the best case.

So look. I’m clearly cynical about all this, but probably for good reason. There’s nothing wrong with buying a home for the right reasons at the right time. And there’s certainly nothing wrong with buying a nice home you plan to live in for a long time. All I’m asking is that you recognize the potential pitfalls of the “forever home” tactic. Doing so will go a long way in helping you avoid artificial poverty.