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Houses, Roofs, and Snow

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There's an old Persian adage that states: "The bigger one's roof, the more one's snow". Living on America's east coast the adage doesn't really apply. The roofs are generally pitched and snow simply thaws and slides off. Back in Iran where most roofs are flat and building structures are of questionable soundness, people are forced to shovel the snow off the tops or else face a collapse or at least water damage, so the phrase fits well. But what the metaphorical phrase tries to convey is that bigger assets bring bigger hassles.

Ironically this wisdom also fits the recent trend in the US housing market. America is a culture of consumers, the bigger and the more luxurious, the better. Some may argue that it is the consumer that drives the mammoth economy here, but considering the troubles brewing in the subprime mortgage markets, there is also a dark side to out-of-bounds consumerism. For the past few years the housing market has been one of seemingly endless growth. That lulled many to jump into the market without much consideration for a possible downside. Bigger homes (known as McMansions) sprang up everywhere and builders couldn’t keep up. People kept snapping up ever bigger and more expensive homes. The general belief was to hold on to the house for a short period, then sell for a handsome profit, rinse and repeat.

Now that the housing market has gone limp, it has dragged many into hard times and many may owe more than the current value of their homes, the so called upside-down position. Owning a bigger home is not necessarily an American invention. People do it all over the world, but many fail to consider the real cost of having a bigger home if they are forced into a long-term ownership.

The general financial approach is a foolishly simple one. You look at the price, then figure out the monthly payments and if it seems to fit one's monthly income, then it's a go. But there is quite a bit more there than meets the eye. Let's take a quick inventory:

  • Initial fees: For that bigger house you will be paying higher fees to the real estate broker, the mortgage banker, the inspector, and the lawyer, just to name a few.
  • Mortgage payments: Unless you're locked in a long-term fixed mortgage (like a 30-year variety), the assumption should be that the variable rate will eventually kick in and in most instances that means higher monthly payments. In some cases the monthly payments could outpace one's income quickly.
  • Taxes: A bigger home means higher taxes. Even if you know what your tax liability is at the time of purchase, there is no chance it'll stay the same for long. There are two forces working against you there. The higher the assessed price of your home goes, the more your town will charge you in property taxes. Also tax rates (known as mill rates around here) never stay in one spot. As the town cost rises, so does the mill rate. It's inevitable.
  • Energy: the bigger the house, the more the cost of heating and cooling it. Unless, of course, you cordon off parts of the house, in which case what's the point of living in a bigger house to begin with?
  • Water and sewer: Many water companies charge homes for water and sewer services based on square footage, not actual usage. In any case, if you are in a bigger home, you will use more water and produce more waste. Just think of watering a larger front lawn as one instance.
  • Repairs: A bigger home simply contains more stuff and therefore more chances for breaks and malfunctions. It's the law of probability. More toilets, more electrical wiring, more piping, more doors and windows, etc. And each one adds an additional risk of needing repair at some point.
  • Maintenance: A bigger property requires more maintenance (think of the snow metaphor.) More gutters to clean, more windows to wipe, more rooms to dust, more lawn to mow, and more driveway to plow. You might need to hire a helping hand or two to cover the maintenance, thus having to part with more money.
  • Furnishings: A roomier house means more volume to fill. That leads to trips to furniture stores to buy more couches, a bigger TV, and more decorative items to hang on the bare walls or fill the corners, or more rugs to throw on the bare floors. Even more closet space means more shopping for clothes and shoes and accessories, and of course more organizers to sort them by color or size. Don't laugh, this is just human nature.
  • I know, I know, enough already. I'm sure this list is not even close to being complete. But there is no escaping the consequences of owning a bigger home. And if more snow won't faze you, the bigger pile of dead leaves in autumn will.

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