In this week’s episode of Best of Both Worlds, Sarah and I share strategies for planning summer, from booking childcare and camps and vacations to planning fun for you.

In the Q&A we tackle a question about the mental load/time cost of home ownership (I accidentally listed this as last week’s question…whoops!).

Please give the episode a listen and as always we welcome ratings and reviews.

In this week’s episode of Best of Both Worlds, Sarah and I look at how to find quality time with partners, kids, and with yourself during the busy years. The good news is that something tends to go a long way — it doesn’t have to be much to matter.

In the Q&A we tackle the time cost of home ownership. A listener is thinking of buying her first home but has heard from friends about how they’re spending all their time dealing with house projects. Is there any way to limit that?

Please give the episode a listen! As always, we welcome ratings and reviews. We are also happy to report that the “explicit” rating from Apple has now been removed — we are (and always have been) a “clean” podcast. So feel free to listen in the car while driving other people around!

Now that Best of Both Worlds is part of iHeartMedia, you can also listen through their channels.

With low interest rates and the existence of 30-year mortgages, the temptation is always going to be to borrow more. An additional $100,000 of house involving an extra $80,000 in loan (so, say, a $300k house to a $400k house, and going from $60k down to $80k down) is roughly an extra $500 a month. That probably sounds manageable for so much more house, especially if you have that extra down payment sitting around, a thought process that continues all the way up the line. The fact that mortgage interest is generally tax deductible also tips the scales toward borrowing more.

The problem is that research keeps finding that happiness is often sparked by small, repeated, but always changing pleasures. Perhaps a lovely home can do this for us, one that embraces us as it welcomes us home at the end of the day. But the hedonic treadmill means we adapt to most things that are constants in our lives. Like our homes and cars. Vacations, travel, dinners out, decadent foods purchased whether you have a coupon or not, gifts, massages, etc., on the other hand, are a little different every time. What the mortgage calculators don’t say is that the difference between spending 25% of your income on housing and 33% is 8% to spend on other things that have a good chance of boosting your well-being more, over time, than a more expensive house.

The counter-argument is that none of these other pleasures has the potential to go up in value. Because most home purchases involve leverage, even small amounts of appreciation have you living there for free. On the other hand, I just read an article pointing out that real estate prices have declined by 60-70% in some markets. Even more modest levels of depreciation can make you take a bath. If you put 10% down and housing prices decline 10% before you’ve paid much on the principle, you’ll lose about 100% of your money. So it’s unclear what’s a reasonable assumption at this point. At least no one can take that vacation to Paris away from you.

It’s a complicated question, but may involve buying a home, most likely outside NYC. As I’ve been researching our options, I’m reminded just how much our government privileges going into debt to buy a house. Not only is the mortgage interest deductible, in many cases the interest rate has been lower than it would be due to the existence of Fannie and Freddie (we will see how that all shakes out now).

So why, exactly, do we elevate home ownership as this good worthy of billions of dollars of subsidies? Policy makers claim that home ownership is a good with positive externalities. It helps people build wealth, and leads to stable communities, in which there is lower crime and better maintenance, and kids do better in schools.

But all of these have a flip side. There’s an interesting article on some of them here (discussing Was Home Ownership Overrated?) People say that renting is “throwing money away,” but if your home declines in value prior to your needing to move, home ownership means throwing money away too. Millions of people have lost equity in their homes over the past few years. Some will stick around long enough to recoup it, but if your home declined 25% in value  (not unusual in some of the bubble areas) it’s going to take many years of 2-3% growth to get there. Assuming that 2-3% growth starts up again soon. Plus, home owners have money that’s being thrown away too, in the form of property taxes, closing costs, etc. A landlord can build these into the rent, but at least here in NYC rents are low enough relative to mortgages that you really can’t.

Subsidizing the single-family, detached house has caused Americans to move far out into the suburbs and exurbs (“drive until you qualify.”) This adds to commute times. Commuting, in studies of subjective well-being, is pretty much the low point of people’s lives.

As for stable communities, this is also a way of saying that the transaction costs in buying and selling a home are incredibly high. You usually lose money if you move within a few years. Stability sounds nice, but you could use the words “high friction” instead, which sounds less positive. With our fast-moving economy, you want people to be able to move where the jobs are. Many home owners these days are stuck in areas of rising unemployment, unable to move to areas of lower unemployment because, shockingly, housing prices are also falling in areas of higher unemployment. Obviously, there are arguments that it’s nice when people stick around and get to know their neighbors, and their kids attend the schools for decades, and the parents have time to get involved in civic organizations, but these have to be weighed against the problem of people being trapped.

All the subsidies means that there’s not really a great supply of nice rentals in good school districts. So we will probably wind up buying. But one of the reasons this has been such a difficult decision is that we’re not sure we want to commit to one area for multiple years. What do you think, is home ownership a good deal or not?

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