The housing market throughout the country is red hot, with houses selling in less than a weekend, and potential buyers writing love letters and putting in offers thousands of dollars above asking to try to close the deal.
But should you get caught up in the rush? On this week's Money Confidential podcast, host Stefanie O'Connell Rodriguez explores why buying a home may not be ideal for everyone.
Our listener, Nina, a 32-year-old living near Pittsburgh, has come to regret her very quick decision to invest in a condo—where her move-in was delayed by the pandemic. "I think it really forced my partner and I to talk about money more openly and I can't say all of those conversations were pleasant," she says. "We're not as enthusiastic about home ownership together as we anticipated. We like the concept of building equity. However, having a large group of people moving into a newly renovated building during a pandemic has definitely caused some very bizarre dynamics."
Nina is not alone in regretting her decision. This week, financial expert Jannese Torres Rodriguez, host of the personal finance podcast, Yo Quiero Dinero, shared her own story of home-buying regret.
Home ownership was absolutely the wakeup call that I needed to realize that I was actually just going through the motions of life and checking off the 'things that you do as an adult.'
—Jannese torres rodriguez, yo quiero dinero
Just two weeks into home ownership, Jannese's new basement was flooded with raw sewage, due to a blockage the previous owner created. And because she had tapped her entire savings for the down payment, she had to take a $15,000 loan from her 401K to cover the repairs. "I was never more broke than when I owned a home," Jannese says. "And it was just a result of not having that financial foundation in place, emptying out what was meant to be an emergency fund to buy a home, and then the emergencies started happening and I had no other recourse other than to start taking out loans."
Jannese recommends taking stock of the realities of home ownership (which includes unforeseen expenses and being more tied to your current location), your personal financial situation, and your own dreams of what you'd like to do with your money, before you leap into home ownership. "We will buy a home at some point in the future, but we are in such a different financial situation now," she says. "I'm in a place now where I'm debt-free. I've been able to really accelerate my retirement savings and I feel much more comfortable taking on that responsibility. Home ownership has its place and it will be at different points in your life, depending on your goals, on when you're ready to settle into a more stable living environment. It really is just based on your personal situation and what makes sense for you at that time."
Check out this week's episode of Money Confidential "I bought my first home—and it was a mistake. What now?" on your favorite podcast provider—including Apple, Spotify, Amazon, Player FM, and Stitcher.
Nina: It almost felt like it was something we were supposed to do. You're getting engaged, at some point you'll be getting married. Well, of course you're going to buy a home because that's what people do when they're at that stage in their life.
Cameron: There's been a lot of renovations and things that came out that we weren't initially aware of when we purchased the house.
Maria: Being that I'm 30, I know I need to move out sooner than later, but I need to feel as financially confident as I can.
Lara: We're not sure that overpaying for a home right now is worth it in the long run a down payment along with the cost of our wedding would essentially wipe out almost all of our savings.
Stefanie O'Connell Rodriguez: This is Money Confidential, a podcast from Real Simple about our money stories, struggles and secrets. I'm your host, Stefanie O'Connell Rodriguez Rodriguez. And today our guest is a 32-year-old new homeowner living in the Pittsburgh area, who we're calling Nina—not her real name.
Nina: When we were looking at purchasing a home it wasn't particularly planned. We made a decision to buy a home as a pretty much a gut reaction.
Stefanie O'Connell Rodriguez: Nina's snap decision to buy a home is something that might sound familiar to some homeowners, especially those who bought during the pandemic. Between lockdowns, low housing inventory and historically low mortgage rates, many homebuyers admit that FOMO or fear of missing out was a major driver of their home buying decisions.
Nina: We knew we wanted to be in a different space and had a rough outline of where we wanted to be and what amenities we wanted to have, but the financial planning aspect wasn't there. So I would say in a way this purchase has forced me to really get serious about my money.
Reflecting now, it almost felt like it was something we were supposed to do. You know you were living together. you're getting engaged, at some point you'll be getting married. Well, of course you're going to buy a home because that's what people do when they're at that stage in their life.
And I think a lot of people, a lot of millennials, especially are feeling that pressure that they have to be doing this when it might not be the best financial choice for them.
Stefanie O'Connell Rodriguez: I wonder where you think that pressure comes from.
Nina: Ooh It's very much a societal pressure. I'm in the nonprofit field and I have friends who are in very different industries with very different income levels. Right? And so there is that element of keeping up with the Joneses a little bit, that you see your friends making these major life changes and purchases, well.
Then you internalize that and you're like, I should be doing this too.
Stefanie O'Connell Rodriguez: Between the societal pressure to buy a home and the red hot real estate market of the past year, it's probably not too surprising that 64% of millennials report new homebuyer regrets in a new survey.
And millennials aren't alone. A competitive real estate market can rush buyers into homes that don't necessarily fit their budget, or their needs or both, including 45% of Gen Xers and 33% of Baby Boomers, who reported some type of remorse about their current home.
Stefanie O'Connell Rodriguez: I'm wondering what the impact on your financial life was when you did make that purchase.
Nina: I think it really forced my partner and I to talk about money more openly and I can't say all of those conversations were pleasant by any means, but it does put you under a microscope. You share property together. So you're talking about the taxes. You're talking about the mortgage payments specifically, you know, you have to be able to have these conversations, frankly.
So for us, it's really forced us to, to have those talks and be more open in general, not just about the house, but our day-to-day purchases, too.
We have drastically different incomes and that's been a really tough one for us to bridge. I'd say we're still a work in progress on that.
In terms of home ownership, my partner and I have decided that we're not as enthusiastic about home ownership together as we anticipated. We like the concept of building equity. However, we live in an 18-unit condo building and having a large group of people moving into a newly renovated building during a pandemic has definitely caused some very bizarre dynamics in our home.
Stefanie O'Connell Rodriguez: Nina and her partner purchased their new home in an old school building that was in the process of being renovated into condos not long before the pandemic.
Nina: Fast forward to nine months later between construction delays and COVID, our unit wasn't ready when we thought it would be. So you had a few people move in right before all of the shutdowns, construction stops. And then you have people gradually moving in over a period of three months.
And so I think the combination of people being isolated, people moving from single family homes to one where there's a condo association, uh, was really hard for a lot of people. It's been rocky.
Stefanie O'Connell Rodriguez: In addition to forcing her to get serious about her finances fast, purchasing a condo also introduced Nina to some of the lifestyle considerations and obligations that can accompany ownership.
Nina: So when we had moved in, I was approached by the developer of the property if I wanted to be the owner representative while they were finishing up the project. About a month later, some of the neighbors started to organize if you will and felt that I was a spy for the developer. I was cornered in the parking lot about my motives. There had been talk about someone hiring a private investigator to follow me around.
As a result of those dynamics my partner and I just isolated. I was afraid to leave our unit because I'd been approached in the parking lot on the sidewalk before. And it was very stressful and it got to the point where so many of the owners requested a new vote, and I was removed as the owner representative.
I'm now on the association board and there's still a contingent of people who aren't happy. I've had anonymous letters left outside my door, very aggressive emails. And at the end of the day, I'm 32.
I don't want to deal with that. So frankly my partner and I have considered moving because it's been purely drama.
Stefanie O'Connell Rodriguez: I think it's funny because sometimes we reduce home ownership to a financial decision when it is really also one of the biggest lifestyle decisions that you will make.
Even if it's not a condo unit, even you are in a single family home there could be an HOA and neighbors and all of these other things.
Nina: And in this experience specifically, the money piece has almost felt secondary. Your home is meant to be your sacred space, your retreat where you recharge. And when you don't feel like that's a safe space to be like, that's your focus.
Stefanie O'Connell Rodriguez: Does owning it make you feel a little trapped?
Nina: Yes, it does because there is that aspect of what if we lose significant amount of money by selling?
Stefanie O'Connell Rodriguez: If you could quantify a cost of losing money to get out of this situation. Do you know what you would be willing to accept?
Nina: I'd say no more than $30,000.
And we're okay with renting. It's almost a relief in a way to know that it will be a little bit less responsibility for maybe a year or so, and then really decide down the road like what kind of home do we want to be in?
That message about equity is in home ownership is just repeated again and again, but home ownership isn't for everybody and that's okay.
And I think we need to stop looking down on that and recognize it's the individual's choice how they want to build equity in their own life.
Stefanie O'Connell Rodriguez: After the break, we'll talk about what comes after homebuyer regret with a personal finance expert who's experienced it firsthand.
Jannese Torres Rodriguez: Home ownership was absolutely the wakeup call that I needed to realize that I was actually just going through the motions of life and checking off the "things that you do as an adult."
Stefanie O'Connell Rodriguez: That's Jannese Torres Rodriguez, host of the personal finance podcast, Yo Quiero Dinero.
Jannese Torres Rodriguez: I found myself, as a newbie homeowner, two weeks after I purchased the home, absolutely regretting the decision. And that got me spiraling. For the first time I was like, why am I feeling so miserable making this decision that so many people claim as the pinnacle of success in adulthood? And for me, I just really found it was completely unaligned with what I wanted at the time.
Stefanie O'Connell Rodriguez: Where do you think this idea of home ownership as the pinnacle of what to do with your money and even just in the 'checklist of life' comes from?
Jannese Torres Rodriguez: It definitely came from my family. So I'm Latina, I'm Puerto Rican. My parents came to the United States in the 1980s, and they struggled for a very long time to get their footing financially. And so, when I was about 12 years old, they were able to purchase their first home and that changed our lives. It was just a different standard of living that we became accustomed to after they were able to do that. And so, I saw that as what you do in order to give yourself a level of stability and how to be financially responsible. So as soon as I got married, those questions started to come up. Okay, when are you guys going to buy a house? And so, I figured that's just what everybody does.
We get a lot of messaging that 'it's never the right time.' And so, I said—okay, I'm still in debt with student loans. I still have credit card debt, but I'm over the age of 30 at this point. I need to buy a house. We're just going to figure this out.
And I found out about the federal program, the FHA mortgage that only required 3.5% down. I was living in New Jersey at the time, which is a super high cost of living area. As a result, it's very difficult to buy a home with 20% down, especially when you're still in debt. And so I did the three and a half percent down payment. And I basically emptied out my emergency fund to buy a home, because that's the only cash I could come up with. And I felt that FOMO, that pressure, like if I keep waiting, I'm never going to be able to do this. And so that's how it started.
Stefanie O'Connell Rodriguez: I hear a lot of people being like, "I'm trying to balance paying off my credit card and my student loans, but I'm still renting and I feel like I'm throwing away money, and I have to buy this house." And the house has been positioned as this purely good financial decision, but in a lot of these cases, I don't know that it is.
Jannese Torres Rodriguez: For me, it definitely was not. I actually lost money selling my home. I spent so much money fixing it. I was never more broke than when I owned a home. And it was just a result of not having that financial foundation in place, emptying out what was meant to be an emergency fund to buy a home, and then the emergencies started happening and I had no other recourse other than to start taking out loans. I had to take out a 401k loan to deal with a $15,000 repair of a sewer line.
And the things just kept adding up, right? It almost felt like I had unleashed the kraken.
The paint hadn't even dried on the walls. It was about two weeks in when I moved in, and I came home after work and I opened the door to walk inside the house and I smelled raw sewage. And I was just like, what's happening? So I go downstairs to the basement and there are literally three inches of raw sewage water in the basement from the sewage pipe, which had been blocked by concrete, because the previous owner had done some DIY repairs and poured concrete down the sewer line.
Stefanie O'Connell Rodriguez: Wow.
Jannese Torres Rodriguez: You can't make this stuff up.
Yeah, I definitely had to come to grips with the idea that I was not in the position to really take on this level of responsibility. I just did not have the financial framework in place of having the separate savings for the down payment, of having paid down my student loans to a place where I was comfortable taking on this mortgage payment, right?
And so, I think there's so much pressure to achieve these things by a certain age and you can get a lot of that external pressure. But if you're not honest with yourself about where you are and what your financial picture actually looks like, you're going to find yourself in the same situation that I was, where I had just overextended myself to the point where now these goals that I thought I was going to be able to achieve, like paying down debt and saving money and saving for retirement, felt so much more burdensome because of this additional pressure that I had put on myself to now have to deal with this mortgage.
Stefanie O'Connell Rodriguez: So in our listener story this week the decision to buy a home wasn't so much of an issue of a financial strain, so much as home ownership isn't necessarily a fit for her personality or for this stage of her life. And I think that's also a really important distinction. Even if it might make sense financially in the moment, maybe it doesn't make sense for how you feel or where you are in your life, or your relationship status, or your job status or your emotional status. And I think that's the part we overlook too.
Jannese Torres Rodriguez: Absolutely. I learned a couple of things about myself. I am absolutely useless when it comes to power tools, even though my father is super DIY and he's tried to instill all of these skills in me. It's just not something I've picked up, and it's not something I actually want to do. The idea of renovations and all that stuff has never been something that appeals to me and I had to find that out the hard way when I realized how expensive it is to hire professionals to do work in your home.
And then, from a personality perspective, there's just this idea that we're all meant to be homeowners. And for me, I'm just not in that place right now. I want the flexibility to be able to move and pick up and go and change my environment. And home ownership, unfortunately, for a lot of us is the thing that keeps us stuck in situations, whether that's a job or a relationship that you may not want to be in anymore.
Stefanie O'Connell Rodriguez: There's a bunch of headlines coming out now about all the people who bought homes during the pandemic and now there's some home buyer regret happening. And I wonder, since you've been in that position, how do you move forward from there? Once you're like, okay, this wasn't the best decision for me how do you not let it trap you?
Jannese Torres Rodriguez: Yeah. I totally understand how it feels. I mean, I was thinking about burning that house down a couple of weeks after moving in. And I was just like, how am I going to get out of this? And I had to just keep it real with myself, right? I had to understand that, yes, this is a big decision that you made. There's probably going to be some sort of monetary loss associated with you selling this house. And I accepted that, because the peace of mind that I'm going to get after getting rid of this drama is going to be worth it. '
Stefanie O'Connell Rodriguez: Can we talk through the logistics of, okay, so let's say I'm in this house. I own it, don't love it. It's not a fit for me, either financially or personally, or for whatever reason. What do I like actually do? Who do I call? What is my next step?
Jannese Torres Rodriguez: Well I think before you sell the house, take a look and see if maybe you want to convert this into an investment property, where you actually rent it out. Because that might have a smaller financial impact, especially all in one lump sum, than just putting the house up for sale quickly after you've bought it. So explore that option.
You can decide to be a DIY landlord and do your own tenant screening and processing payments and all that sort of thing, or you can decide to work with a realtor to find a tenant and they can handle the tenant selection process for a fee. You can hire a property management company, which typically charges you between eight and 10% of the rent that you charge in order to manage the property. And they'll do things like taking care of landscaping, screening tenants, handling evictions, if it gets to that point, and maintenance. So if you have that option, explore it, right? You never know.
If you find yourself in a situation where you're just like, I just need to sell this house, then the best thing to do is, obviously, to talk to a realtor. They can set you up with a plan based on how quickly you want to sell, what price you want to sell it for, what condition you want to sell the property in. And then you can go from there.
Stefanie O'Connell Rodriguez: Did you say you were going through this process with a partner?
Jannese Torres Rodriguez: Yes, this was me and my husband, our first home. And he's still traumatized by the whole thing, because he saw how much it stressed me out. So next time we do this, because we will buy a home at some point in the future, but we are in such a different financial situation now. And we really, we needed that perspective in order to see what it is that we did want and what we do want in the future.
I'm in a place now where I'm debt-free. I've been able to really accelerate my retirement savings and I feel much more comfortable taking on that responsibility, knowing that I'm not dealing with lingering credit card debt or student loans, or having to dip into my 401k or my emergency fund in order to purchase a home. So I think home ownership has its place and it will be at different points in your life, depending on your goals, on when you're ready to settle into a more stable living environment, and it's not based on an age. It's not based on a life status. It really is just based on your personal situation and what makes sense for you at that time.
Stefanie O'Connell Rodriguez: Is there anything financially that would make it feel like the right time?
Jannese Torres Rodriguez: I think for me, it's definitely being able to put 20% down, having a separate emergency fund, making sure that by purchasing this home, I'm not going to have to negate things, like continuing to save for retirement. And as long as those things are in place and I'm not jeopardizing the future for the present, it makes a lot of sense
Stefanie O'Connell Rodriguez: I think the other piece of this conversation around home ownership and the pressure to buy is that home ownership has been framed as this cornerstone for building equity and building wealth.
Jannese Torres Rodriguez: I have been able to save and invest more money as a renter than I ever was as a homeowner, just because I am dealing with a lot less financial responsibility as a renter. So this idea that home ownership is the only way to achieve and build generational wealth is just simply not true.
There are so many different ways for us to build wealth and it's not just one size fits all approach.
We're seeing a generational shift when it comes to what wealth building can look like. Things like online entrepreneurship were not a thing a generation ago. Investing on apps that you can download on your phone were just not a thing. So we're just being introduced to all of these tools that have existed for a long period of time, right? Entrepreneurship has been a thing forever, but now the accessibility to it is what's different. And the same thing goes for investing. The stock market used to be something that only people with really high net worths could even access, right? They had to work through professionals in order to invest. Now, it's a matter of downloading an app on your smartphone and linking your bank account, and you're an investor within a couple of minutes.
Stefanie O'Connell Rodriguez: Yeah, we talked about the narrative of the home as the pinnacle of wealth building. We've talked about the narrative of the American dream. There's also just that social pressure, because everyone else is doing it.
Everybody else is posting their living room makeover or their home renovation project. And it makes you feel like, well, shouldn't I be doing this too? So I'm wondering if you have ways of pushing back against that dialogue in your head.
Jannese Torres Rodriguez: I really just have to be clear on why I'm doing what I'm doing. And there's nothing that makes it clearer to me than seeing my net worth continue to grow because I'm investing and because I'm doing the things that feel like the right thing for me. So while my friends might be renovating their kitchens and living out the HGTV lifestyle they might not be on the same path to saving for retirement and really focusing on what the future looks like.
So just because you see externally what people are doing, and you think that that is some mark of success, you don't really know what's going on behind the numbers. You don't know what kind of debt they're in, or if they're even using their retirement accounts at work to save. So the FOMO is real, but the only thing that you really should be worried about is your financial picture and if what you're doing with your money is aligned with what is meant for you at this time.
Stefanie O'Connell Rodriguez: Something I see people struggle with when they're like, well, maybe I actually don't want to buy a home. They have trouble identifying, well, then what is it I'm saving for? And I know that for a lot of people, without that clarity, it is really tough to be like, okay, well, what's going to be that motivation to save?
Jannese Torres Rodriguez: Yeah, I totally get that. And so, I'm not a hundred percent sure I'm going to have kids, but I still know that there's people in my life that I want to be able to provide financial support to in the future, right? My parents are in their sixties, they're getting older. I know I'm going to want to be able to help them financially. And that's a reality for a lot of us, even if we don't necessarily want to admit that. So there's somebody that you love that you would want to be able to help financially, and setting yourself up in a place where you can be able to do that I think is an amazing gift, right?
And if, for whatever reason, you just want to build wealth and not give it to anybody in particular, you can think about starting a foundation that makes a difference in a cause that you care about, or supporting organizations in your community that care about, the causes that you care about, right? It's just really about being strategic and putting it to work into the things that matter to you and leaving a lasting legacy that way.
Stefanie O'Connell Rodriguez: I also find that for me, one thing that's really helpful is getting super clear about the feelings I want to have and what are the things that I don't want to have to worry about if they pop up?
Even if it's not that I'm saving for a house, I am buying myself freedom from having to worry if my housing situation falls apart. The freedom from having to worry about a job that makes me feel trapped or a relationship that makes me feel trapped.
I think it's hard, because home ownership was not just a cornerstone of the dialogue around wealth building for so long, but it was just a cornerstone of how we organized our lives and the way that we worked toward things for such a long time And I just think now It's a little bit harder to set clear goals and plan because it is a little bit more abstract, but there is just so much more opportunity, to your point, to think about, well, what's the impact I want to make with my money on my own life and the lives of the people around me?
Jannese Torres Rodriguez: Yeah, absolutely. I think a lot of people don't really realize that they're not seeking some sort of status symbol in life. They're seeking the ability to live life as they want, right? It's about freedom. It's about freedom to choose, whether that's a job or where you live, or maybe working less, because that frees up your time more and you can spend time with your kids, or you can take care of your elderly parents. We just want freedom and money does that for us. Money can buy time. Money can buy help. Money can buy resources. Money is a tool that can allow you to really become an engineer of your days, not only short-term but long-term.
Stefanie O'Connell Rodriguez: Money is a tool we can leverage for freedom. For some of us, that freedom might come in the stability and security of a home that we own. And for others of us, that freedom might look like something completely different, and that's ok.
To avoid a housing decision you might regret, remember to take all the aspects of buying a home into consideration - yes, the financial aspects, but also, the time, energy, and lifestyle aspects as well.
While feelings of FOMO and social comparison are real and totally valid. Keeping your full financial picture top of mind and getting clear on what other long-term goals and priorities you have can help you better assess whether the decision to buy a home actually aligns with the rest of what you want for yourself and your future, regardless of what everyone else is doing or telling you to do.
And don't let shame or feelings of embarrassment about making a major money decision you regret keep you trapped in it. Even if it means losing some money. Selling a home can be as much of a financial and lifestyle goal to plan for as buying a home. And you can take the lessons you've learned from both experiences to get clear on what you really want moving forward.
This has been Money Confidential from Real Simple. If, like Nina, you have a money story or question to share, you can send me an email at money dot confidential at real simple dot com. You can also leave us a voicemail at (929) 352-4106.
Come back next week when we'll be talking to a 33-year-old journalist who isn't sure whether or not she wants to have children and whether she should still financially plan for starting a family anyway.
Be sure to follow Money Confidential on Apple Podcasts, Spotify or wherever you listen so you don't miss an episode. And we'd love your feedback. If you're enjoying the show leave us a review, we'd really appreciate it. You can also find us online at realsimple.com
Money Confidential is produced by Mickey O'Connor, Heather Morgan Shott and me, Stefanie O'Connell Rodriguez Rodriguez. Thanks to our production team at Pod People: Rachael King, Matt Sav, Danielle Roth, Chris Browning and Trae Budde.