A Basic Necessity – Part 4

Why did we return to America after ten years in Japan? Our primary goal was to expose our kids to American culture, to give them alternatives to the Japanese education system’s conveyor belt to forty years of corporate servitude. Next, we wanted to be close to my family. That goal was quickly satisfied, and didn’t seem so important now. We also wanted to enjoy some of the unique things America had to offer (for example, National Parks), and to give me the opportunity to work from home. Most of all, we craved a sense of permanency (as much as anything could be permanent in life), after having rented and moved from place to place around Japan’s Shonan Coast for ten years. We wanted a home of our own.

But the economy wasn’t cooperating. For the two years since returning from Japan, my mind was imprisoned in a hellish vortex of agony, depression, and rage over the insane rise of housing costs in America that just happened to coincide with our return.

In A Basic Necessity – Part 1, I established a bit of context by looking at the house-price-to-household-income ratio over time, which rose from about 2:1 in 1970 to 10:1 in 2020 (in our area).

In A Basic Necessity – Part 2, I cursed our bad luck at returning to America at the peak of such an unprecedented rise in housing costs, and tracked housing prices as they shot up another 50% while interest rates doubled – in a span of two years. I concluded that paying off a house was an impossible long-term goal for almost all would-be, first-time home-buyers (which included us, as we hadn’t owned residential real estate in America for seven years or more).

In A Basic Necessity – Part 3, I took a look at the American debt culture that made this shocking phenomenon invisible to existing home-owners (low interest meant low monthly payments), and I did some math to conclude that the throw-away money on rent in our area was actually less than the throw-away money involved in buying a house, even considering the rise in equity over time.

Fast-forwarding to the present, I needed to escape this spinning vortex of self-inflicted mental pain, and settle our housing situation once and for all. For two years we had been renting a small duplex on a shabby, low-income street – a depressing stretch of junk-covered lawns, lowlifes, and broken-down cars. Our boys were growing fast, and this place felt smaller with every passing month. I cursed every time I prepared food in our tiny, one-person kitchen. Our living conditions were a significant downgrade compared to the places we had lived in Japan, or compared to anywhere I had lived since college.

In this latest installment of A Basic Necessity, I would commit to overcoming our particular housing problem and help my family realize their dreams in the upcoming year.

The first step to solving any problem was defining it. What was the problem we faced, exactly? Or, to be more precise, how did I perceive the problem? Were things really as bad as they seemed?

When we first moved here at the end of 2020 the problem was low supply, extreme demand. Competition among buyers was like the opening round of Hunger Games, with people tearing each other’s eyes out in terrible death matches that would award a blood-soaked winner the privilege of paying 20% or more above an already super-inflated price (plus sexual favors for life to the seller, and the sacrifice of a child or two). By the summer of 2021 this FOMO frenzy had reached such levels of insanity that I abandoned any hope of finding us a suitable house.

Today, the first day of 2023, the seller’s market did not exist, thanks to high interest rates. In the last half of 2022, housing sales plummeted and house prices fell a few percentage points month over month. We were potential cash buyers, so high interest rates gave us an edge.

On the other hand, a buyer’s market did not exist either, at least not yet. Everyone was staying put. Around two-thirds of so-called homeowners in America were not owners in the true sense of the word. They paid rent to a bank in the form of a mortgage, and very few of these folks now had the financial chops to give up their low-interest loans and buy a new house – especially in a year when everything screamed “recession,” mass-layoffs, and foreclosures further down the road.

There were two other problems remaining now that the prices had leveled off. Supply was still an issue, but this situation would only get better next year.

Our other remaining problem was the risk of putting a massive stack of cash down on a house, when every economic indicator suggested that there could be a crash. This was the same reason the loathsome, big-scale investors had backed out of the market. We’d only be in America for another decade or so, which wasn’t long enough to recoup losses on a massive drop in value of a house. This problem had buried me in doubt and despair for a year or more.

But was my perception correct? Were things as hopeless as they had seemed? The reality was: if the housing market did crash after we bought a house, it wouldn’t break us. And there was no scenario in which we would lose all our money on a house. Houses were a basic necessity. Everyone needed a place to live.

Over the holidays I spoke to a few people who gently suggested that I let go of my anger over this situation, accept the new reality, and get a house.

Things might have been hopeless for future first-time, would-be home-buyers, but it was time for me to recognize that we weren’t in this group. I may have felt like the poorest person in the world in our current living conditions. I may have surrendered my lucrative job in Japan and accepted a fifty percent pay cut (as housing prices rose fifty percent). But recently I was reminded that we had more options, at least compared to 90% of the U.S.

Over the holidays a friend sent me an article on “signs of financial fitness”. It was astonishing to see such pathetic standards for “financial fitness,” and to remember how poor America really was. The debt culture had disguised the poverty of the masses, with the mentality of “how much debt can I sustain?” instead of “should I maintain debt at all?”

In sharp contrast to almost all Americans, we had always maintained zero debt, and we lived far below our means. We were sitting on a mountain of slowly-deflating U.S. dollars, just begging to be spent. Losing US$200K in a housing crash would hurt, but it would not be a life-changing event.

With that mental barrier out of the way, what were our options now? We wanted a home of our own, but what did that mean? Or, as my wife liked to ask, what was the plan?

We had checked off the box of “being close to family,” and it didn’t seem such a high priority now. My mom had originally planned to move to SLC, but then changed her mind. My brother and his family lived nearby, but they’d likely move away when their daughter graduated high school in a couple of years. Salt Lake had a lot to offer, but there was nothing keeping us here. We could go anywhere that offered a better quality of life.

In the coming year, flexibility was our friend. We would monitor the housing market in our current community, while evaluating the possibility of moving to another state. We’d spend another summer in Japan, with a loose goal of moving to a new house in the fall. It could happen before then if conditions were right.

Most of all, I vowed to maintain optimism about housing. The FOMO frenzy was over. Economic disaster for most would only mean opportunity for us. In any event, 2023 promised to be a much better year.