How the Simple and Sustainable View Real Estate Differently Than Most people, And why you should too. Part 1

Real EstateMost of us, especially those of us called, ‘Boomers’, grew up hearing, “Your home is your biggest investment, so buy as much house as you can afford.”  In fact, for many years, some ‘experts’ even encouraged us to refinance every 5 years or so and withdraw the equity in order to invest or to facilitate a lifestyle of consumption.  We assumed equity was an eternally growing organism.

In 2008, we found out the hard way, that real estate was a gamble like any other ‘investment’, and was subject to economic laws and markets. Many people lost their shirts when the housing bubble burst.  I got to keep my shirt, but lost all my equity and then some. Wow was that a tough lesson.  Now I look at real estate a whole new way, just like many others who learned a new kind of prosperity through simplicity.

In the spirit of full disclosure, I knew instinctively that the ‘buy big’ and ‘equity happens’ had ‘baloney’ written all over it, but I chose to ignore my spidey senses and went along with the crowd. Oh, how I wished I’d listened a long time ago.

I don’t remember exactly when I first began to question the generally accepted real estate philosophy, but I remember clearly what I was thinking. I was watching one of those fix it shows on HGTV and was floored at how much the homeowners spent on the makeover. Out of the blue, my brain told me that the perception of real estate held by most Americans was a violation of the laws of thermodynamics; things have a tendency to run down.  It’s called ‘entropy’.  Building materials would always deteriorate and decay. It was inevitable.  Basic physics demanded that barring intervention, appreciation would peak and would be followed by depreciation as the buildings, roads, yards and community infrastructure fell to the laws of thermodynamics.  A drive through the neighborhood I grew up in, confirmed my hypothesis.

On a visit to Kentucky just prior to 9/11, I took my wife to see the house where my sisters and I spent most of our ‘Wonder Years’.  It was a three bedroom, 1.5 bath ranch house.  It was a typical starter home in a typical subdivision, in a typical suburb. Over the years, the idyllic setting where neighborhood children rode bicycles, played backyard ball games during the afternoons, kick the can in the streets on muggy summer nights and dreamed our dreams of what we wanted to be when we grew up, became a place of overgrown trees, dying lawns, crumbling bricks and oft replaced roofs.  The days of property appreciation had long since abandoned the neighborhood just like the children who grew up, moved away and never came back.

Despite what science, logic and my eyes told me, I continued to buy homes, sell them and buy bigger ones, accumulating, rather than eliminating debt.

To be continued…..

In the next installment, I’ll explain how I changed my way of thinking and joined the growing ranks of the simple, sustainable prosperous.  Then I’ll challenge you to do the same.

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