Archive for category Money and Marketing

I’ve written before about the cultural Myth of Progress and the “expansionist drive” that supports it. Another way of expressing these ideas is to simply say that, in our culture, enough is never enough.

That idea has been coming to mind as I move forward on the process of selling my townhome in Georgia. I bought the home in 2004, which, if you’ve been paying attention to historical housing prices, just made you cringe. That was, literally, just before the bubble burst. Since the bubble hadn’t popped yet, you could still get an 80/20 mortgage with zero down payment and no PMI, which is exactly how I was able to move from a 2-bedroom rental apartment into an 1800-square-foot townhome, basically at the drop of a hat. One day, I woke up and decided it was time to own instead of rent, and a few months later, I had moved into my new home. Okay, it wasn’t exactly that simple, but closer than you might think.

I paid a total of $167,000 for the home. Within the next few years, I would hear on the news about housing prices tanking, but I didn’t think much about it, because I had no immediate plans to sell. My time horizon for moving was 5-10 years out, and I figured I’d deal with the situation when the time came.

Of course, the housing market didn’t improve. In June of 2009, I moved into a group-living situation with some friends and decided to rent the townhome out. By July of 2010, I had bought a home in Knoxville and relocated entirely. The housing market was a little better in 2010 than they had been in 2009 (at least in part due to the tax credit, which I didn’t know at the time), so I decided not to rent again, but to sell.

Lots of financial advisers would tell me that this is the absolute worst time to sell. The housing market in general is still depressed compared to 2004. There are three to five units for sale on my street, and there have been for the last three years. There have been two sales on my street in that time period, in the range of $140k to $150k. At least one of the units for sale is a foreclosure. Many units are empty, their owners apparently still continuing to pay, since no foreclosure signs have shown up, but it doesn’t bode well for the neighborhood. The conventional advice for this situation is to ride it out and wait for the housing market to rebound.

Rebound to what? Rebound to the point where the home can be sold for at least as much as you paid for it, of course. And that’s where we come to the Myth of Progress. Everything is seen through the lens of profit and loss, except the scale is distorted. Lack of profit counts as a loss and profit is barely seen as breaking even.

Consider this: thanks to a generous contract on a book that I wrote, I was able to dump a bunch of money into the mortgage on the townhome. I put the money into the mortgage, instead of some other investment, at least partly in preparation for this very situation. The principle on the loan is currently about $120k, so theoretically, I could sell the house for as little as $120k, plus my agent’s commission, and walk away clean.

Most people would be horrified at that prospect. If I bought at $167k, sold at $120k, they would count that as a $47,000 loss. The only factor that would come to their mind would be the starting number and the ending number, and the Myth of Progress says that the ending number must be higher than the starting number or you have failed. But here’s how I think of it: if I had continued renting my apartment, I would have paid about $1,000 a month for five years. That’s $60,000 to live in a 2-bedroom apartment. Instead, I paid $47,000, or $783 a month ($885 if you add in the HOA dues) to live in a beautiful townhome, about twice the size of the apartment, that I loved dearly. And that’s not even counting the approximately $5k to $10k in interest that I was able to write off on my taxes! Sounds like a bargain to me.

Of course, the speculators will say that if I hold onto the townhome, the market will eventually recover, and I will be able to sell it for more. By my own logic, selling for $150k might count as a profit, even if it’s numerically a loss. That’s true, but making a profit isn’t my primary goal. I’m not interested in wringing the maximum amount out of every single transaction. I just want to have “enough,” and I think that’s where the Myth of Progress most leads us astray. It makes us view every transaction through the lens of maximalization. The question is always whether you have gotten everything you possibly could, not whether you got “enough” to satisfy yourself.

For me, “breaking even” and walking away from the townhome clean would be “enough,” and any cash I get out on top of that would be “profit.”