UBER NUTRITION

How often over the years have you heard that “owning a home is the best investment you will ever make?”.   Well, I am simply going to tell you that it is not and it really never has been.   The only time a home was a good investment was when they were bought before the credit bubble and banking mortgage scam of the late 90’s and early 2000’s.  During the 90’s, if you could find a house in a good area, and put a minimum amount of work into remodeling or improvements, and then turn around and sell the home during the early 2000’s when banks were giving loans out to anything that breathed and the credit bubble allowed for people to have jobs that never should have existed to begin with, then you could walk away with a very nice return.   And that return was based on the overinflated value of your home created by demand which was fueled by a monopoly on credit.

However, that return you got from the sale of your home is only good as long as you keep it in a liquid state.  Meaning….cash in the bank.   So, if you are going to go buy another home right after selling your previous home, you are now buying a home at the top of the market, essentially losing your return assuming that you sink all of your return into a down payment and possibly more into your next home.  This would most likely be the case because you of course would be selling your first home so you could move up, and not down.  So your next home is going to be more expensive than your previous.  For example, if you buy a stock low, and then sell it at a high price, you aren’t going to turn back around and then use the proceeds to buy another different stock that is overvalued are you?   But this what most people did with their homes.

So the only way you really could have truly benefited would to have bought a home in the 90’s.  Spend very little on improvements. And then sell it in the early 2000’s for a premium.  Then, take your cash and put it into a low risk interest bearing account or savings account.  Then go live in an apartment and wait years until the housing market crashes.  Then take your cash and buy another home on the cheap.   The only way anyone really could have done this, is if they had a crystal ball.  Because there is no way anyone can actually time the markets and predict when it will fall.  So you would have felt like you were living in an apartment indefinitely while the values on homes kept rising.

But in general, why is a home not really a good investment?

1.  You pay interest on your mortgage!!   For at least the first decade, the mortgage you carry is front loaded to pay interest and not principal.  Go look at your mortgage statement.  If you have a $1000 mortgage, only about $100 per month is going towards the principal payoff.  The rest is about $900 per month straight to the banks!!!  That is $900 per month you will never get back!    It will take years before a larger portion of your monthly payment actually goes towards the principal!

2.  Eventually you will either have to repair something, or remodel assuming your home wasn’t just built yesterday.  Unless you like to do your own work, it will always cost you a $ grand here and there for someone to do any painting or flooring or whatever you need.  Aside from that, just about everyone I know that has moved into a brand new home, still had to spend $ within the first 3 years to make additional improvements because the home was built at builder’s grade quality.  Bare bones…..cheap fixtures, cheap toilets, cheap exterior paint, etc.

3.  So you get that nice tax return at the end of the year right?   Well, you still have to pay property taxes anyhow on your house!!  That still is $2000 average per year.  My parents have a newly built home that is nothing but a regular sized middle class couple type ranch, but they pay $3800 in taxes per year!   What a rip off!

4.  Don’t forget about that home insurance!    Plan on a minimum of a $1000 yearly insurance policy, even for a cracker box house.

My advice to any single 20 something college grad that is looking for housing, would simply be to live the apartment life until they get married one day.  They can just make their monthly rental payment and that’s it!   No taxes, cheaper utilities, and no home improvement projects.   They can put the rest of their month end earnings away into an interest bearing account.   One day, if they get married, then they can use their savings for a good down payment and buy a house.  Or keep that savings in a low risk security and buy a home with a minimum down payment.   But not as an investment, but as a place to raise a family.  That’s what a house is for.  Homes are not for single people!   They are for families.   A home is not an investment.  It’s a place to live until you retire and then scale down.

What occurred in the early 2000’s was nothing more than an overinflated bubble.  My prediction is that housing will NEVER return to the overinflated values they once were at.  First of all, there is still a second wave of mortgage failures that are coming on the horizon.  This will lead to a greater surplus of homes than there already is and more job losses.   With all the new homes built during the past decade and people defaulting and walking away from those homes, there is nothing but a surplus of homes.  That means no DEMAND.  And it will get worse.   As of 2010, jobs still have not returned.   Sure, you’ve seen a little tiny return of the stock market, but that’s just stimulus money making its way into the stock market plus people that gone ahead and put their money back in because they are tired of waiting and don’t know what else to do.  But, there have been no new jobs.  That means no new home buyers other than the “single” types looking to buy on the cheap with the $8000 tax credit.   That means that housing will be depressed for years and years.

Is there an upside to looking at this?  Well, if you are looking to get out of your home, and you sell on a “down”, then you can go and buy another home that is on a “down” too.  So, you are selling low and then buying low which results in a lower mortgage than your current mortgage.  Rather than selling high and then buying high.  So looking at it that way, your losses aren’t really that big of a deal in a sense.   If that precise message could be put out to the general public by the mainstream media, then that might result in more buyers in the market which could help for a “tiny” housing turnaround.   But now, you’ve got a surplus of homes, people without jobs, no new jobs created, and people who are “afraid” to buy a house even though they are cheap now.

So once again, homes are NOT an investment.  They are four walls that you buy and raise a family in.  If your ship comes in and your financial status increases, then you can sell and buy a nicer home.  Otherwise, you pay off that home over the years and then you die on the kitchen floor of a stroke at the age of 90 like everyone else did back in the day!   Then your children sell it and make off with the inheritance.  That’s what a home is!

Insulating your home is of course the only way to make your home more comfortable during the extreme temperatures of the winter and summer months. An older gentleman that I worked with at one time on a project, that is an engineer and holds a PhD from Kansas University, put it simply, “Throw your money at insulating your home instead of throwing your money at the utility companies”.

The most important lesson I had learned, was that rather than assuming, to go around your home and check to makes sure that there are no air leaks or drafts coming from anywhere. The reason why I say this, is because although I had definitely made sure I sealed all leaks within my home, I assumed for some reason that the cover with glass doors on my fireplace was most certainly sealed rather well. Well, that’s what prompted me to write this article. I double checked it and discovered nothing but cold drafts coming from all around the outside edges where the screen meets the brick. Most of it didn’t fit flush against the brick. But you wouldn’t notice it unless you inspected more closely. I couldn’t believe it! How could I have overlooked this?! So I ran out to Home Depot, or “deep-ho” and bought some 42” foam cylinders that are are meant to seal gaps for window air conditioners. I inserted the foam in between the screen edges and the brick from the inside of the fireplace. Not visible at all and it did the trick. I doubt it’s “fire-proof”, but then again I don’t use my fireplace.

Another short story is an old house that I lived in that was always uncomfortable during the winter months. I thought I had done all I could in insulating it, but failed to do anything about the slight draft I could feel coming from all the aluminum framed windows. Six fairly large windows. So….from the inside of the house, I ran a bead of clear caulk in between the aluminum frame and the wooden sill. What happened? I was able to get my thermostat 7 degrees higher!! All from just caulking my windows?!

The thing is, you might not think that some small drafts here and there through cracks or gaps would make much difference, but when you add all those small cracks and gaps up, it can equate to basically a baseball sized hole or larger in your wall. During the winter, don’t you think your home would get cold pretty quick if I drilled a hole even the size of the quarter into your wall exposing your home to the outside elements?

Here are the most important areas to check:

1. Make sure you have insulation covering at least the height of the ceiling joists in your attic.

I had discovered in my home that the ceiling joists were actually only about 6-8 inches deep rather than the typical 12 inch. It was because the builder/owner went cheap when building my house decades ago. So I had about 4-7 inches of blown in insulation in my attic!! That’s it!! So about a year and a half ago, I laid R-30 unfaced insulation into my attic. It was a tough job, but it only took a weekend and about $250 to do. This is probably the most important thing to do to your house. During the winter months, heat rises to the ceiling. That’s the first place it wants to escape. The quicker it escapes through your ceiling, the less pressure it puts out against your walls. Thereby almost “sucking” cold air into the walls of your home. Once I did this, my home felt much more comfortable! During the summer months, the insulation resists the heat that builds up in your attic from entering into your home through the ceiling. So ceiling insulation makes a huge different during both summer and winter months. I have a couple areas in my house that have “pockets” that are attics aside from the main attic. One of the pocket attics happens to sit above a room in my house that runs a little cooler in the winter than the other rooms in my home. So I actually double stacked the ceiling insulation in that part. That might be considered a little excessive, but it helped just that much more!

2. Check your windows. If there is a draft in between the frame and the sill, run a bead of clear silicone caulk in between.

3. Check your fireplace screen! If you don’t use your fireplace, you might want to insert some foam inside areas of the screen from the inside. Or seal the gaps where the glass doors meet the screen.

4. If you have an unfinished basement, or there is a part of it that is unfinished, go and check to see if there are any drafts or gaps in between the framing and the foundation mud sill. I stuff some paper faced insulation in these areas of an unfinished storage room of my home.

5.  Go around your house and check again!

Now one thing that I have not mentioned is: walls. The walls are the second most important area for insulation, with the attic being the first most important. So if you’ve done everything listed above to a great degree and you are having major troubles with heating and cooling, you might want to look into picking a room or two within your home that seems to have the most trouble and add insulation inside the walls. However, this just might not simply be possible for a lot of homes. Especially if you have an old home where instead of foam boarding, fiberglass was placed into the wall cavities of the house as insulation. Over the decades, the fiberglass loses its R value for obvious reasons: moisture, age, etc. If that’s the case, you’d pretty much have to tear out the drywall inside your house, or remove the outside siding from your house to get to and remove the fiberglass insulation and then refill the wall cavity with spray foam. Quite pricey of course! If you discover that your wall cavities are empty, it might a rather simple job to drill a 2 inch hole at the top of your wall from the inside or outside of your house and fill the wall cavity with blown in insulation. This can even be a job for the aggressive do-it-yourselfer.

This is why new homes of today heat and cool much better. They have foam sprayed into the wall cavities which offers superior insulation above any older home. That’s almost like taking the panels off the NASA space shuttle (resists extreme heat upon atmosphere re-entry) and putting that material into your wall cavities.