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Originally published June 30, 2013 at 4:08 PM | Page modified July 2, 2013 at 2:00 PM

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Why you should not buy a house

If you think buying a house will make you happy and rich, think twice, writes editorial columnist Sharon Pian Chan.

Times editorial columnist

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Renting is like throwing your money away. Buy a house now because Seattle home prices are rising. The Fed is going to raise interest rates. A house is the best investment you can make.

Sound familiar? Owning a home is the American dream. It’s what differentiates the adults from the larvae. Like marriage and parenthood, buying a house means you can shed the label “recent college grad” and call yourself grown-up.

But a home is not necessarily the best investment you can make. And even if you can afford it, it may not make you happy.

I bought my first house in 2004, because my parents were piping “buy now” into our talks and I had read too many Laura Ingalls Wilder books. My monthly mortgage payment was 38 percent higher than the rent I had been paying. A pipe froze one winter, and the kitchen ceiling caved in.

My husband and I caught Seattle’s renovation fever. Each paint color, floorboard and countertop would reflect our unique personal style. For four years, if it was Saturday morning we were at Home Depot in ratty, paint-spattered clothes.

One of my dogs went on a dirty strike and repeatedly peed in one of the bedrooms. The other ate drywall.

Every time we cooked a meal in our gorgeous renovated kitchen, we tasted the bitterness of the remodel. We packed it in. We rented out our house and bought a condo on Capitol Hill. It has a 1970s kitchen that we have no plans to alter.

Peel back the packaging on those reportedly low interest rates. Those are reserved for people with stratospheric credit scores, 20 percent for a down payment and minimal student loans.

Also, have you met the zombie homeowners? They still walk this land. Between the peak of the market in June 2007 and May 2013, 48,350 homes were foreclosed on in the Seattle metro area, according to Zillow, an online real-estate marketplace based in Seattle.

The foreclosure crisis disproportionately affected young people and people of color. I know three different college-educated, employed people whose mortgages fell underwater and, credit rating be damned, they opted to abandon their homes.

Home prices are rising now, and Zillow estimates they will go up 7 percent in the next 12 months. But from peak to trough, Seattle homes lost 33 percent of their value. As of May, home values were still 24 percent below the 2007 peak. Even if they escaped foreclosure, 31 percent of Seattle-area homeowners are underwater, meaning they owe more on their mortgages than their homes are worth.

Recent studies show that high rates of homeownership can actually dog a region’s economic growth. A May study from the Peterson Institute for International Economics showed that when a state doubles its homeownership rate, a doubling of unemployment later follows. An increase in homeownership led to lower levels of labor mobility, longer commute times and fewer new businesses. A Finland study from University of Tampere found the same correlation in that country.

Zillow estimates that if you plan to stay in a home for less than 3.6 years, it’s better to rent than buy. Here’s my break-even analysis: If you had $75, would you rather spend it on shoes or a cubic yard of compost? If the answer is shoes, keep renting.

“There are very few people you can go to who will tell you ‘no’ when you ask whether you should buy a home,” said Jane Hodges, Seattle-based author of the book “Rent vs. Own.” She advises: Take a free first-time homebuyer class from the Washington Housing Finance Commission.

I put about $65,000 into a down payment and renovation costs on that first house. If I sold it now, I would clear $93,906 after closing costs and selling commission. If I had invested $65,000 in a basic S&P 500 index fund instead, it would now be worth $94,288, after paying fund fees.

“I wouldn’t use a house as an investment. Investing in the stock market or some other vehicle is a better choice,” said Svenja Gudell, senior economist at Zillow.

Often I think of the trip to Istanbul my husband and I talked about but never took. That would have been an investment in our relationship and happiness.

We were going to eat kebabs and see the Hagia Sophia. Instead, we were at Home Depot.

Sharon Pian Chan's column appears regularly on editorial pages of The Times. Her email address is On Twitter @sharonpianchan

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