Tuesday, May 24, 2011

Why I rent? (And why I will eventually buy)

At no point in my life would it have been a good time to buy a house. Anything pre-2005 wasn't an option because I had yet to finish school and didn't have a job to support a house. Then in 2005, I got my first job and my first salary. Without going into details it wasn't a salary that I would want to make a house buying decision on. By 2006, I started getting a little bit of pressure from coworkers advising me to buy a house with the line that I was "throwing my money away" with rent. I remember even meeting with a real estate agent who approved me for a $300K loan. That was ridiculous at the time considering my salary, down payment and other factors.

In 2007, I started looking for a new a job and was able to look in places like Milwaukee, Columbus, and North Carolina. Eventually, I lucked into two offers from a company in North Carolina and my current company here in Minnesota. The fact that I had the other offer out there from the company in North Carolina helped me in my salary negotiations. If I had been locked into a house then I would have been forced to look for jobs in the Twin Cities area. This would have been a huge constraint, and probably would have meant I would have settled for a smaller salary.

In 2008, the economy soured and the stock market dropped 32%. Most of the money I had saved for a down payment was in the stock market, which means if I had bought a house I would have been selling at a low point. Since the end of 2008 the stock market has rebounded and is actually up 39% from that point. Selling stocks to buy a house would have been a terrible financial decision on that alone. Now combine that with the fact that home prices have continued to go down since 2008, then it is clear that this was not the year to buy a house.

In 2009, businesses started reacting to the poor economy. At my company they started a furlough program that cut my salary by a paycheck and a half. Because I was renting (and had a very inexpensive rent), I had been able to save up some money and was able to use that extra unpaid time off for vacations. I remember driving to Cleveland for a wedding, going to the College World Series and generally just having a great time that year. Would I still have had as much fun if I was worried about a mortgage? Probably not.

In 2010, I got married and started looking at finances from a joint perspective. Now, I could finally start looking at houses in terms of what we (as opposed to I) could afford. Having a 2nd salary and a 2nd savings made a huge difference in that analysis. Just like that the type of home I could afford increased. The new goal was to determine how M and I handled finances by looking at what we spent. This has been an ongoing process, but we now have 10 months of data that will help us make a more educated home buying decision. Getting that level of data was important, but 2010 was also the wrong time to buy a house because it was a great year for the stock market and another bad year in the housing market. Year over year the Minneapolis houses from 2010 to 2011 have gone down 11%. The money that would have been invested in a house was instead going up in the stock market. I am very pleased not to have bought a house in 2010.

Now it is 2011. Is it a smart time to buy? Maybe? Home prices might be ready for a rebound and there is no doubt that interest rates are low. M and I are in a good financial situation and we would be able to afford a reasonable home. However, we still choose to rent. Here are the reasons why:
  1. Flexibility: If M and I would like to move, then it is as easy as giving our landlord a 2 month notice. This gives me peace of mind if our job situation changes or if we decide to look at living somewhere else.
  2. Poor investment: The stock market can be very volatile. There can be declines like the ones experienced in 2008 and early 2009. I am well aware that there are risks involved, but the good news is that with the added risk comes more expected reward. At a relatively young age, I can take on the added risk and feel safe that the market will continue to grow at an average rate that is larger than the housing market.
  3. Maintenance: I'm not much of a handy man, so the idea of fixing things around the house doesn't appeal to me. If something breaks at our duplex, then I call the landlord and he sends someone to fix it.
  4. Location: M and I live in a part of the Twin Cities that we probably couldn't afford if we were going to buy. The modest house across the street from us is going for $500K. There is an extremely nice duplex about 6 houses over that is going for $1.3M. The condos that are a block away from us go for $1.2M and have an association fee of $803 and taxes of $13,809 a year. It is too bad that we wouldn't be able to afford the area, because we really like where we live. There are shops, restaurants, a grocery store and a small movie theater all within walking distance of our place. It is going to be really tough leaving our neighborhood because of the convenience it gives us on a daily basis.
Those are the main reasons why I like to rent at this point in my life. However, M and I will eventually buy and here are the reasons why?
  1. Kids: I would like my kids to grow up in a place they can confidently call their home. Maybe it wouldn't matter to them if they were in a place we rented or bought? However, it would matter to me and I am pretty sure it would matter to M. Also, this fits into point two.
  2. Socially Acceptable: Buying a home is something adults do. The real estate agents of America have forced that propaganda down our throats enough times, that most people believe it. Not many people want to go against the social norms in fear of being ostracized. M and I are the same way, and even if renting always made more logical sense, it still doesn't mean we wouldn't eventually buy. 
  3. Neighborhood: Our street is the renter's street. The street (Maple) running perpendicular to us is the the buyer's street. There are some major differences between the two streets. Maple Street is a filled with two above-average children per house playing in perfectly manicured lawns. The lights are brighter and the people seem to be friendlier. When I look at Maple Street I get jealous and hopeful that one day I will live on a street like that.
  4. Customization of the house: I don't want to knock any walls down, but it would be nice to at least have that as an option. Also, I wonder if ownership of a house will make me think differently about where I live. Will I care more about where the couches are placed compared to the TV? Will I hang up more of my favorite pictures?
  5. What else is there to do with the money? This might sound bad, but really do I always want to put money into my checking, savings and stock accounts? Eventually it would be nice to put the money to use. While stocks probably will be a better investment than a home, you can't live in stocks. 
A home hasn't been the best option for me in the past, and I don't think it is something we should do in the present. However, in the future I think that a owning a home will have some advantages. 

Tuesday, May 17, 2011

Minnesota Twins

The Minnesota Twins have the worst record in baseball this year with a 12-27 record. They have the worst run differential at negative 93 runs. They have the longest current losing streak at 9 games. They are the most games back of a division leader with 13.5 games seperating them from the Indians. They have scored the fewest runs with only 121 (or 3.1 runs a game). They have given up the most runs per game at an average of 5.5. They have the worst on base percentage and slugging percentage at the plate. They have the fewest strikeouts as a pitching staff. They have 9 players (Young, Thome, Hughes, Butera, Tosoni, Repko, Nishioa, Holm and Rivera) with more strikeouts than hits. It doesn't take too long to find stats that show you how awful the Twins have been this year.

This is my 6th season as a Twins fan, and I have seen some remarkable things. In 2006 the Twins came for a large midseason deficit to win the division on the final day of the season. I can still remember watching the fans at the Metrodome cheer on the Royals as they beat the Tigers to put the Twins in first place for the first time all year. In 2008 the team went into the 2nd to last series of the season needing to win all three games against the White Sox to stand a chance of winning the division. After winning the first two games, I was in the upper deck of the Metrodome when I watched Alexi Casilla's single to cap a big comeback and sweep the White Sox. That team eventually lost 1-0 in a heartbreaking game 163 division tiebreaker. In 2009 the Twins topped anything they did in 2006 or 2008. They were dead in the water at 3 games behind the Tigers with only 4 games left in the year. Somehow they won all 4 games (including one against Zach Greinke) and forced another game 163. This time they won that game in the greatest game I have ever seen live.

I should be used to crazy things happening to the Twins considering the 2006, 2008 and 2009 seasons. Each season topped the other, which is only appropriate since 2011 would top all of them. Right now the team has a better chance of being historically bad than competing for a playoff spot. They are on pace to lose 112 games, which is something that has only been done by 8 teams (including the Cleveland Spiders, Boston Braves, Pittsburgh Allegenys to give a sense of time) in major league history. Only 3 of those 8 teams were after 1950; the 1952 Pittsburgh Pirates, 1962 New York Mets and 2003 Detroit Tigers.

This year looks to be one of the worst sports years of my life. The Twins as mentioned above are terrible. The Jazz went from being a regular in the playoffs to a team without its star (Deron Williams) getting ready for the NBA draft lottery tonight. The Dolphins finished another average year no closer to finding a franchise quarterback. Duke had a good year, but is looking at an upcoming year where UNC is everyone's favorite to win the title. It is a low point for my sports teams. However, with these valleys comes opportunities to reevaluate how you can do things better in future. Sometimes when things are going well it glosses over larger problems at the core. There is no better chance to make significant changes than now at this low point. For the Twins that means they need to get younger, better and improve the farm system to the point where players are ready to contribute when stars (like Mauer or Morneau) get injured.

I will be there as a Twins fan to see the turnaround. They have provided me with many great moments, and it is safe to say that no matter what I am a Twins fan for life. They are my team.

Wednesday, May 4, 2011

Osama Bin Laden

"I remember where I was when" usually precedes a historical moment that everyone can relate to. For previous generations it has been Pearl Harbor or JFK's assassination. For my generation the first event that fit that criteria was 9/11.

It was a Tuesday morning in Oxford, Ohio during my first month of my freshmen year in college. I remember sitting in Biology class in Pearson Hall when someone mentioned that the World Trade Center had been hit by a plane. I didn't realize the severity of those words until I got back to my dorm room at Porter Hall and turned on the TV. That day was then filled with watching TV and trying to study for a Calculus test I had the next day. I remember the images and the fact that my Calculus professor wasn't going to delay the exam. It wasn't much of a surprise to me when I later found out how terrible I did on that test. Studying for Calculus was not a priority to me at that moment.

It is amazing to think of all that is changed in the world between 9/11 and Osama Bin Laden's death this past weekend. For me personally a lot has happened since I went from an 18 year old freshmen to a 28 year old corporate America worker. Below is just a taste of what has happened during those 10 years:
  • I completed 4 years of college and graduated from Miami University.
  • I traveled domestically to Cincinnati, Cleveland, Columbus, Jackson, Las Vegas, Atlanta, Wisconsin, Kansas City, Omaha, Bemidji, Chicago, Des Moines, Seattle, DC, Maine, Wilmington, Chapel Hill, Asheville, Florida and others that I am sure I am missing.
  • I traveled internationally to China, South Korea, Japan, Hungary, Austria, Spain, Canada and Mexico.
  • I met 3 out of the 5 groomsmen in my wedding, which shows that not all of your friends have to come from high school.
  • I met, dated, proposed and married my wife.
  • I've been in 3 weddings with only one of those times being on the groom's side.
  • I've had 4 different banks for my checking account.
  • I've gone from watching The Daily Show on tv to the watching The Daily Show on my computer.
  • I've gone from being employed as a summer camp counselor to my current role as an SAP SuperUser.
  • I've added the following ballparks to my list; The Metrodome, Target Field, Kauffman Stadium, Miller Park, Wrigley Field, US Cellular Field, Great American Ballpark, Jacobs Field, new Busch Stadium and National Parks.
In other words it has been a long time since 9/11. Despite the length of time that has passed I am happy that justice was finally served.

Tuesday, May 3, 2011

The Royal Wedding

For the longest time, I thought people were caring too much about the wedding between Prince William and Kate Middleton. It seemed like the media was cramming this "fairy tale" wedding down our throats to the point that it was embarrassing. Then there were the incessant facebook posts made exclusives by females (at least among my friends) that led me to believe that either people genuinely cared or the media had done their job well. Either way it seemed kind of excessive for two people who didn't seem to have any real accomplishments or power.

Anyway, I think this wedding gives everyone a chance to reflect on weddings, marriage and social status. And unfortunately for the House of Windsor this reflection isn't very positive. Here is what I would care about:
  • Diana married Charles when he was 32 and she was only 20 high school dropout. And people celebrated this? Really? 20 is too young to be married, especially when it is to a 32 year old. Is it that much of surprise both people had affairs and the marriage ended in a divorce. This should obviously not be an example for the public.
  • Divorce is a constant theme among the Royal Family. Besides the above I will let Time magazine take it away "William's uncle the Duke of York is divorced. His aunt the Princess Royal is divorced and remarried. The Queen's sister Margaret was also divorced." 
  • Excessive, unearned titles also seem to be a theme among the Royal Family. This is not longer the 15th century, and I think the titles are nothing more than conceited ways of satisfying rich people's egos. 
  • Income and social mobility is poor in England (and the USA), which means it is harder for kids from poor families to become rich compared to other countries. Part of this has to be attributed to the caste system in England that is epitomized by the Royal Family sitting at the top.
  • Doing nothing is one of the most fun things I can think of, but that doesn't make you someone other people should admire. The Royal Family is symbolic and only is around for ceremonial causes, which means they don't actually do anything. One of my favorite quotes is from football coach Barry Switzer, who said "Some people are born on third base and go through life thinking they hit a triple." Does that not accurately sum up the Royal Family? It is one thing for them to think so highly of themselves, but why should anybody else care about them?
I think that we should celebrate hardworking people, who make smart choices and help better the world. There is nothing in the past 50 years of the house of Windsor that suggests they should be a positive example or a group of people that should get any attention. The only reason I care about them is because I care about highlighting their faults, and why we should use them as example of what can be wrong with the world.