The challenge facing first time home buyers is well documented at this point. The gap between the median income and median home price continues to widen. This presents an increasing challenge to anyone looking to save up a down payment and purchase a home of their own. It is easy to think about giving up this goal, but if you can shift your mindset it can help keep the door open.
In the book, Moneyball by Michael Lewis, Billy Beane finds himself in a similar situation as the General Manager of the Oakland A’s baseball team. The A’s have the lowest payroll in the league and some how they are expected to compete with teams like the New York Yankees and Boston Red Sox that have orders of magnitude more money to spend. It is a terribly unfair situation and yet Billy Beane and the A’s found a way to be competitive and even make the playoffs.
The Art of Winning at an Unfair Game
The subheading of Moneyball sums up the challenge of buying a home for most people in the United States. The cost of housing has risen dramatically and in recent years interest rates have also shot up which creates a massive challenge for the average person.
In building a baseball team, Billy Beane broke the components of what the team needed to produce down to basics and then figured out how they could approach meeting those needs different than everyone else. He had to work differently to be successful and that is how people need to function if they are going to be able to enter the housing market.
Am I in the Right City?
The housing market in the US is incredibly varied. In San Francisco, $1 million may not even get you in the game. In St. Louis, $400K could get you a reasonable sized home in one of the nicest neighborhoods in the city. The average home in St. Louis is under $300K.
I see people moving to Spokane from Seattle all the time because prices in Eastern Washington are approximately half of what they are in the core of Seattle. There are just cities that represent the New York Yankees in our Moneyball analogy. The big coastal cities are just not in the equation unless you are making some serious money or have built massive equity from owning property for a while. This is the first place the Moneyball mindset has to come in. If you want to buy, you have to be realistic about whether this will require a move to a lower priced metro area.
It is worth exploring new areas with a similar job market if you don’t have a vision for what another city could look like. I have seen numerous extended families relocating to Eastern Washington from California so that the kids can buy a home as they start a family. It really sucks that so many awesome coastal cities like San Francisco and Seattle are so unaffordable, but it’s something that needs a sober perspective if you are going to be able to make a real plan for the future.
Your Winning Purchase Needs to Be a Little Different
The biggest thing that is encouraging about home buying despite that challenges is that you don’t need to find a home each week or even a few times a year. You only need to do it once every five to ten years (or once period if you are lucky). This is what puts the odds a bit more in the favor of a young couple who knows their area and is open to what their future could look like.
People are all different and so if you can try a house on and imagine a life that you would truly enjoy despite bad paint or an old kitchen then you are in a good zone. This is also a big reason to look in a place you enjoy and can see the value in that the masses may not see the same way. It’s an odd quirk of modern life that people seem to love standing in lines. They do it for hot, new restaurants, but they also do it in the housing market. The best schools and top neighborhoods end up inflated when areas that are a slight step down are consistently much more affordable.
If you have Moneyball mindset then you can see that there are amazing homes and potential neighbors in these “other” areas and you can escape the crowd. If you can live life in a smaller footprint or with one bathroom then you will continue to find opportunities. Just changing a Zillow search to include 2 bedroom or one bathroom homes can unlock potential opportunities that most people are not even looking at due to the standard desire for a 3 bed 2 bath home.
In Austin, just being an extra 10 minutes away from the super hip areas can drop prices dramatically. If you want some fun on Zillow, compare home prices in 78704 (Ultra Hip) to 78748 (Still great, but no hype). The difference is massive even to be slightly outside the core of the city. If you know your city, you can find some of these imbalances that many will miss.
Anchor in What You Really Need
How many cool restaurants do you really need to enjoy your life? If we are honest, it’s not that many. The kids at the schools rated 9 or 10 aren’t the only ones who are learning and happy. Sometimes the highest rated schools have a whole set of challenges that come with a hyper competitive culture. If parents in the area are engaged with the school, then having a super high rating isn’t the difference between success or failure for your kids. Once again, if you know your city and can talk to people at the schools, you may find that there is a real gem that school ranking websites will never identify.
I think it’s safe to assume that there are cool neighbors in virtually all neighborhoods and it only takes connecting with a few to bring a new area to life. For me, having projects to work on over time has always brought enjoyment and a deeper connection to the property. I would have never developed my love of gardening and landscaping if I wasn’t forced into it by our first home. My biggest Moneyball move has been to buy houses with yards that were in complete disrepair. The look of the overgrown property drove many away, but I saw it as having a blank slate to work from.
Buying a house is similar to building a baseball team in that there is tons of variability in the options out there. If most people have one a similar vision in mind, then there will be houses that fall through the cracks just like there were promising baseball prospects for Billy Beane. For the person that can remain flexible in their search, the possibility of finding a winner is feasible. Even though the housing market nationally is as challenging as ever, you only need to find one good house to make it a win.
I hope this serves as some encouragement that there is opportunity out there still in this world and you can find a great spot to call your own if you know how to look differently.