If someone were to chart it, I’d guess that the bell curve that represents how happy American homeowners have been over the last 10 years would be just about as volatile as the one that represents home values.
Actually, the emotional roller coaster might even be a carbon copy of the path of home prices from peak to trough, as the joy and exuberance most owners express about their homes at any given moment is directly proportional to what it’s worth at the time.
But there are two germane, essential truths: (1) Happiness is the ultimate objective of the intentional life, of which homeownership is a part; and (2) Home values, like the value of any asset, go up and down.
So, wouldn’t it be great if we could decouple our experience of happiness with our homes from their values, freeing ourselves up to simply enjoy them and be happy no matter what’s going on in the market? What if we can make our experience of homeownership recession-resistant, even if we can’t recession-proof the market itself?
Well, I know some such happy homeowners — people who remained free of the angst and teeth-gnashing that seemed to become the near-universal sentiment among homeowners during the housing recession. And they also remained free of the euphoric rush and frenzied decision failures of homeowners at the top of the market.
Here are a few of the traits and behaviors that I’ve noticed in these happy homeowners:
1. Smart, proactive money managers. This does not mean these people are day traders or sit around the computer tracking every cent they spend. What it does mean is that these people are assertive about their financial planning, understand their income and expenses, save and invest for the present and the future, and live well within their means. This empowers them to weather occasional financial storms like illnesses, layoffs, and market downturns without excessive panic and fear about what their home is worth at any moment in time.
I once heard a happy homeowner express his belief that there should never be a need to tap into an emergency fund, because so-called "emergencies" like car repairs and roof leaks are just inevitabilities of life. So, instead of having an emergency fund set aside, he has structured his income and savings and expenses so that he saves upwards of 20 percent of what he makes every month, no matter what, and is always in a state of financial preparedness for the curve balls that life can throw.
2. Optimistic about their long-term future — and that of the market. I’ve been fascinated lately to see all the talk of how much better mutual funds perform over the long term if they are simply invested in every stock on an exchange and parked there for decades, versus being actively traded by even the most expert of Wall Street wizards.
I find that so compelling because it mirrors my experience of real estate: One of my first clients was a 70-year-old man whose home I sold for $550,000; he told me he had paid less than $20,000 for it 30 years earlier.
Homeowners who have an optimism that the value of their home will increase over the very, very long term tend to be less hung up on and stressed out by the cyclical ups and downs in the real estate market.
3. Conservative mortgage holders. These folks often put a lot of money down, make extra payments, invest in improvements that bring up the value of their home, or make some combination of these and other relatively conservative mortgage moves. They might refinance if interest rates drop so low the costs of refinancing pale by comparison with the savings. But these folks are generally inclined against taking short-term or aggressively adjustable loans, and they tend to disfavor frequent refinancing or excessive borrowing against their homes.
As a result, even if they didn’t put a huge down payment on the home at the time they bought it, they do tend to get and stay in a relatively strong equity position compared to their peers.
4. Relatively stable and committed to their homes for the long term. People who own homes that work well for them and their families — and will work well for years and years to come — tend to be less emotionally yanked around by market vagaries.
Homebuyers take note: Happy homeowners tend to be people whose homes have ample space, are in good condition, and are in neighborhoods where they feel safe and comfortable; if you can position yourself well with respect to as many of these criteria out of the gate by being smart about the home you choose, you’ll be that much closer to membership in this select club.
These people are aware of what’s going on in the market; they’re just not obsessed with it, because they don’t plan to move in any event.
Often times, a happy homeowner’s commitments to his home mirrors a commitment to his job or career or line of business, if he’s self-employed, which allows him to take the stance that as long as he can make the payment, he’s planning to stay put for a very, very long time. And that, in turn allows him to opt out of the "freak out"-engendering fixation on real estate headlines and market data that in a down market causes so many unhappy homeowners to make panicked, poor real estate decisions.