the economics of the beastly thing.
We spent the day (Saturday) working on the house. Progress seems slow– sometimes painfully slow, and we did some mental calculations over dinner to determine whether or not we’ll be able to live in the house by winter (or at least part of the house.) The answer is: we’re going to try damn hard to be in there by winter, but we’ve still got a long road ahead of us, and I have a feeling that we’re going to be acquiring a lot of blisters as we limp down that road.
But this blurb from Fine Homebuilding this month does help us feel a bit better about the whole miserable mess. The letter to the editor is titled, “The Economics of Home Buying” :
“Kevin Ireton [in his earlier essay, “Is green building too expensive?”] states that over the life of a 30-year mortgage, a $350,000 home actually costs $796,000– a lot of money. But the real cost is vastly more if you account for the pretax dollars you must earn, then pay taxes on, before paying the mortgage with what is left.
If you consider taxes and other costs that reduce your income– for argument’s sake, say 40%– then you have a different equation for determining the earnings needed to afford a $350,000 home. The $796,000 30-year mortgage payback cost becomes a whopping $1,327,000, plus or minus. Add to this the cost of transportation, clothing, and so forth required for the job over 30 years, and you easily push needing to earn more than $1,500,000 to pay for a $350,000 house.
The equation of having to earn about $4 to $4.50 for every dollar spent to buy a house certainly is an incentive to build your own house, where your labor becomes sweat equity. If you can get the cost of the $350,000 house down to less than $150,000, including land and utility hookups (and I’ve seen this done many a time at even lower figures), you give yourself the gift of not having to earn hundreds of thousands of dollars for the same housing results. Not bad pay for a year or two of work. If you were making a modest $35,000 a year, this savings would mean not having to put in an extra 15 to 20 years of work, with the resulting societal and carbon cost of getting to and from the job.” — Richard O. Byrne (from Fine Homebuilding, #197)
So. Does this make my tired back feel less sore? Absolutely. We’re stretching every dime we’ve got to try to pay for this place, and we’re spending every bit of “disposable time” trying to make progress. (I use the term “disposable time” because we’ve got no “disposable income.”)
I’m not sure how much I buy Byrne’s argument that one reduces their carbon footprint by building their own house. Most people don’t necessarily start living a less consumptive lifestyle just because their house is paid off. A person’s carbon footprint is much more dependent upon their philosophical choices than on their retirement date.
But I do buy the argument that building your own house has huge financial rewards– though from down here in the muddy trenches (have you seen the muddy trenches in my future living room?), it can be pretty hard to feel them. Most people don’t have the skill, inclination, or time to take on such a task. There are a lot of times when I envy those people. I imagine them sipping lattes in urban Starbucks, and texting their other clean-cut, non-house-building friends on their brand new iphones. Or whatever type of phone is hip now. (I wouldn’t know what kind of phone is imbued with all the latest forms of hip-ness, perhaps because I live several hundred miles from the nearest Starbucks.) I imagine all these hip, non-house-building people enjoying their weekends, not worrying about how to pay the lumberyard bill, or poring over buildingscience.com articles while trying to decide whether they should have a vented or a non-vented roof. I like to imagine that these non-house-building-people have less stressful lives, more friends, and hipper telephones. But maybe– just maybe– it will all seem worthwhile in the end.
The Saturday morning realities of trying to run a small business while (re) building a house. (Never one to be satisfied with anything, Luke notes that his wheelbarrow isn’t very full in this picture.)
Filed under: house thinking | 5 Comments
Tags: economics, financing, Fine Homebuilding