Moving to a Less Expensive City to Buy a House Isn’t Always the Best Idea
The New York Times tells the story of a couple who thought they could save money by moving to Detroit.
We’ve spent the past week looking at a few different sources that suggest homeownership may only be achievable if those of us in larger metropolitan areas are willing to move where the affordable homes are.
If you want to settle down, you may have to get moving.medium.com
Let’s look at a few sources and get conflicting advice!medium.com
But what happens when you put that advice into practice? The New York Times’ Ron Lieber gives us the story of Amy Haimerl and Karl Kaebnick, a couple that decided to move from Brooklyn to Detroit so they could buy a home.
Well, the couple was missing two crucial bits of knowledge, one about the Detroit market and the other about themselves…www.nytimes.com
Many residents of high-cost areas entertain the dream, at least occasionally: Give up the rent or mortgage grind, liquidate assets and start over someplace cheaper, perhaps one that could use a few spirited new residents.
Amy Haimerl and her husband, Karl Kaebnick, fell hard for Detroit and thought they could make their own dream of financial freedom come true when they moved here in 2013. But this is what happened: They put more than $400,000 (including all of their retirement savings) into a 3,000-square-foot, 102-year-old home in the city’s West Village neighborhood that was most recently appraised at just $300,000.
Haimerl and Kaebnick bought a home “on a block where only two homes were boarded up.” They used their savings and Haimerl’s retirement account to purchase the $35,000 home in full, without a mortgage—and were now owners of a structure with “no wires or radiators or doors or pipes.”
But they were homeowners! Mortgage-free homeowners! All they had to do was fix up their new home and they’d be set.
Go read that quote from the NYT piece again: they ended up spending more than $400,000 (and incurring a lot of debt, including the mortgage they tried to avoid) to make their Detroit home livable. Although they did spring for some custom woodwork, they put a lot of money towards the basics— a functional roof, running water—and the job is nowhere near done:
The interior trim is bare, and the house still needs paint in many rooms. It’s missing a porch, and the garage out back is crumbling.
Sure, this couple did not take the “save money by buying a home in a less expensive city” advice quite as stated. I’m pretty sure the people who hint “have you thought about moving?” aren’t really thinking “have you thought about moving to a house with no doors or running water?” But I find this story interesting because it shows how advice is simple and reality is complicated; sometimes it is cheaper to move, and sometimes it ends up costing you everything in your retirement account and more. Lieber also addresses the difficulty of becoming part of a new community; it isn’t as easy as showing up, and not everyone you meet—especially in Detroit—is going to be glad you’re there.
So read the NYT piece, and if you’re one of those people currently renting in a high-cost metropolitan area, let us know whether you’re going to email it to everyone who asks “why don’t you just move somewhere cheaper?”