The Benefits of Buying and Holding

I just returned from a week of visiting family and friends in suburban Philadelphia (thanks to Julie Lance and the rest of the O.C. team for keeping the blog in great shape while I was gone).  I stayed with my sister, who lives in Blue Bell, in Montgomery County, and visited my closest friend, who has lived in another part of Montgomery County since she and her husband graduated from Penn State nearly 30 years ago.img_0177.JPG

My sister paid about $150,000 for her three-bedroom, one-bath house on nearly one-third of an acre in Blue Bell 10 years ago (those are her shepherds in her living room). She used the proceeds from a previous sale for her down payment.  Today, she owes about $80,000 on the place, and, thanks to a 15-year loan, should have it paid off in nine years, when her husband expects to retire from his government job at age 55.

My best friend moved into her sprawling split-level home in Maple Glen in 1992.  She had my sister, her husband, and I over for dinner while we were there.  The place is glorious; it’s on a flat one-acre lot and is surrounded by woods.  While we were enjoying appetizers on the back patio, a doe and her two fawns were grazing in the distance.

They paid $199,000 for the place, using the proceeds from their tiny starter home as their down payment.  It’s now worth three or four times that, but that’s not of interest to them.  They plan to keep it forever — they expect their kids (and eventual grandkids) to spend time there.  And they’ll have it paid off well before their retirement in 15 years.

Buying and holding real estate is more common in places like Pennsylvania, where people tend to stay put.  There’s also not a lot of speculation going on to drive up prices.  Instead, things there are much as they’ve always been:  People buy houses and live in them for a long time — often long enough to pay them off and enjoy a mortgage-free retirement. 

Homes are a lot pricier here in Cali.  They always have been.  But the principle of buying low and holding on is still a smart one, if you can swing it.  Do you know someone who took the plunge into a house here 10 or 15 years ago?  We envy those people now, but at the time, the house they bought probably seemed pretty expensive.

According to this Reuters story, buying low (or at least lower) is already happening in Riverside County. Will buying low and holding real estate ever be possible again in Orange County?  Time will tell. But there’s no doubt that buying as low as possible and then holding on is the way to go with real estate.

Recent Redfin posts:
Everything Changes
Where Everyone Wants to Feel at Home:  In the Bathroom!
A Final Review of the Housing Bill

  • Randy Porkins

    Wow. Buy low, sell high. I never could have figured that out.

    Oh, and that’s some nifty use of examples at 1/3 of local prices.


  • Cindy Allen

    Randy, don’t you think some people need to be reminded to buy low, sell high? Judging from our current predicament, many folks probably never heard of this fundamental principle.

    I’m sure there are some people in OC that bought low 15 to 20 years ago and are enjoying the benefits of that right now. But buying low around here is going to be pretty tough until prices return to a more realistic level.

    I was thinking about the last bull market in housing in LA — 1988-1990. Prices didn’t start recovering for six or seven years in the most desirable areas. But some people who bought in the late ’90s or even early 2000s did “buy low.” If history is any guide, we should start to see things bottom out and try to start coming back in 2011 or 2012. Maybe in those two years, we’ll start to see some “buying low” again. Here’s hoping they also “hold.”

  • J

    How about not speculating on property and buying what you can afford with a 30yr fix… I do not know how people got qualified for most of their ARM loan loans but it was a train wreck waiting to happen.

    Buy something you like and stay there for a while. Do not treat your home as a investment peggy bank! It should be a place to live and enjoy!

    In the long run you will always do better