There’s a lot of chatter out there about how important it is to own your own home. No matter who you are, where you are, or where you’re going, the time to own is now. Maybe. Maybe not. If you’re twenty-something, there are other priorities. One of them is career mobility.
Even it you have a steady job, your life is in a state of flux. You’re still working to find your place in life. A house is a play on permanence, but you’re still moving forward toward your better place, where ever that might be. Career mobility will help you get there. Owning a house may keep you from ever finding it.
A house is a good thing to own—sometimes
Owing a home has so many advantages, there’s no doubt about it. It’s an investment that also provides shelter, which is one of the basic necessities of life. That’s a win-win in a way that few other possessions can offer.
Appreciation and amortization. Houses tend to rise in price over time, which gradually and quietly builds your capital. The equity build up is expanded further through the use of debt. You take a mortgage to buy the home and the amount of the loan gradually declines over the term. Equity is increasing from two very different directions. While appreciation is increasing the value of the house, amortization is decreasing your mortgage balance. The longer you own the home, the greater your equity.
Owning a house also provides important non-financial benefits. Since you own it, a house can provide a sense of permanence, a place where you’re going to stake your claim in life. You can modify it as you see fit without having to get permission from a landlord. And in general, it’s beneficial to raise children in a home that you own as opposed to one that you rent.
It’s good to own a home—no argument there.
Career mobility is one of your biggest assets when you’re young
Older workers have a huge advantage in the job market when it comes to experience, training, maturity and grounding. As a young adult, this can make the competition for jobs difficult. You can’t match older workers on any of these fronts.
But you do have one advantage that older, more experienced workers don’t have: career mobility. You’re not “set in your ways” and you’re less controlled by your circumstances than older people tend to be. You can go where you need to and get the job done, and employers prize this quality.
You’re free to work, free to travel and free to move, and that makes you a prime candidate for important assignments and eventually for promotions. It also makes you free to follow the jobs. Lifelong employment is disappearing fast—career mobility gives you greater options in the event you lose your job.
Don’t be in a hurry to give up this advantage; it won’t last forever, but it will serve you well while it does. Make the most of it! It’s your competitive edge in an increasingly tight job market. You don’t have the usual encumbrances that hold older workers back—like family obligations, large financial burdens…and a house.
How a house can interfere with career mobility
If you own your home and need to leave town either to accept a promotion, or to replace a lost job, your house could slow or even stop your progress.
Can’t sell quickly. Even in a strong housing market, it’s generally easier to get out of a lease than it is to sell a home. In fact if you rent and you know a job transfer is in the offing, you can often convert the lease to a month-to-month arrangement when it expires. If you own, you’ll probably need to sell the house. That can take months, and selling it from a distant city can be complicated if you have to move quickly to get the job. That can also leave with a double house payment—the one on your house and the one on your new residence.
Trapped equity. As we’ve already discussed, rising home equity is a big advantage of homeownership, but it’s not without its flaws. Equity can be trapped in a house until it’s sold. You may be reluctant to accept a job transfer because of that equity. And the larger the equity position, the more reluctant you’ll be to move. You might decide to stay closer to home and accept a lower paying job. Is that what you want to do while you're young?
Home repairs. Unlike the human body, houses don’t heal when they’re broken. And there’s no equivalent to health insurance to help you handle the cost. If anything is broken you’ll have to fix it and pay any costs necessary. Not only does that cost money, but it also saps your time and energy. Both diminish career mobility.
Competes with the job. Some people like mowing the lawn, shoveling snow and trimming hedges, but many others like having their weekends free to recharge their batteries and to be fresh for work on Monday. Then there’s the matter of extra work projects and outside training—maintaining a home will compete with all of that.
Owning is generally more expensive than renting. There are various charts floating around that show that owning can be cheaper than renting, but most don’t factor in repair and maintenance costs or the opportunity cost of lost investment income on home equity. Suffice it to say that renting is almost always less expensive than owning. Owing your home could leave you unable to take a job you really want that pays less than you now earn. As a renter, you’d be free to take the job.
There’s a time for everything in life. Tune out the chatter about needing to own your own home now. There’ll come a time when it will be the right thing to do. But when you’re twenty-something and looking to find and advance your place in the world, it could compromise your career mobility. And that’s one of the biggest advantages you have.
Latest posts by Justin (see all)
- Mutual Funds, ETFs, and Robo Advisors in Canada: June 2018 Update - June 17, 2018
- 5 Reasons Why Mortgage Insurance Is a Rip Off (and What To Do Instead) - March 18, 2018
- You Only Have a Few Days Left In RRSP Season! - February 23, 2018