I can't say that I ever made a conscious decision to live in a small space. I did however, have a great desire to simplify life down to the things that mattered most to me, experiences and relationships; and also find a greater degree of freedom. Couple that with actually digging myself out of a mountain of debt while chasing the american dream, well, as I often say: Experience is the best teacher.
One of the questions I had to ask was, "is it going to be a house or a boat? It certainly can't be both!" This is not the 1980's anymore folks. Or even the early 21st century, where credit was freely available and we were able to live way beyond our means to falsely convey a facade of "wealth". Let me digress for a moment. If you were a child of the 1980's, or even parts of the 90's, it's likely that your childhood was a lie. Yep, I said it.
Everywhere, small homes and cottages, were being razed for McMansions in horribly planned unsustainable communities all over the US. New financial instruments were being created to allow families to take 2nd or even 3rd mortgages out against their existing homes to finance vacations, pools, furniture, electronics, cars..etc. Life was good; we had become full-on consumers. None of it was real though. It was an orgy of easy credit gone wild. Eventually, reality has a funny way of slapping you right in the face, as a lot of people found out in 2007. It was common knowledge that home prices only went one way, up!? That is, until they didn't.
According to Mortgage Calculator: the rise of the United States mortgage market occurred between 1949 and the turn of the 21st century. In fact, the mortgage debt to income ratio rose from 20 to 73 percent during this time. In addition, mortgage debt to household assets ratio rose from 15 to 41 percent. I always wondered why my grandfather was able to live in a modest home and raise a family, all while working at a corrugated box factory. I can't imagine anyone being able to do this today.
So we took the long way around, but it was going to be a boat. It was always going to be a boat. The idea of owning my residence outright, without a 30 year mortgage really appealed to me. The fact that sailing a boat is a sport, an art, and a science all at the same time intrigued me. The chance to show my son and daughter that there are no set paths in life, and have them share in the experience, convinced me.
Owning a house could very well be in my future someday, but it probably won't be in a way that will take up 73% of my income. Housing is a market, like any other where supply and demand set the price you will pay for a particular piece of property. Want to live on the ocean? Lot's of people do, so the price for these properties is commensurate with the demand. The problem with today's market, is that it's not a free market anymore, it's grossly manipulated, so you and I are not paying what would historically be a fair price. The housing crash of 2007/2008 was driven by the banking sector's need for profit and growth to survive, which manifested itself in sub-prime loans - new sources of income. From it's peak, home prices in many metropolitan markets fell over 30% from it's pre-crash level.
In a response to this and other "headwinds" in the economy, the Federal Reserve began a policy called "Quantitative Easing". This policy of printing new money to add to the existing supply was intended to allow banks to have capital to loan to businesses and entrepreneurs, essentially jump starting the economy. That's not what happened though. Rather than the money going into real tangible goods and services, banks were more interested in short term return on investment, so they directed the money into things such as high yield bonds in emerging markets like Brazil, Argentina and South Africa, and you guessed it, cheap real estate that was at it's low after the crash.
So this latest housing "recovery" has not been main street America getting back on it's feet, despite what media would lead you to believe. It has been more like banks and investment companies using a gigantic leaf blower to re-inflate a housing balloon that had a few shoddy patches thrown over it after 2007/8. The structural problems still exist.
So given that off the cuff analysis, I would prefer to stay out of the hosing..ahem..housing market until such a time where it actually becomes a market again, based on real supply and demand, and not on the speculative interests of big banks. If such a time ever arrives.
Living small shouldn't be a negative thing. As a society, we are not used to viewing words like contract, downsize or scale back in a positive way. The economy is contracting, oh no! The company is downsizing, so we are letting your department go. In this case, applying these concepts elicits such positive things as:
- lower rent/mortgage
- lower energy bills
- less clutter/material items
- adventurous, engaged living
- higher degree of mobility
- reduced environmental impacts
If you choose to live in a liveable, walkable/bikeable community, the benefits are even greater. You want to be outside; enjoying the weather, being sociable, being active.
Maybe you really weren't into that job anymore anyways. You've always wanted to write a screenplay, or sail around the world. So do it. The less you have for obligations, the more options open up to do the things that you really want to do, the things that are important.
A chance late winter photo of "Half Moon", with it's namesake.