Briefcase Study: House Fever

Home is where the heart is. There’s no place like home. When the house is a rockin’ don’t bother knockin’. There’s no questioning the fact that a home is a critical piece of our lifestyle and identify. Where we live has a lot to do with whom we associate and spend time as well as how we perceive our standing in the world. “My, what a beautiful home you have…” roughly translates to, “You appear to be happy and successful.” Take the home away and we’re left with little to show for our accumulated life choices and sacrifice. In short, homes are hugely important to us.

When we’re in the mode of retirement planning with folks, a house often represents an outsized proportion of time, attention, and money as compared to other possessions and planning desires. This is not wrong or uncommon at all, it’s just real life. But when we see a person or a couple get house fever, it’s really amazing to witness how very important the role of house becomes and to what ends they’ll go to secure the very best – often most expensive – home they can afford. When ‘house fever’ gets really bad, we’ve seen otherwise smart and responsible people morph into unrecognizable versions of themselves, stopping at nothing in order to secure that dream home. Anything short of doing so is simply unacceptable. Add to this the unprecedented low interest rates and pandemic-fueled real estate market takes on a strange shape.

Now, if you’re reading this and wonder if I’m talking to or specifically about you, please resist that urge if you can. Why? Because at one point or another it’s all of us that gets house fever. The reason I bring this up is to simply encourage caution. Because when house fever hits at or near retirement, it can – I repeat can – lead to some unintended and unfortunate consequences. 

An aspiring or recent retiree who gets a bout of house fever can find themselves in a unique spot. Let me offer an example. While pushing toward that final financial independence ‘finish line’, saving and saving to grow the nest egg, a thought pops into mind. “Where do we want to retire to?” Fair enough. After all, retirement is truly the opportunity of a lifetime to pull up stakes and go wherever the wind blows. In light of this, a vacation is taken and a lot is purchased in a sunnier climate that will someday be home to the dream house. Whether it’s a $40,000 lot or a $250,000 lot, this piece of ground is often a relatively small investment compared to that growing nest egg. And once the lot is paid for, it can be used as equity toward the new home. 

What happens in the six months or six years that follow begins a slippery financial slope. Books of house plans are purchased and dog-eared, countless dinner conversations are had covering every feature that the house has to have, and dreams are cast that are powerful and full of promise. The potential problem, however, is this: these dreams are very difficult to walk away from if new details arise. The detail that often arises that makes house fever for the retiree so dangerous is…cost. That is, the cost to build this house is MUCH higher than anticipated. Because these dreams are so vivid now and so powerful, the only way to proceed seems to be to find the money. Somehow, some way, we’re going to find the money to do what we said we’re going to do. 

I want to emphasize that house fever doesn’t always lead to financial ruin or extreme regret. My only word of caution is to recognize that it can. Drawing a few extra hundred thousand from the nest egg now can not only increase the risk of depleting the nest egg and incurring unforeseen taxes, but the multiplier effect of building a costly new home on the beautiful lot can have a significant drag on monthly expenses for years to come. 

Finally, even if the numbers work, we’ve seen folks who experience buyer’s remorse or worse yet, suffer a change in health or family disruption that makes the beautiful new home no longer the top priority in their lives. When this happens, the financial and emotional pain can be very real. 

So, love your home and strive to own the nicest home that you can. Just beware that house fever is very real, can happen to all of us (probably already has happened to all of us) and is preventable. If you really want that home and feel that you’re stretching to buy it, consider working a little longer before retiring in order to save a bit more money, consulting with a contractor and bank before you buy a lot and dream big dreams, or simply asking why this dream is so important. After all, I dream big and love it when others do too. I just worry that we can sometimes build a tower without first counting the cost.