There are two types of financial decisions: Good financial decisions and educational decisions. We’ve purchased four homes and did well with one, did okay with one, lost our rear end in one, and our current one we’re cautiously optimistic on. The biggest lesson we’ve learned in home ownership is the power of scarcity.
The first component of a house is land. A homeowner/developer must have enough land to build a house. The problem with land? They’re not making more of it. Now if you’re driving through parts of the US, (ahem – New Mexico, Texas, Nevada), you’re thinking that land isn’t scarce. If you live in an urban area, open land for purchase is either really expensive or just doesn’t exist. Even worse, sometimes you have to buy a house on land just to tear it down! Now that sounds costly.