A blurb in a recent edition of Virginia Living magazine caught my eye because it discussed the condo craze currently sweeping the Ballston-Virginia Square-Clarendon corridor of Arlington County.
We lived there for 23 years, settling into Northern Virginiaâ€™s first high-rise condo, Tower Villas, at Virginia Square, in 1981. We rented the first year, paying $625 a month (including condo fee) and buying it a year later from our landlady. When we sold it in 2004, we walked away with a tidy profit several times over what we paid in 1982. The couple who bought it poured a ton on money into renovation and now rent it out for $3,500 a month plus the $575 a month condo fee. Thatâ€™s six times more than we paid in rent our first year there some 25 years ago.
According to Virginia living, new two-bedroom condos roughly the size of our old one (1300-plus square feet) now go for $1.4 million and up and new condo developments sell out in a matter of days. The market flattened for a while in early 2005 but is now booming again.
An old rule of thumb used to say that your housing costs should not exceed 25 percent of your take home income. That means the couple renting our old condo should be taking home at least $16,000 a month or about $192,000 a year.
We paid off our mortgage in 1997 and held a old-fashioned mortgage burning party in a park across the street from Tower Villas. Amy and I pledged, at the time, to never, ever take out another mortgage on a home and, thankfully, we havenâ€™t broken that pledge. Yet according to a recent study, fewer than 10 percent of Americans will pay off a home mortgage, down from 44 percent just 25 years ago and some financial advisers suggest paying off a mortgage is a bad idea. Now Americans just trade up, adding larger, longer-term mortgages and debt while keeping their monthly payments about the same. Another new twist is the â€œinterest-onlyâ€ mortgage where you never pay on the principal of a loan
Trading up to bigger mortgages and interest-only loans means you never actually own your home. You simply possess, for a time, a contract to live there. Saying you own such a home is only an illusion â€“ just another fantasy in a society built all too often on false perceptions.