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I haven't read the whole thread, but wanted to make 2 comments.
I live in the Seattle area, and houses are more in the $500K range. A $1000 a month rental will get you a shoebox in a bad part of town. I live in a smallish rental and pay $2350 a month.
The biggest downside of renting is no tax deductions for mortgage interest and property taxes. We get hit HARD at tax time, to the tune of about $20K a year for federal taxes. I'd love to be able to buy, but we're not in a position to. It's also hard to swallow the thought of being tied to a $500K+ mortgage for the next 30 years.
Off to keep reading, and carry on lol
Also, property taxes are higher on rental property than on owner-occupied homes in most states; renters experience the effect in higher rents. For example, property taxes in Michigan are about $1500/year higher on the average rental house than on an equivalent owner-occupied house.
Ok. But my point remains that leverage creates an asset-liability mismatch and increases your risk.
Asset-liability mismatch...WTF? I can get high safe yields that are much greater than my mortgage cost. If not I can always pay off the mortgage. It is instead very likely that interest rates will increase eventually and my low cost mortgage will be an even bigger bargain.
You implicitly did. When you argue that car loans are good because you can make more on an investment than the interest cost, you are assuming all else is equal in order to make that comparison. If the car purchase would have been different, all else is not equal, and it's an apples to oranges comparison.
I have no hint what this gibberish is supposed to mean. I merely stated that today's very low interest rate loans make sense for the buyer. The car dealers don't seem interested in giving a big discount for cash so it makes sense to take advantage of the very low loan rates. I said nothing about apples and oranges.
For you the options may have been worthwhile, but that isn't necessarily so for people who are broke and living paycheck to paycheck, as a lot of this country is...
People who are broke typically cannot buy new cars. I spent $67,000 driving my car for over 200000 miles and 10 years. The $1500 options package hardly made a difference. If it did I guess I would have bought a KIA instead of a Honda.
Is this figure an average for all the years, including both the bachelor's and master's programs?
Yes, costs were pretty much the same every year.
Bachelor's degrees qualify for grants if your income isn't high enough to afford to put the kid in question through the program.
What "grants" are you talking about? Where do you live, rural Iowa? For many of us living in high cost of areas on the east or west coasts, we make good salaries...at least on a nation wide basis. Unfortunately high taxes and high costs of living leave us struggling but we do not qualify for tuition assistance or in my case we get so little that it barely helps.
"Some loans" for one year of a master's program is probably not a big deal. However, a lot of folks out there have a much more crushing amount of student debt - $25k for undergrad and another $25k for a Master's program is not at all uncommon - and that is $50k in debt!
It is all relative. $25k would not cover even a single semester of undergraduate education at many colleges.
5% is still very low compared to the 10% of the 1960's or the 12.5% of the 1970's. Even as recently as the 1990's a typical rate would have been about 7.5%, which is 50% higher than the current 5%!
You had many options. You could have borrowed to go to law school. You were 80% of the way to becoming a school teacher, you could have done that. You could have pursued some other degree. You could have decided you wanted to learn a trade and then done it. You could have enlisted in the military and taken care to choose a job which translated well to civilian life.
In short, you had the same options that everyone else had. You had considerably more options than billions of people who have not had the good fortune to be born in the USA like you.
You continue to have options; you prefer to continue as you are.
There was a nearby law school that was turning out hundreds of unemployed lawyers - there was a havy surplus of lawyers even then. I had a friend who graduated law school and was struggling with student loan debt as he worked as a stockboy to pay off those loans. (He went back to school for a masters degree that didn't work out then he went into local politics and became a county commissioner before getting elected to a $100K countywide position.
At the time this led me to reject borrowing even more money to go to law school; if I didn't get a law job I'd have no way to repay that mountain of debt.
What options do I have now? Going back to school for education or trade is financially not an option available to me.
This is based on assuming the supply of housing is fixed and there isn't any new construction.
Wrongo, it is based the assumption that net new construction - net of housing supply losses e.g. obsoletescence, withdrawn from service, converted to other uses, demolition, etc - does not exceed local market population growth. New construction in many markets was near zero for several years starting in 2007-2008 and the current construction boom is still playing catchup with population growth.
Rental vacancy rate in Portland is in the neighborhood of 1-2 percent, rents have gone through the roof in the past five years, and new construction won't be close to meetiing population growth for the foreseeable future.
Well, I was simply responding to your argument, which seemed to be saying that yes, Americans are in a lot of debt but it's "good" debt. I am arguing that in many cases, it isn't.
Also, total wealth DOES have an effect on how much debt one is in, because it can be used as a means of funding large expenditures without incurring debt to do so.
I made no such statement. what I said:
Quote:
Originally Posted by usayit
Maybe its a layman's view....
Cheap credit => inflated consumer purchasing power => Debt => Rise in prices of goods/services.
Of which contributed to the rise in the cost of purchasing a home and rent.
My point of view is that debt is a highly misused tool by the American consumer. Some debt is not as bad as others. In the case of mortgage, its a vehicle to home ownership which reflects to what has already been said.
I'm actually fairly debt adverse and conservative in spending.
Quote:
Ah, the classic "current cash flow" vs. "equivalent annualized cost" debate.
It depends on what you hold constant in your definition of affordability. If you hold future wealth constant, then in order to make an apples-to-apples comparison, you should adjust your current consumption to EAC, not cash flow. To do otherwise is to apply inconsistent standards on what amount of future wealth is adequate, when determining what you can afford to consume now.
Well, even the layman who does not understand the long-term view, is eventually affected by it. With insufficient capital to fund future needs, they will go into debt. They might even die in debt rather than paying it back.
Doesn't this assume that current cash flow and funding future needs are mutually exclusive?
Are you saying that EAC is favorable to the renter?
True for both renting and owning. Many renters also fail to invest the cashflow surplus over owning, and end up broke.
It is (usually) not owning or renting by itself that determines if a person builds wealth; rather it is their career, living habits, family circumstances, and prioritization of financial goals over short-term pleasures.
Most renters cannot buy so there is no cashflow surplus for those who cannot buy.
If it is truly not possible to get a mortgage for a condo in your area, then move. See how easy it is to sidestep a blade of grass?
This issue exists nationwide lenders have the same policies in NYC and LA as they have iin Hooterville and Pixley. And the cheapest condos are the most likely to be affected, because they are more profitable to landlords.
There is only one reason anyone is in debt, it is because they choose to live above their means financing everything.
You think most poor people choose to live above their means? How might a homeless person live below their means? Or someone who spends two-thirds their income to rent a crappy SRO room?
But you can afford to work for minimum wage for the rest of your life and retire on only your SS benefits, with no savings?
You can work in the accounting field with no degree, and make substantially more than minimum wage.
If that is all I can earn I will necessarily have to live on that; I expect eventually to pursue seasonal homelessness to save on rent when I can no longer afford year-round shelter. Yeah I have a friend with no degree who got hired at a mattress store to do payroll; within three years he bought a house and now he pays less to own that house than I pay to rent a crappy room in an eight-person house.. I'm sure I could do that job well but as not a people person and with sucky jobs under my belt I have no idea how to get a job like that.
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