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And the alternative is what? Rent will never be paid off in a million years.
One alternative is to buy a small, "functionally obsolete" older home with formica counter tops.
Just looked up my first home - built in 1992, 1300 square feet, in a safe, pleasant suburb of a mid size town that enjoys low unemployment and a good economy. List price - $137k. And hey, it's got a "master suite" and TWO bathrooms - and an open floor plan! It may still have formica counter tops though...probably won't work for many people because of that.
You hit the nail on the head. To add an anecdote, my sister for years has wanted a home. The junky place she was renting approximated a loan payment, despite the literal holes in the side of the walls and almost literal use by the owners as a junkyard in the back.
My sister is poor, and works at a grocery store where she's been for almost 10 years. She has good credit, but doesn't make much money. The D to I ratio would never allow her to borrow. Her husband makes slightly more, but has bad credit from his divorce. They've stayed there as they kept hoping to buy a home.
I'm not poor, I don't think I'm rich as I'm in a high COLA, but for this exercise I would be. My credit is fine. My income diversified. I sell my labor by consulting for companies, generally in intervals of less than 1 year. At any rate, I had some extra cash, so I decided to help them out. I figured we buy, I put down the downpayment, we both own the home, they pay the payments and when they're done, they can pay me. Upon final payment to me, I quit my claim to the deed and the home is theres. (Done up slightly more advanced so the IRS doesn't give me a hard time about gifts.)
About 5 weeks before closing, I wrapped up my assignment. They were quite happy with my work, and I was happy to have the holidays off with my early finish...we even split the remainder of the PO for coming in under budget. I signed up with another project at another company that was starting in January. Now, I'd been upfront with the bank that I was a consultant, and so I would do this frequently, but they went crazy that I'd first "lost my job" and later "switched jobs." even after verifying my hire at the new place for even more money.
Less than a week before close, with a holiday in between, the douchebags actually called my agent and told her to postpone the close, which would have put us outside of contract. They didn't even call me first. We could have lost the home. I already had a flight and hotel booked in part because they wanted me there for the close....not to mention I charge by the hour, so this was an expensive little trip...especially for nothing.
So when I got an e-mail forwarded to all that we were done, after being told to look at my e-mail by a completely distraught little sister who thought she'd just had lost her home at the last minute, I did the only thing possible. I gathered what cash I had, grabbed a couple interest free cc advances, and responded to that e-mail letting that same group that we were closing regardless, and that bank could go pound sand while it practices communication.
And my sister got her house.
But, the bank underwriting is definitely harder now than it was in 2004, 2010 or 2012.
I totally agree that it's much more difficult to qualify for a mortgage loan than it was five or ten years ago.
But I also understand why. Careless lending to unqualified buyers was part of the HUGE housing bubble that burst.
I'm very glad your sister got her house.
Another option would have been for she and her husband to rent three or four more years till his credit was cleaned up from his divorce, since he makes good income. But it sounds like you guys worked it out well.
Yes it's a big deal because not being able to buy a home increases wealth inequality, which is much greater than income inequality. It also has intergenerational consequences, as in parents who never own a home obviously are unable to leave homes to their children and the cycle repeats, i.e. if your parents did not own a home, probably you won't own a home either.
Buying a home doesn't necessarily increase wealth. My mom owned her home for 40 years, and because she lived in an area that had turned into a really bad area, and had borrowed against it to pay for repairs during the years, she ended up with about $5k at the end of the day. What she did have is a roof over her head for 40 years, which is what a home should give you.
She also was smart enough to know that she couldn't rely on that home to fund her retirement, so she lived in near poverty, making very little money because she had no marketable skills and hadn't been in the workplace for 20 years when my parents divorced. She did make it a priority to sock away as much of her money as she could for her retirement. She drove a beat up car, never ate out, never took vacations, never bought new closes, and had no luxury anything for the 20 years she worked, but she saved, saved, saved (and invested).
Now she has a great retirement. She travels, just bought a new car (paid cash), and doesn't stress about money. She rents in a nice area, and has a roommate to lower expenses.
Location: San Ramon, Seattle, Anchorage, Reykjavik
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Quote:
Originally Posted by KathrynAragon
This exactly.
Another thing to consider is that many buyers today aren't willing to buy the homes that actually match their budget. A 1200 square foot starter home with one bathroom and linoleum floors and FORMICA countertops? HELL NO.
Interest rates are at record lows. There are tons of houses out there, and yet people keep buying and building brand new ones.
I love watching House Hunters, where early 20's couples with no savings are looking to buy the perfect $500k house. OMG - I hate that tile! Those cupboards are just gross looking! That's not the latest countertop! The sense of unearned entitlement is amazing. I had to scrimp and save to afford the downpayment for my house and finally had enough in my early 30's. Now its paid off. Fanciest house on the block? Does it compare with all the trendy crap on the H&G channel? Nope. But it's in a great neighborhood, with great schools, and is now paid for.
One alternative is to buy a small, "functionally obsolete" older home with formica counter tops.
Here's a photo taken 6 years ago in December 2009 of the "charming" kitchen of the 992 square foot house I'd just purchased for the value of the land it was sitting on. I completely gutted the house and brought it up to 2015 levels (I should have torn it down but that's a different story). A lower income couple could have easily afforded the mortgage payment, taxes, and insurance if they hadn't destroyed their credit rating.
Here's "after" remodeling. I did it with my checkbook but a lot of couples put in a lot of sweat equity and do the DIY kitchen upgrade to get the level of fit & finish they want.
I love watching House Hunters, where early 20's couples with no savings are looking to buy the perfect $500k house. OMG - I hate that tile! Those cupboards are just gross looking! That's not the latest countertop! The sense of unearned entitlement is amazing. I had to scrimp and save to afford the downpayment for my house and finally had enough in my early 30's. Now its paid off. Fanciest house on the block? Does it compare with all the trendy crap on the H&G channel? Nope. But it's in a great neighborhood, with great schools, and is now paid for.
I'm almost certain the people don't actually buy the homes on most shows. I've proven they didn't on Buying Alaska. At least on Property Virgins they look at sometimes a hundred homes (which is reality when purchasing a home) not just three like the fake shows.
Up here in the far frozen North, when banks foreclose on a home, they often let the residents stay there as long as they keep the place heated and pay the taxes. The bank owns the home, but the neighbors don't know that. The bank has the property down as a "performing asset". Psst, it s not a performing asset. The resident who gave the bank a 30 year mortgage has already paid double what he paid for the home in cash flow.
Often times the resident is still paying 6 3/4% on his debt because he doesn't know any better. Can you say housing collapse? A town in Maine recently sold 16 homes for $48,000. That is not each. That is for all sixteen homes or $3,000 per home.
There are pockets of prosperity in our country, but there are far more absolute sink holes of sudden poverty that far outnumber those pockets of prosperity. We have 95,000.000 adults between age 18 and 65 not working in our country. They are not contributing much to our economy. For those suffering from innumeracy, that is nearly three times the entire population of Canada, NOT WORKING!
Apologists will point out that some are stay at home moms, home schooling their kids. There are also third generation welfare people. The people who vote for a living outnumber those who work for a living. To call up the famous John Belushi quote, "Game over, Man!"
Tick, tick, tick.
It is 2016. Do you know where your IRA is tonight?
I agree that we have some serious economic issues in this country. To put things in perspective, we actually have a worldwide recession in the mix and compared to many other first world countries, our problems are about average. Not saying that's great, considering the big picture, but I don't believe we're as close to Armageddon as you're implying.
There are about 319 million people living in the US. 23 percent of those people are under 18. 14.5 percent of those people are over 65. So out of 319 million people, 119,625,000 of them are typically not employed or counted in unemployment figures due to age. That leaves 199,375,000 million Americans of working age. USA QuickFacts from the US Census Bureau
This "93 million Americans are out of work" mantra is straight from Donald Trump. The facts just don't hold up.
Quote:
Trump’s press office did not answer an inquiry, but we have a good idea where the number came from. According to the Bureau of Labor Statistics, the federal government’s official collector of employment data, either 92 million or 93 million members of the civilian, non-institutionalized population who were age 16 and over were not in the labor force in July 2015. (There are slight differences in the figure if you use seasonally adjusted numbers as opposed to non-seasonally adjusted numbers.)
But what does this number actually mean?
For one, it includes lots of people who likely aren’t looking for work. It includes every American of retirement age -- 65 and older. It includes every high-school student at least 16 years of age. It includes every college and many graduate or professional-school students. It includes every person who has a disability that makes it impossible for them to work. It includes parents who are choosing to stay home to take care of their kids. It includes every adult who’s gone back to school full-time. It even includes trust-fund kids who are living off investments.
Put it all together and this is not a trivial group of people.
Very good article on the real numbers and which includes the quote above:
Trump is labeling every single one of the 93 million adults who are not working today as being "unemployed" as if they all want to or need to suit up and show up on the workplace but instead are sitting alone in a tenement house in their jammies watching Jerry Springer while they frantically send out resumes across the country.
In my immediate family (my household, adult kids, and parents) we have 2 retirees who are no longer working, 2 stay at home moms who are voluntarily not working, 2 adult students who are voluntarily unemployed (one is also a SAHM), and me - I only work about 3 hours a week and that's just "doing the books" for my husband's consulting work, and technically I'm unemployed as well. In fact, come to think of it, out of twelve adults in our immediate family, six are employed and six are not. OMG that's a fifty percent unemployment rate in our family alone!!!!
So we're part of the group that Donald Trump is calling "unemployed" even though every one of us is doing exactly what we choose to do at this time in our lives and none of us are on "welfare" or "public assistance." In fact, though we're all at various stages of our lives, every single one of us is living comfortably and safely, without any assistance from Uncle Sam. Not a one of us is living in an area that is doing poorly economically.
And we contribute to the economy - it's not like we're not shopping and buying and consuming goods and services - which generates tax dollars. Our HOUSEHOLDS are paying taxes, saving, investing, spending. Frankly, I don't appreciate the implication that we're not "pulling our weight." My household alone pays more in income taxes than most people MAKE in a year. My parents are retirees who put in decades of work and tax dollars into Social Security and other funds. My husband and I pay $1000 a month for ACA health insurance (we had a better plan at nearly half the premium three years ago). My daughter, my son, and my two sons in law are all military veterans, as is my father and my brother and my ex husband - the kids' dad. In fact, I still have two immediate family members serving in the military - is it accurate to say that my daughter, the wife of an Air Force officer who has deployed several times over his career and will almost certainly deploy again, is not pulling her weight in our society just because she's a SAHM?
I personally don't consider myself one of Donald Trump's "unemployed" Americans even though apparently he considers me in that number.
I love watching House Hunters, where early 20's couples with no savings are looking to buy the perfect $500k house. OMG - I hate that tile! Those cupboards are just gross looking! That's not the latest countertop! The sense of unearned entitlement is amazing. I had to scrimp and save to afford the downpayment for my house and finally had enough in my early 30's. Now its paid off. Fanciest house on the block? Does it compare with all the trendy crap on the H&G channel? Nope. But it's in a great neighborhood, with great schools, and is now paid for.
...and that's how most people do it. At age 30, I certainly couldn't afford the house I grew up in. I sounded just like the millennials whining about how unaffordable things had become. Shortly after that, there was a big housing market correction at the S&L meltdown and things became affordable again. We had another big correction at the Great Recession. If you save and pay attention to your credit rating, there are always buying opportunities to get into the housing market.
Here's a photo taken 6 years ago in December 2009 of the "charming" kitchen of the 992 square foot house I'd just purchased for the value of the land it was sitting on. I completely gutted the house and brought it up to 2015 levels (I should have torn it down but that's a different story). A lower income couple could have easily afforded the mortgage payment, taxes, and insurance if they hadn't destroyed their credit rating.
Here's "after" remodeling. I did it with my checkbook but a lot of couples put in a lot of sweat equity and do the DIY kitchen upgrade to get the level of fit & finish they want.
Wow, great job.
But OH THE HORRORS of that first kitchen. Basically third world standards!!! How on earth could anyone be expected to actually live in that space? (Of course I'm kidding.)
I'm almost certain the people don't actually buy the homes on most shows. I've proven they didn't on Buying Alaska. At least on Property Virgins they look at sometimes a hundred homes (which is reality when purchasing a home) not just three like the fake shows.
Interesting story:
My realtor was actually ON House Hunters, so she gave us the real scoop.
Yes, they are actual buyers.
Yes, they do actually buy one of the three homes on the show.
That's about the most of the reality. The behind the scenes truth is that:
They looked at a bunch of homes not shown on the show.
They may or may not have actually looked at two of the three homes showcased on the show.
When the show is filmed, they have already purchased the home they "decide" on, on the show.
So it's a mix of truth and contrived truth and lots of staging and "retakes."
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