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It seems many think it's an entitlement to be able to purchase a house 3 times a person's salary. But is this really an entitlement?
I know I mentioned this a lot before. But my parents bought a home in 81 on one income. It was 2.5 times to 3 times my dad's salary. They put zero down and my dad's company paid the downpayment (as a loan to my parents interest free).
Now about 30 years later, shouldn't we expect to be able to the same? Why should the same home require 2 incomes plus a huge downpayment?
Is this an entitlement and if so why do you think so?
30 years ago, the cost of higher education, cars, health care/property/auto/liability insurance, income and property taxes, utilities, cars/fuel were a fraction of what they are today, on a relative value basis.
30 years ago, people were more inclined to do without than they are, today. People take more vacations, dine out more frequently, have multiple phones, fancy phones, pc's, high speed internet connections, premium cable, DVD players, A/V stuff, premium coffees and debt servicing because they tend to spend more than they earn.
Perhaps the real issue is that most incomes have no kept pace with the true cost of living and lifestyles lived or desired by the majority.
Location: Halfway between Number 4 Privet Drive and Forks, WA
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Quote:
Originally Posted by sheenie2000
It seems many think it's an entitlement to be able to purchase a house 3 times a person's salary. But is this really an entitlement?
I know I mentioned this a lot before. But my parents bought a home in 81 on one income. It was 2.5 times to 3 times my dad's salary. They put zero down and my dad's company paid the downpayment (as a loan to my parents interest free).
Now about 30 years later, shouldn't we expect to be able to the same? Why should the same home require 2 incomes plus a huge downpayment?
Is this an entitlement and if so why do you think so?
Describing what you said above, No, that is not entitlement. Granted the house is a typical median home.
Entitlement is wanting the tricked out McMansion on a beer budget, and thinking you somehow "earned" that house or that you're "entitled" to have such a fancy home.
Touting "homes are overpriced" and waiting for prices to drop is subjective. I understand in alot of areas, median homes were wayyy out of reach. And prices are coming down, which is a good thing. But where prices have been historically stable, that isn't a good thing. It's a catch 22. I can see it from both sides, but unfortunately alot of folks on this forum can't see outside their own corner of the world.
middle-aged mom put it perfectly. Our parents, IF they went to college, paid a very tiny fraction of what we do - if anything. Between my husband and I, we owe around $1000/mo in student loans for undergrad and grad school - we also had scholarships and financial aid.
Look at the price of cars these days. Do you really think that salaries have gone up to the point where the cost of a car back in the 60s and 70s is proportional to the price today, taking salaries into account? How about day care? If both parents had to work back then... do you really think they paid $800/mo PER KID in 60s-70s money? Plus, and this is speaking purely from an engineer's point of view - 3% raises these days don't quite cut it, and bonuses are non-existant.
We dine out very infrequently (I prefer to cook), we own basic cell phones (no texting plans), basic cable with HBO with the internet and phone packages, and I have a $550/mo payment for a total of three years to own a 2008 Honda Fit. The banks still approved us for up to $380k for a mortgage. We would never be able to afford this, even with our current six figure salary, because of our monthly bills (and we are way more frugal than most people in their late 20s).
I do not feel entitled to a $380k house. The house we are purchasing is well under $200k (sold in late 2007 for almost $400k). I still haven't found work down here, but we are delighted that we could pull it off the same way my in-laws could, if we chose to - on one income. Sure, it won't be a McMansion - but our parents didn't live in those either.
In short, if you are content to live a very simple, frugal life - in our case we had to leave NYC to manage this - then right now it seems you have a shot to do so. But, you have to take the good with the bad - no more Starbucks, Blackberries, and J Crew.
Seriously though,
It's not just home values... it's the over inflated cost of living contributed by the rabid increase of use of credit. Easy lending in every loan type whether it be home, credit cards, business loans, etc. etc. has fostered an unreasonable level of "demand" for goods and services that is unparrallel to our production capacity.
Housing is a major factor towards cost of living (whether rents or home prices) and as Americans get priced out, and ever reliant on credit, we also become weaker as a country in terms of global wage competitiveness and production.
Let prices fall. Let wages fall. Let people default. And we'll see how much more competitive America becomes vis a vis the rest of the world as things become cheaper here (supply and demand) - the rest of the world would rise, and imports would cost a whole lot more. All that means is that we'll have to start producing for ourselves... instead of relying on others and credit that's for sure.
It's a systemic problem that isn't just solely about home prices. It's also about jobs, American competitiveness, and long term sustainability.
It seems many think it's an entitlement to be able to purchase a house 3 times a person's salary. But is this really an entitlement?
I know I mentioned this a lot before. But my parents bought a home in 81 on one income. It was 2.5 times to 3 times my dad's salary. They put zero down and my dad's company paid the downpayment (as a loan to my parents interest free).
Now about 30 years later, shouldn't we expect to be able to the same? Why should the same home require 2 incomes plus a huge downpayment?
Is this an entitlement and if so why do you think so?
Before the real estate bubble came along, it was possible to do this -- as recently as 2000.
There is no such thing as a "right" to be able to afford a particular housing option, but under normal conditions, prices are 2-3x median income.
Ironically, a large part of what caused the bubble was a desire to make home ownership more widely available by easing up credit. But this had exactly the opposite effect -- easy credit pushed prices up so far that most people can't really afford a house any more (including many of the people who bought)
Ironically, a large part of what caused the bubblewas a desire to makehome ownership more widely available by easing up credit. But this had exactly the opposite effect -- easy credit pushed prices up so far that most people can't really afford a house any more (including many of the people who bought)
The Bubble with 2 Heads......
Some of this and a very desperate need for an asset bubble to prop up the dismal economy, following dot com bust and 9/11. Somewhere along the way, way too many folk got caught up in the "froth" as evidenced by a sense of entitlement to live in/off a momentary blip in time.
AKA, a culture of entitlement that cannot be sustained.
Not only the culture... but also the system that encourages it. You can't just have the demand side of things (culture), you also have to have the supply side of things (the system itself and the drug dealers, ahem corporations, that outsource jobs, package securities, and gives out risky loans).
Hence, a systemic problem. Inherent with the system itself.
Systems and cultures can be changed. But, that would require an extreme shift in the status quo which naturally would happen (through the defaults, business failures, etc.) .... except that the current order doesn't want to lose power.
-chuck22b
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