Spiraling Housing Costs Hurting Americans

[intheflow]

Spiraling Housing Costs Hurting Americans
By SIOBHAN McDONOUGH, AP

WASHINGTON (April 29) - The American dream of having a job and owning a tidy home is becoming a fantasy for more people.

Housing prices are outstripping wage increases in many areas, meaning more people are either spending above their means or living in dilapidated conditions, according to a pair of studies being released Friday by the Center for Housing Policy, a coalition pushing for more affordable housing.

It's generally accepted that a family should not spend more than 30 percent of its income on housing to ensure there is enough money for other necessities.

But in a recent six-year period, the number of low- and middle-income working families paying more than half their income for housing has increased 76 percent. In 2003, 4.2 million working families spent more than half their income on housing, up from 2.4 million in 1997.

The problem is even more acute for immigrant working families: They are 75 percent more likely than native-born working families to pay more than half their income for housing.

(snip)

One out of every eight families in the United States - or 14 million - had critical housing needs in 2003, defined as either paying more than half of income for housing or living in run-down quarters. The center found homeowners now are more likely than renters to have critical housing needs - 55 percent of the 14 million are people who own their homes.

Meanwhile, the median-priced home in 2003 was $176,000, up more than 11 percent from 2001. During this time, national median salaries went up only 4 percent for licensed practical nurses (to $33,000), 3 percent for elementary schoolteachers ($43,000) and 7 percent for police officers $45,000).

(snip)

http://aolsvc.news.aol.com/news/article.adp?id=20050429011409990001&_ccc=3&cid=842

[nadinbrzezinski]

1. the bubble will crash, the bubble will crash

it will nto be pretty, 1929 I tell ya

[physioex]

3. I can't say one way or the other about a depression...

But I tell ya that it is simply NOT worth purchasing a house now with the outrageously high prices. There is simply too much of a gap between rent and mortgage. And also while you are renting, you do not have to carry the high tax burden. I am certainly glad to have friends who have made much money from selling their appreciated houses, but I agree this way too much.......

[MADem]

13. Great time to sell, though! n/t

[valis]

14. Why? if you own a place and you like it why sell? You'd still have to

stay some place...

[MADem]

19. If you want to downsize, relocate, get off the consumer treadmill

move to a more rural environment...whatever. It is a great time to sell IF YOU WANT TO.

If you don't want to, then by all means, DON'T!

[tinrobot]

23. Selling is stupid unless you want to cash out and move

I live in LA. My house has almost almost quadrupled in price since I bought it in 1997.

Problem is, if I sell and move within LA, every other house is similarly overpriced, so my mortgage wouldn't change much. The one thing that would change would be the property taxes, which would take a huge jump.

The only reason to sell now would be to move to another state. My family and career are here, so that's not going to happen anytime soon. I'm staying put for now.

[AP]

29. You can sell, rent and buy later if you think prices are going to fall.

But if prices hold steady, you lose.

In CA, I think there's going to have to be a change in the property tax laws (bianual valuations + lowering rates + shifting some of the burden on to corporate property), so you might actually win if prices increase less than the return you get on your profit from selling AND you parachute into a new, more fair property tax scheme when buy again.

[physioex]

33. Right exactly.....

With the huge increase in value, I would bet on a fall or atleast a flatening off. So in my opinion it is better to wait.

But hey no one knows the future, it might go up forever..... ;)

[physioex]

32. Entire Point of My Post....

If you need to sell for whatever reason, then yes it is a good time to do so.....But like I said, it's not worth buying.

[LiberallyInclined]

35. no...actually- it won't. at least not nationwide...

the most desirable places have the highest prices- what a surprise!
the rate of appreciation may slow in some places, and local zoning changes can hurt prices in that market...but again- not nationwide.
sky-high interest rates could hurt things as well- but they'll have to hit double digits first, and that's not likely in the forseeable future.
real estate markets flucuate for various reasons- but any 'bursting bubble' will be caused by extremely bad economic conditions, but 'the bubble' won't cause the bad economic times.

[Carolab]

2. Yeah and I just read some propaganda in the paper

about how the housing market is doing so well!

After a short "blip" in March (due to weather, mind you)...we had record sales!

Ahem.

Personally, I think today's "investment property" market is yesterday's dot.com market...luring investors into RE deals for fancy communities based on unrealistic promises of returns. The returns are typically 20% on capital for the land investors--the developers make out but the builders end up carrying the risks (and losses). Problem is, a lot of local/regional builders don't have other land to choose from--the larger investment companies come in and buy volume, which they can't do--so where else do they go for land?

[KT2000]

4. "investment property"

must be playing a role in these costs. In my neighborhood there are 70's houses that young families could probably afford to buy but "flippers" get them - do some cosmetic improvements and resell it for more.

Capitalism eventually devours itself - I think that is where we are now.

[valis]

15. Same here... Houses that young families could afford

are bought, "renovated" and made into "luxury condos" (basically, put in granite counters and other crap nobody really needs) and sold for twice the price...

[TygrBright]

5. WHOA!! Housing is unaffordable for many people....?!?!?

WHO KNEW?

Gee, those geniuses in the media can sure pick up on a developing trend in JIG TIME, can't they?

:sarcasm:

disgustedly,
Bright

[Kolesar]

6. There's two empty houses on my street

and one house that was unoccupied for a year. I live in a good town, too. These are just old houses.

[intheflow]

28. In my neighborhood developers are buying up

these cute 1950's-era bungaloos with pretty decent yards to knck them down and build McMansions on the lots, cramming them in and eating all but the "curb appeal" lawn. It's tragic that so many homebuyers get into the new home only trap, because the new homes that are being built are these bohemouths.
:banghead:

Before:


After:


(Not a true before and after, but these are the two types of houses I'm talking about.)

[Carolab]

30. What a shame. All those lovely old Sears bungalows.

Classics.

[Stuckinthebush]

7. I was talking to a mortgage broker yesterday

I was looking into rates for refinancing before they skyrocket. I told him I was interested in looking at the rates for a 30 year fixed. He started to push 3/1 and 5/1 ARMS as being a great way to go because in 3 or 5 years, you can refinance at lower rates.

I said, "That would seem rather foolish given the state of housing and the economy today. Once the rates start to rise, they won't be coming down anytime soon. If I take a 3/1 ARM, then in 3 years, I will be refinancing at a much higher rate than I could right now. How does that make sense?"

He sputtered, and said something about the assumption of a bad economy and housing bubble being a little over the top, etc., etc.

Why do they want to push ARMs at a time like this? Am I missing something?

[edhopper]

9. Because they make more money with ARMs.

Many people are taking ARMs because that is the only mortgage the lenders will give them. Yes rates are going up, why should they allow you to get a fixed rate when they are at historic lows? When rates hit 8% or 10%, why should they have people still paying at 5% or 6%?
Of course the huge amounts of defaults and foreclosures to come don't seem to worry them.

[Stuckinthebush]

10. Lovely

Just frickin' lovely.

[not fooled]

25. yeah, and I've heard that real estate agents are licking their chops...

...waiting for interest rates to rise so that a lot of houses bought w/interest-only loans and no-down ARMS will hit the market.

So, although agents may still be pushing the idea of a rising market, they know the crunch is gonna come and are poised to benefit from it (assuming of course that a lot of people will still be able to buy houses).

[AP]

31. they make their money on turnover almost as much as they do on prices.

You sell three 300,000 houses, you make as much as if you sell one 900,000 house.

[AnneD]

17. Good for you...

He wasn't expecting someone with common economic sense. I would go for a 15 yr for a lower rate and pay off early and save $$$$. The monthlies are not that much more. Anything other than a fixed puts money in their pocket and he was just suprised you caught him in the act of picking your pocket. Good save.

[SidDithers]

8. Another ripple from the softwood lumber dispute...

expensive wood means expensive new homes.

Sid

[midnight armadillo]

11. I'd love a house for $176k

The median price near Boston is something like $350k. A $176k home would be a studio condo.

Ah, the renting life...

[freedom_to_read]

12. im with u armadillo

here in Boston buying a "starter home" is out of the question. I share a 3-br rental with 2 other people in an inner ring suburb... rent costs almost 50% of my income, and of course I have zero equity; but it's still a way nicer place to live than anything I could afford to buy.

[valis]

16. Yup... Renting is not fun either, though.

When you calculate how much you pay for rent, the tax break you get on the mortgage interest, and the fact that if you buy in the end you'll own a place you can keep or sell then it makes perfect sense to buy. Obviously, only if you plan to stay in a place for several years...

[LibDemAlways]

18. In Southern Cal. a $176K "home" would be a vacant lot

in a dangerous neighborhood. In my neck of the woods a 700 sq. foot one bedroom apartment masquerading as a condo is currently over$300K.
70's era 3 and 2 tract jobs in need of "updating" are going for over $600K. Once the cosmetic "updating" is done by a contractor/profiteer, they are going back on the market for close to $800K. It's all nonsense, of course, but somebody is paying those prices or they wouldn't be so high. It's only the low interest rates and interest only loans that are propping this market up. Once rates rise and prices fall, lots of recent homebuyers will be left holding a big, worthless bag.

[midnight armadillo]

22. That's exactly right!

ARMs and interest-only mortgages (what insanity!!) are the only thing propping up the housing market. There certainly isn't the wage growth to support the housing costs.

I get a kick out of Mass. politicians bemoaning all the young people leaving the state, when we have so very many colleges here. Hm, I wonder why we'd leave... Actually, if it wasn't for the fact that my wife & her family are very close knit I'd seriously consider packing up for Burlington VT or even Montreal.

[bleedingheart]

20. Here in Pittsburgh you can buy a decent home for under $100K

no joke...

problem is that a lot of people get into "new home mode" and in that market you will spend a minimum of 180K or more...

[Moderator]

21. intheflow

Per DU copyright rules
please post only four
paragraphs from the
copyrighted news source.


Thank you.


DU Moderator

[intheflow]

24. D'oh!

I know that. I've actually called other people on it in the past. What can I say? It was late when I posted it. Sorry to be another need to moderate.

Peace! :hi:

[NickB79]

26. I know a lot of people who are going the prefab home route

My little sister and her husband were almost ready to close a deal on 5 acres of wooded land for $20,000 and install a prefab home with basement for another $90,000. The deal fell through because the local township put a moratorium on any new homes from being built to combat sprawl and farmland destruction.

Of course, this is in the middle of nowhere central MN, so land prices aren't so expensive out here. Still, my mom's home is a prefab and it's decent. It is an attractive option for those without much cash.

[SoCalDem]

27. I got tired of gambling in Vegas, so we toured Fleetwood's models

That's what I want in a few years when my husband retires.. They are very nice and laid out better than our big house.. We bought for 82K in 81.. We finally did a refi a few months ago to do some necessary , but major work on it, and in a few years we will sell and buy a prefab..

If you do not live in hurricane or tornado country, it seems the way to go..

they are HALF the cost of "regular" houses..

[spooky3]

34. My grandma bought one and you could not tell it was

not a "stick built." They are a good buy.