interesting lecture on income/consumption over the last 30 years

[RetiredGypsy]

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Originally Posted by twaddle Brilliant, but wrong. I took a look at prices in Riverside, San Bernadino, and Ontario -- the armpits of SoCal. Prices trippled from 1997-2006. I somehow doubt it was due to their great school districts. Now there absolutley is a correlation between higher home prices and quality of education. But that was certainly true in the 1970's as well. Our SoCal family had members in schools in both Riverside and Beverly Hills. Believe me, the differences were striking in the 1970's.

San Diego, the quality of education here is horrible, from K-12. I went to one elementary school, two junior-high schools, and two high schools (Navy brat with a weird inter-city moving thing going on). From middle class to upper-middle class. My brother went through a couple different ones, again here in San Diego. 15-20 years ago houses here were cheap, I mean cheap by outside-California standards. Housing has skyrocketed, quadrrupling or sextupaling (is that even a word?) in even the crappy neighborhoods. The quality of education has, if anything, dropped.

One thing I find interesting is that the price of car cost reduction at -24%. I find that one hard to swallow. My grandparents owned cars starting in the 50's with...almost got on a car tangent there; could have gone on for hours, and the list of cars they had was impressive because they could pay their cars off within a couple years. Same for my parents, they paid off their older vehicles within 3 or so years. No one in my family was rich, at points barely even middle class. Now, car payments can go on for close enough to a decade to make me sick. 7-year finance options aren't rare. Of course they have to keep cars longer, they'd lose thousands of dollars ontop of what they just paid for it trying to sell it a couple years after they paid it off. Do that enough and it's suicide. They had this problem in the '70s?

[barbarus]

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Originally Posted by Oldbabe Families want to "move up" in housing because they want to get their kids into good school districts in the suburbs. becomes less educated, less able to compete with foreign countries who value education, i.e. support it with taxes, the way we do not. Maybe we already are but the fog of denial is so thick we can't see it.

Oldbabe, while you are quite correct about the desire for good schools, this impetus pales in comparison to the desire to show off, to lord it over others.

As far as a good education, only parents will be deluded enough to think this will mean much going forward.
A good education will be like a lottery ticket. A necessity to win but an almost assured loss for most.

And yes, it is sad for our society.

[laurence]

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Originally Posted by RetiredGypsy San Diego, the quality of education here is horrible, from K-12. I went to one elementary school, two junior-high schools, and two high schools (Navy brat with a weird inter-city moving thing going on). From middle class to upper-middle class. My brother went through a couple different ones, again here in San Diego. 15-20 years ago houses here were cheap, I mean cheap by outside-California standards. Housing has skyrocketed, quadrrupling or sextupaling (is that even a word?) in even the crappy neighborhoods. The quality of education has, if anything, dropped. One thing I find interesting is that the price of car cost reduction at -24%. I find that one hard to swallow. My grandparents owned cars starting in the 50's with...almost got on a car tangent there; could have gone on for hours, and the list of cars they had was impressive because they could pay their cars off within a couple years. Same for my parents, they paid off their older vehicles within 3 or so years. No one in my family was rich, at points barely even middle class. Now, car payments can go on for close enough to a decade to make me sick. 7-year finance options aren't rare. Of course they have to keep cars longer, they'd lose thousands of dollars ontop of what they just paid for it trying to sell it a couple years after they paid it off. Do that enough and it's suicide. They had this problem in the '70s?

Have to disagree here, live in San Diego, lots of siblings/wife/siblings of wife educated in public schools here. I think they are very good. Alma Maters for family include Columbia, Cal, UCLA, UCSD, San Diego State, Boston University, etc. - all achieved through public school. Lots of schools in the county listed in the top 500 nationwide. My daughter is in an excellent special needs program and is really thriving in it. I'm sorry your experience was unsatisfactory.

[NinjaPigeon]

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Originally Posted by chinaco Plus, if you live in a large metropolitan area... lower cost housing is often in an area of town where you would not want to live (safety reasons) or out so far that the commute is a killer.

This is very much true in Atlanta. Even on a fairly decent salary, I'm still not sure how people can afford to live in these homes. Either everyone else in the city is making 200k (DINKs maybe), or I'm missing something

[NinjaPigeon]

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Originally Posted by Hamlet Seems to me that this housing crisis is a partial solution to the lack of affordable housing facing the middle class. A few more years of this and that 76% increase in housing will be wiped away. New families will find the median home much more affordable.

That's why I'm still sitting on the sidelines I'm hoping in another 3 years I can actually afford to buy a home that is within reasonable distance of the city and where I'm not likely to get shot.

[laurinsane]

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Originally Posted by tiuxiu and yet here we sit with our SUVs and cell phones and high speed internet

I totally agree with some of that facts presented in the article, i.e. mortgage increase and health insurance increases. Those definately take their toll on the middle class.

But then I also take a look at someone like myself - middle class. I don't drive a fancy gas guzzler. I don't pay for cable. I don't go out to fancy restaraunts, or eat out a lot for that matter. I don't have a lot of fancy ammenities like my peers, but some how I can pay my bills every month, and still sock away about 17-20% of what I make a year on a $50k salary. This is a lot more than some of my friends who live in double income households can do.

I swear its the whole keeping up with the Joneses that's doing everyone in and creditcard debt. Of course not everyone can survive a vacation with an all inclusive resort like I can. I think a lot of people feel entitled to things that they don't really need.

[TromboneAl]

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I don't drive a fancy gas guzzler. I don't pay for cable. I don't go out to fancy restaraunts, or eat out a lot for that matter. I don't have a lot of fancy ammenities...

Right. Amy Dacyzyn wrote The Tightwad Gazette partly because so many news stories said that people couldn't make ends meet, and she wanted to prove that it was possible.

[Notmuchlonger]

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Originally Posted by R Wood Get rid of all records (minor exceptions like personal documents or needed for filing tax returns) older than a month. That way later you can make up numbers for expenses and/or income in arguments. You can embellish away and you can not even prove it to yourself.

Ha! That is good thinking RWood! That way I can use ignorance as my defense..er wait nevermind

[JustCurious]

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Originally Posted by Hamlet Seems to me that this housing crisis is a partial solution to the lack of affordable housing facing the middle class. A few more years of this and that 76% increase in housing will be wiped away. New families will find the median home much more affordable.

I wholeheartedly agree. We are watching the market correct itself right in front of our eyes.

[ladelfina]

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R. L. Polk & Co. Reports Vehicle Age In U.S. On The Rise Median age for passenger cars remains at a record high of 9.2 years for second year in a row The total truck scrappage rate of 4.8 percent is the lowest since 1996 R. L. Polk & Co.

Again.. perhaps the "new SUV in every driveway" consumption myth is overblown?
More than 1/2 the cars on the road in the US the last couple of years are over 9 years old..?? See, now I would never have guessed that!

[laurence]

And they are all parked on my street! Seriously, the low resale value makes all my neighbors keep their cars rather than trade them in. My neighbor on the corner has a van, a mini cooper, and two F-150's, and it's just him and his wife! But he couldn't part with the late 90's F-150 because they offered him almost nothing, and it's still in great shape. I guess the maintenance, registration and insurance didn't factor in.

[ladelfina]

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And they are all parked on my street!

[Johnphx]

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Originally Posted by Oldbabe Here's an intersesting article about the kinds of people who aspired to the middle class, probably hoping to give their kids a better shot, moving their kids from urban areas to a new development in Arizona called Maricopa but ended up worse off, IMHO. Calculated Risk The upshot is that the developers of Maricopa didn't build a high school and there's absolutely nothing for teenagers to do except get a after school job at the supermarket which has become their hangout. Looks like Ladelfina beat me to it. She posted this article link in "Other Topics" with a good summary. Great minds think alike!

This is me and my wife. We bought our first home out here in Maricopa (the city, which is in Pinal and NOT Maricopa County actually) in Oct of 2005. We didn't buy anything insanely fancy (1684 sq, 3 bd, 2ba, 0.11 acre lot) for $233k. If I use the prices for the (now) bank owned properties on my block my house is worth about $140k (and that might be optimistic). I don't figure I can possibly recover from that deficit (I owe $207k now).

That means that IF houses out here stopped deflating right now and started inflating at about 3% annually it will take 17 YEARS to get back to my original purchase price (not including inflation, since if I only appreciate at the rate of inflation from here on out I can't get that back). And I think we might even have a little further to fall before this is over.

Edit: OMG - I just read the article (I had to dig through the older ones to find it), I am not sure I could be much more depressed now.

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In April 2006, Fox closed on a three-bedroom home in one of the biggest developments in town, Rancho El Dorado...The price had dipped to $212,000,.... I called Daryl Fox in March [2008], when I was back in New York. He told me his house was still on the market — now for $135,000 — and he still had not received a single offer...a foreclosed house on his block was on the market for $99,000.

[Johnphx]

At some point, people are going to do what the banks would do. They are going to begin looking at this as a purely financial transaction and begin walking away in ernest. Banks are being allowed to write these losses off. Are taxpayers allowed to write down depreciation on a primary residence?

It will take FAR less time for ones credit to be fixed then it will to get right on these loans.

[clifp]

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Originally Posted by Johnphx This is me and my wife. We bought our first home out here in Maricopa (the city, which is in Pinal and NOT Maricopa County actually) in Oct of 2005. We didn't buy anything insanely fancy (1684 sq, 3 bd, 2ba, 0.11 acre lot) for $233k. If I use the prices for the (now) bank owned properties on my block my house is worth about $140k (and that might be optimistic). I don't figure I can possibly recover from that deficit (I owe $207k now). That means that IF houses out here stopped deflating right now and started inflating at about 3% annually it will take 17 YEARS to get back to my original purchase price (not including inflation, since if I only appreciate at the rate of inflation from here on out I can't get that back). And I think we might even have a little further to fall before this is over. Edit: OMG - I just read the article (I had to dig through the older ones to find it), I am not sure I could be much more depressed now.

John sorry for your misfortune at it look like you put 10% so you were one of the 100% down people.

The only good news is that in my experience after living in CA for ~40 years, it is very rare for California Real Estate to appreciate at 3%. Far more typical is it for go up 5-8% for a few years followed a 2 year bubble of +15%/year, followed by a drop of 0-20% for a couple of year. To make it even more maddening unpredictable some areas in CA can be going up while others go down.

Not saying that your house will go from $100 or $140K back to $240K in a couple of years but less than 10 years seem pretty likely at 5-7 years not impossible. Hawaii suffered a similar problem when the Japanese economy collapse Hawaii house were depressed for almost a decade and then tripled in price.

[Johnphx]

The fact that I could rent this place at half of what my mortgage is (and I wouldn't be paying maintenance, so less than half overall) saddens me. But the second worst part is that because I am so far upside down I cannot refinance (not cash out, just refi the remaining balance) to lower my payments.

When you sit down and think about it, its kinda nuts. My wife and I are prime borrowers (credit scores in the low 800's) and our current PITI payment is right at 20% of gross. Were I able to obtain refinancing my payment would drop by 22% and my new payment would be only 15% of my gross. That means I am MORE qualified then I was when they made the original loan.

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Not saying that your house will go from $100 or $140K back to $240K in a couple of years but less than 10 years seem pretty likely...

If my house is worth $120k (splitting the difference based on the article), then my house has to essentially double to get back to even. In order to do that requires greater than 7% appreciation per year over the coming decade. I don't know ANYONE who thinks that is going to happen.

My wife and I are in our early/mid 30's. Our incomes should continue to rise over the next 20 or so years and we have many years left to continue to save and invest. But one has to wonder whats going to happen to the multitudes of retirees who bought in the last couple of years and whose primary retirement vehicle was their home equity.

There is a HUGE 55+ retirement community a couple of blocks from me. Imagine being one of those seniors and watching your single greatest asset become an albatross around your neck.

[kcowan]

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Originally Posted by Johnphx There is a HUGE 55+ retirement community a couple of blocks from me. Imagine being one of those seniors and watching your single greatest asset become an albatross around your neck.

I suspect that most retiress have no mortgage so this does not matter. Being concerned about house values is like watching your portfolio value daily.

[Johnphx]

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Originally Posted by kcowan I suspect that most retiress have no mortgage so this does not matter. Being concerned about house values is like watching your portfolio value daily.

I admit I got beaten by the market. But at least in a 401k/IRA when the market dips or go through turbulent times, one can average down and increase profits when better times resume. With my home I can't do that.

Once the correction was underway, I think 10-20% was expected and is in line with a recommended downpayment so that one can retain equity during such corrections. But 50% over two years took me (and alot of others I imagine) by surprise.

[volga]

John:

Have you reviewed this option:

Should You Walk Away? - Educate Yourself On Your Rights If You Face Foreclosure. Our Website Can Help You.


Some one in this situation could first buy a home that is similarly lowered in value (but priced at about what you can qualify for), say in Scottsdale or NE PHX before sending in the jingle mail and the resulting hit to ones credit score. I know you never would do this type of thing.

[Johnphx]

Does anyone think that allowing people to take depreciation as a write down on their taxes would encourage at least some people to stay in their homes (presumably those with the ability to pay anyways) versus just walking away and taking the credit hit and rebuilding later?

That's what the banks are doing anyways, taking an "investment" loss on the home and then reselling it. If the government wants to continue to encourage home ownership (like the deduction of mortgage interest and the capital gains exclusion for the first $250 / 500k) then this would be in that continued pattern.

It would provide a safety net. If I invest in stocks and make a bad bet then I get to write down the loss as an investor on my taxes. Why not a home, the single biggest investment for most Americans.