Stupid people spend more than 1/2 their income on housing

[Chardok]

Hopefully, this'll give you dang fureners a little more perspective on the American mindset when it comes to finances and home ownership. The horsemanization is, of course, my own commentary, as articles like this one piss me off to no end. I realize that, as much as we are all screeching about the "bailout" for the big corporations - the people who got into these horrendous messes brought the whole thing on themselves by taking on more debt than they could afford.

MIAMI - Al Ray is so strapped for cash, the only time he eats out is on Wednesday or Sunday, when the local McDonald's sells hamburgers for 49 cents.

Oh no! Poor, stupid fatty can't stuff his fat fucking face with McGriddles and French fries every DAY?! WHAT KIND OF SICK WORLD IS THIS?!

Ray lost his engineering job last November, and has been working as high school tutor, scratching out about $1,000 a month — if he's lucky. He struggled to make his $1,400 monthly mortgage payment and $330 monthly homeowners' association fee until May, when he stopped paying.

Ray, 44, is looking for work and renting out a room in his two-bedroom condo in Davie, Fla., for $500, but his monthly income doesn't match his expenses and he's facing foreclosure.

"I barely have money to survive," he said.

If you have enough money to eat out - even 1 day a week - then you're doing it wrong. (ps - you can buy TWO packs of ramen noodles for the price of ONE McDonalds Hamburger; even at .49)

Ray is one of more than 7.5 million people — almost 15 percent of American homeowners with a mortgage — who are spending half of their income or more on housing costs, according to 2007 data released Tuesday by the U.S. Census Bureau. That is up from nearly 7.1 million the year before.

Conclusive proof that we americans are greedy, fat idiots who don't deserve a bus pass, let alone credit cards (ps - this also shows we're getting WORSE.

Traditionally, the government and most lenders consider a homeowner spending 30 percent or more of their income on housing costs to be financially burdened. But that definition now covers almost 38 percent of American homeowners with a mortgage — 19 million of them.

And My GF wonders how 1000.00/mo is such a stretch. I follow this formula as well. Yes, it means we have to live in a smaller place, and we have to rent but guess what? I'm not facing foreclosure! Wheeee!

Though home prices have fallen this year, in the most expensive markets where home prices tripled during the boom, many working families still cannot afford to buy a home.

And if they can't afford it, they shouldn't buy it. Really, was I the only one who paid attention in 5th grade?

"We had a bubble," said Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C. "This is a case where we absolutely want the market to adjust."

The data underscore the serious affordability problems in this country and highlight how the slightest financial problem — from a lost job to higher gas prices or insurance premiums — can put a family behind on their mortgages and into the realm of foreclosure.

When home prices fell in the early 1990s, borrowers had more equity in their homes, and were able to escape foreclosure. But now, an estimated 10 million homeowners owe more on their mortgages than their homes are worth, according to Moody's economy.com.

More than 4 million homeowners were at least one month behind on their loans at the end of June, and almost 500,000 had started the foreclosure process, according to the Mortgage Bankers Association.

Cascading foreclosures over the past two years created a domino effect in the lending industry, undermining investor confidence and forcing the Bush administration last weekend to announce the greatest rescue package and market intervention since the Great Depression.

And yet, the deal will not help Dolly Hanna, 51, and her husband, who bought five homes in the San Francisco area over the past 20 years, and were enjoying life during the housing boom by renting them out.

Uh oh, I can't see where this part of the article is headed, no siree.

But her husband's overtime at his mechanic's job was cut, and the Hannas now find themselves overextended at a loss of $15,000 per month and trying two sell two of the homes.

How much do you want to bet that they're 2 bedroom econo-homes that they're trying to sell for $520,000.00 because they owe $470,000.00 on the stupid thing that, in any sane part of the universe, would sell for 80-90k.

With four children, Hanna had been a stay-at-home mom, but Monday she started a job in real estate. They are seeking a renter for two upstairs bedrooms in their primary residence for $1,200.

Awwww, welcome to like, oh, what's the word? REALITY.

Getting a loan during the boom was easy, Hanna knows. Too easy.

"All you had to was massage the information enough to fit it into their round hole, and they gave us a mortgage," Hanna said.

You mean lie, right? No, you mean 'massage', right? Oh, wait, no, you lied your way into this mess. Fuck you.

In San Francisco, more than one out of five homeowners with a mortgage spends half or more of their income on housing.

Then 1 out of every 5 people in San Fransisco are idiots. I KNEW IT! (Guess, what? that means at LEAST 10 of the 49ers are morons.

That's also true in 13 more of the largest 100 metro areas analyzed by the Associated Press. Other places include California metro areas of Stockton, Los Angeles, Riverside, Oxnard-Thousand Oaks, San Francisco, and San Diego. Also in the top 10 are the Fort Myers, Sarasota and Orlando metro areas in Florida, and New York-Northern New Jersey-Long Island.

Who in God's name would spend half their money to actually LIVE in a shithole like New Jersey, anyway?

But the most cost-burdened homeowners in the country live the Miami-Fort Lauderdale-Miami Beach metro area: 58 percent of homeowners spending 30 percent of their income on housing costs, and 29 percent spending half of their income or more on housing.

Though prices here are dropping, the high cost of land, construction, insurance and property taxes makes living in South Florida too expensive for some.

(Here's a thought, then, MOVE OR GET A CHEAPER PLACE. (I call this the "Kinison Method")

"Certainly, we hear about people leaving South Florida and going into Atlanta where they can get into a house for less money," Suzanne Weiss, associate director for real estate with Neighborhood Housing Services of South Florida.

To help with the affordable housing stock, Neighborhood Housing Services of South Florida joined forces with a construction company to build homes for low- to moderate-income residents that include energy-efficient appliances and hurricane-resistant windows.

Other cities and states are also taking action.

In Illinois, a network of 15 nonprofit housing groups gives free advice to struggling homeowners seeking to avoid foreclosure amid rising mortgage payments.

The Kinison Method would work in Illinois, too, it seems.

In New England, an affordable housing program funded by the Federal Home Loan Bank of Boston awards grants and low-interest loans to communities to encourage affordable-housing initiatives for very low- to moderate-income households.

And in Las Vegas, the Nevada Fair Housing Center is helping Rita Harvey renegotiate her mortgage from $2,700 to around $1,800 per month.

Harvey, 64, lives on about $3,300 a month in social security and disability payments for herself and her four disabled grandchildren. She nearly lost her home this summer after her adjustable rate mortgage payment jumped.

"I did not understand that in two years, this would adjust out of control," she said. "Nobody deserves what I've had to go through."

I can think of one person who does, and her name rhymes with Cheetah Parvey - Guess what she didn't do? ASK HOW AN ADJUSTABLE RATE MORTGAGE WORKS. Fun, huh?

[Darth Wong]

Since when can a guy buy 5 houses on a single-income as a mechanic? That alone is proof that the housing boom had become a form of insanity, and it's pretty hard to find sympathy for people who obviously overextended themselves by living on greed and inflated optimism.

[ArmorPierce]

Since when can a guy buy 5 houses on a single-income as a mechanic? That alone is proof that the housing boom had become a form of insanity, and it's pretty hard to find sympathy for people who obviously overextended themselves by living on greed and inflated optimism.

mechanic jobs can make over 100k especially if he was doing over time which it states he was.

[Darth Wong]

Since when can a guy buy 5 houses on a single-income as a mechanic? That alone is proof that the housing boom had become a form of insanity, and it's pretty hard to find sympathy for people who obviously overextended themselves by living on greed and inflated optimism.

mechanic jobs can make over 100k especially if he was doing over time which it states he was.

$100k is not enough money to own five houses unless you are absolutely assured of steady, healthy rental income from all of them. People who buy houses with the intent of renting them out have to be careful that they don't get in over their heads, which is obviously what happened to this couple. And to the whole American economy for that matter.

And of course, all of the economists who boasted of the health of the economy just a couple of years ago are all pretending that they all saw this coming all along.

[tim31]

I would not personally consider 100K as the sort of money you can raise a family with AND still play games in real estate. People with families to support shouldn't be risking it in what seems like an easy cash grab.

[aerius]

Getting a loan during the boom was easy, Hanna knows. Too easy.

"All you had to was massage the information enough to fit it into their round hole, and they gave us a mortgage," Hanna said.

Congratulations. You're going to jail for loan fraud. And I bet if the IRS audits your tax returns you'll get nailed for tax fraud as well.

mechanic jobs can make over 100k especially if he was doing over time which it states he was.

Standard mortgage is 20% down 36% DTI max, depending on the interest rate this means the most home you can afford is around 3.5X your yearly income. Assuming each of those homes is worth $250k which is half of what they're trying to sell them for, that's $1.25 million total for the homes. Their salary would have to be $360,000 a year to afford those homes. I've yet to hear of any mechanic making $360k a year.

[mr friendly guy]

My colleagues earn over 100 K and there only have one house. Australia like the US also has a housing boom, and it hasn't seem to bust in Western Australia, although it has dropped. Heck, I earn a bit over 100 k and I wouldn't attempt to buy 5 houses (even if I was looking to buy houses).

The other way you could ensure yourself of being able to buy is if you manage to achieve a positive cash flow. Most of the time rental income isn't greater than what you are paying in interest, and negative gearing will only offset some of the loss. At least in Australia you can claim other deductions which make an "on paper" loss, which allows you to claim back as tax. Accordingly to those who did this (and published books on it) this more than offsets the interest.

If house prices drop you might still be ok as you are still getting positive cash flow, although if they keep dropping it will bite you. The problem is finding these "positive cashflow properties" in this day and age where house prices gone up astronomically. This strategy would only work if rent has gone up in the same proportion as house prices, which it hasn't.

IIRC from the prices in the book I read (which was several years old already when I picked it up), there is no way you could buy a house at those prices listed anymore in Perth. People are doing it the old fashion way of negative gearing and hoping house prices go up.

And I am sure people would be reassured we have people here in Australia who bitch about interest rates and blame the Reserve bank instead of their own goddamn stupidity.

Oh, and the people in the article remind me of Casey Serin, the so called most hated blogger.

[Glocksman]

Since when can a guy buy 5 houses on a single-income as a mechanic? That alone is proof that the housing boom had become a form of insanity, and it's pretty hard to find sympathy for people who obviously overextended themselves by living on greed and inflated optimism.

mechanic jobs can make over 100k especially if he was doing over time which it states he was.

$100k is not enough money to own five houses unless you are absolutely assured of steady, healthy rental income from all of them. People who buy houses with the intent of renting them out have to be careful that they don't get in over their heads, which is obviously what happened to this couple. And to the whole American economy for that matter.

And of course, all of the economists who boasted of the health of the economy just a couple of years ago are all pretending that they all saw this coming all along.

Heh..
I've lost track of the number of 'get rich quick' infomercials I've seen that push exactly that: buy on credit and then rent out.

The only people that made money off of it were the ones charging $$$ to push the idiocy.

[General Zod]

I'm having a hard time feeling sympathy for a sizable majority of these people. I can get by just fine on a "measly" salary of $30k with enough money leftover each month to buy a few luxuries, so how come they're struggling? Unless they're trying to support a family or have some medical problem that's fucking them in the ass with expenses I really can't see how they aren't able to get by.

[Illuminatus Primus]

Are people that intimidated by social self-consciousness that they'll lock up 50% of their income in paying for a house? How is the comfort of being able to tell friends you have an x square foot house in y development worth the opportunity cost in comfort and security in literally hundreds of things that money could've been better spent on?

[Themightytom]

I'm having a hard time feeling sympathy for a sizable majority of these people. I can get by just fine on a "measly" salary of $30k with enough money leftover each month to buy a few luxuries, so how come they're struggling? Unless they're trying to support a family or have some medical problem that's fucking them in the ass with expenses I really can't see how they aren't able to get by.

do you own a house?

[General Zod]

I'm having a hard time feeling sympathy for a sizable majority of these people. I can get by just fine on a "measly" salary of $30k with enough money leftover each month to buy a few luxuries, so how come they're struggling? Unless they're trying to support a family or have some medical problem that's fucking them in the ass with expenses I really can't see how they aren't able to get by.

do you own a house?

Of course not. Because I'm actually smart enough to do this thing called "living within my means." I hear it's a novel concept that some of these people could stand to try.

[Jaevric]

$100k is not enough money to own five houses unless you are absolutely assured of steady, healthy rental income from all of them. People who buy houses with the intent of renting them out have to be careful that they don't get in over their heads, which is obviously what happened to this couple. And to the whole American economy for that matter.

And if you find a way to be absolutely assured of steady, healthy rental income then please share with the rest of us. I handle delinquent mortgage accounts five days a week (and spend a lot of that time trying to find ways to keep some idiot in his house despite the fact he should never have gotten it) and nothing kills my sympathy faster than "Well, it's a rental property and the renters aren't paying on time."

Why? Because if you buy a house with the assumption that you can rent it out and be guaranteed a reliable renter, and you can't afford the house payment if you don't have a renter, you're an idiot. And if you bought a house on an adjustable rate mortgage in order to rent it out, you're too stupid to be helped.

[Solauren]

I have some sympathy for some of the people in this situation.

For example, the Engineer that lost his job and can't make his mortgage.

Yes, his current income is in the shitter. However, we don't know what he was making before hand. It's possible he could afford it before hand.

If that's the case, I feel 'that's too bad' for the guy. However, if it's not the case, he's an idiot.

However, for everyone else in the article (unless I missed someone)...

You did it to yourselves. Please, do us all a favor and render yourselves unable to breed, in case your stupidity is genetic. If you already have children, please do this anyways, so you can't have more.

Property rental, if you're not careful, can run your finances into the ground very, very, very quickly.

If you're careful, owning a duplex for 5 - 10 years (and renting out the section you don't us) let's you pay of your mortgage fairly quickly and save up a a nice downpayment on a better house, thereby lowering your mortgage on the new house to what you can afford.

[Aaron]

do you own a house?

What does that have to do with his point, that being that if you can't afford it why do you have it?

For that matter, why does someone have to own a home? Unless money falls from the sky into my lap, I have no intention of ever buying a home.

[General Zod]

I have some sympathy for some of the people in this situation.

For example, the Engineer that lost his job and can't make his mortgage.

Yes, his current income is in the shitter. However, we don't know what he was making before hand. It's possible he could afford it before hand.

If that's the case, I feel 'that's too bad' for the guy. However, if it's not the case, he's an idiot.

On the other hand, while it's possible he could afford it before, it's also likely he was still paying above his means to live there and skimping on everything else to afford it. In which case he's still an idiot. We also don't know why he lost his engineering job, but if it was anything besides his company laying off workers to save costs, I'm having an even harder time feeling sympathy.

[Death from the Sea]

do you own a house?

What does that have to do with his point, that being that if you can't afford it why do you have it?

For that matter, why does someone have to own a home? Unless money falls from the sky into my lap, I have no intention of ever buying a home.

owning your own home is a much better use of your $$$$ than renting forever. Many people buy a larger home while they are raising their children and then after the kids are gone and grown they sell the big house and move into a smaller home, and use the excess $$$$ from the sale of the bigger home to help with retirement.

[Aaron]

owning your own home is a much better use of your $$$$ than renting forever. Many people buy a larger home while they are raising their children and then after the kids are gone and grown they sell the big house and move into a smaller home, and use the excess $$$$ from the sale of the bigger home to help with retirement.

I understand that. What I should have asked was "what is the deal with the American attitude towards home ownership" ie: your a loser if you don't. For myself while I can afford to buy a home, certain circumstances would make it irresponsible for me to do so.

[General Zod]

owning your own home is a much better use of your $$$$ than renting forever. Many people buy a larger home while they are raising their children and then after the kids are gone and grown they sell the big house and move into a smaller home, and use the excess $$$$ from the sale of the bigger home to help with retirement.

Quite frankly if you don't want to be tied down to the same plot of land or don't intend to stay there more than a few years, then it's pointless to buy one, somewhat shooting the "better use of your cash" argument out of the water.

[Darth Wong]

Are people that intimidated by social self-consciousness that they'll lock up 50% of their income in paying for a house?

Absolutely. It's built into our genetic code. Think of all the animals which use colourful plumage to attract mates even though it also attracts predators; they are literally risking a violent death in order to attract mates. What is an irresponsible mortgage compared to that?

[Kanastrous]

I'm having a hard time feeling sympathy for a sizable majority of these people. I can get by just fine on a "measly" salary of $30k with enough money leftover each month to buy a few luxuries, so how come they're struggling? Unless they're trying to support a family or have some medical problem that's fucking them in the ass with expenses I really can't see how they aren't able to get by.

do you own a house?

Of course not. Because I'm actually smart enough to do this thing called "living within my means." I hear it's a novel concept that some of these people could stand to try.

What are average living expenses like, in *chatters excitedly*?

[General Zod]

What are average living expenses like, in *chatters excitedly*?

The 1 bedroom apartment I'm renting right now costs me about $640 a month, which is typical (Denver, specifically ). Apartments can go anywhere from $350 for a studio at the really cheap ghetto end to $3k a month for a nice upper-scale condo. (That's not factoring in things like deposits, first & last month's, etc.)

[Darth Wong]

What are average living expenses like, in *chatters excitedly*?

The 1 bedroom apartment I'm renting right now costs me about $640 a month, which is typical (Denver, specifically ). Apartments can go anywhere from $350 for a studio at the really cheap ghetto end to $3k a month for a nice upper-scale condo. (That's not factoring in things like deposits, first & last month's, etc.)

In other words, you're still living like a student. Don't talk about living costs for normal people if you don't know what they're like.

[Kanastrous]

There's a legitimate zone fringing across living-like-a-student and living-like-a-young-professional.

[General Zod]

In other words, you're still living like a student. Don't talk about living costs for normal people if you don't know what they're like.

I'm not sure how that counts as "living like a student" unless anyone who's single and not trying to raise a family happens to fall in that category. (Which are precisely the people I was blasting for being in massive financial trouble).