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

[Broomstick]

The first house I remember living in was a living room, kitchen, two bedrooms, and one bath - for six people. My parents in one bedroom and us four kids in the other.

We never had more than a three bedroom place, so until my sisters started going off to college that was two girls to a room. I remember when we got a place with a bath and a half! Wow!

Of course, I also remember when almost no one had a color TV, either...

[Kanastrous]

...and then there was the wolves...

[Korto]

Can you buy a house on 30K(net)? Yes
We're admittedly paying about 2/3's of our take-home on the place, but more than one third of that is over-payment. I can do maths, and I worked out where our break-points were (18% interest as-is, 12% if I lose my job). We don't have much money, but we never did, so we don't miss it. Don't need heating in this part of the country, so we have no heating bills (we do have big fluffy jumpers).
Our costs will increase as the kids get older, but perhaps our incomes will, too.

The house is over a hundred years old, there's no hot water in the kitchen (then again, there was no hot water in the kitchen in my old rental), it's small, but with a big backyard I've started vegetable gardens in, and it's perfectly placed in the centre of town (everywhere is 5 min walk!).
I don't much care about the size inside a house, it's the size of the yard that's important. Enough room to do stuff. Chooks. Gardens. There's not enough room for goats (dammit).
My wife noted a couple of days ago that we've got 4 adults and 2 kids living in a 3 b/r house (with the new kid, the wife's mother's staying over to help, and we've had a friend staying for a while as he finds a place). It doesn't feel crowded. Except that I can feel crowded by my mother-in-law if she's within 50 miles.
Can things go wrong? Oh hell yeah. Big interest rates hikes combined with a lost job will have us in shit (got a few plan B's, however). One reason I'm trying to pay the damn thing off as quickly as possible.

Oh, and married first, then house.

Shit, gotta get to work. Last day before the holidays. I'll be able to get back to work building that fence.

[Ender]

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.

I knew a few guys who did well with that - they charged rent at a rate that it let them pay of the mortgage is 5-6 years time. Granted I think that only worked because of the housing conditions in VA at the time, and the steady press of sailors, students, and summer vacationers looking for a place, but I do know a few who bought a house early on, rented their entire term, and then owned it free in clear by the time they got out and sold it for a tidy profit.

[The Kernel]

I'm going to offer a slightly different perspective here from someone who lives in an area that is by no means the national average.

I live in the Pennisula in the San Francisco Bay Area, and around here if you want a house, you are looking at $700k minimum for a place that isn't a burned out dump. And for that $700k you get a decent place with maybe 7,000 square foot LOT (maybe 1700 square foot house).

I have a fucking one bedroom apartment which, although granted is quite nice, costs me a whopping $2200 a month in rent. On average you are going to pay anywhere from $1300-$2000 for even a semi-decent one bedroom apartment.

Although I do very well for my age, an enormous percentage of my income goes toward my housing. If I was to buy a place right now, I would need at least $400k for a down payment if I wanted to be putting less than 50% of my income towards a combination of principal, interest, insurance and property tax. I figure I can afford a place, but only with the assumption that my wife is working and the possibility of her taking a break to have kids seems like a pipe dream.

I'm not going to argue that everyone has this problem, but it's a microcosm of the problem that the whole country faces. There are plenty of people like me who are getting into overwhelming mortgages and banking on real estate being their primary investment. Fortunately for them, very little devaluation of real estate has occurred around here but a drop in home prices would cause all of this house of cards to unravel and people with household incomes well into the six figure range would find themselves unable to pay their bills.

[Crayz9000]

... and I thought Los Angeles rents were bad enough... That makes the 2bd condo my wife and I are renting right now seem like a downright steal at $1350. (That's enough of a strain with both of us working...)

[Chardok]

Can you buy a house on 30K(net)? Yes
We're admittedly paying about 2/3's of our take-home on the place, but more than one third of that is over-payment. I can do maths, and I worked out where our break-points were (18% interest as-is, 12% if I lose my job). We don't have much money, but we never did, so we don't miss it. Don't need heating in this part of the country, so we have no heating bills (we do have big fluffy jumpers).
Our costs will increase as the kids get older, but perhaps our incomes will, too.

The house is over a hundred years old, there's no hot water in the kitchen (then again, there was no hot water in the kitchen in my old rental), it's small, but with a big backyard I've started vegetable gardens in, and it's perfectly placed in the centre of town (everywhere is 5 min walk!).
I don't much care about the size inside a house, it's the size of the yard that's important. Enough room to do stuff. Chooks. Gardens. There's not enough room for goats (dammit).
My wife noted a couple of days ago that we've got 4 adults and 2 kids living in a 3 b/r house (with the new kid, the wife's mother's staying over to help, and we've had a friend staying for a while as he finds a place). It doesn't feel crowded. Except that I can feel crowded by my mother-in-law if she's within 50 miles.
Can things go wrong? Oh hell yeah. Big interest rates hikes combined with a lost job will have us in shit (got a few plan B's, however). One reason I'm trying to pay the damn thing off as quickly as possible.

Oh, and married first, then house.

Shit, gotta get to work. Last day before the holidays. I'll be able to get back to work building that fence.

I'm sorry, did I read that right at 18% interest?

[salm]

I´m of the conviction that the ideal living space should be as small as possible as large as necessary.

- You have to waste less time on small maintenance and cleaning of small places

- You waste less money on small places

- You waste less energy on small places

- It´s harder to put a large diversity and quantity of entertainment (e.g. basketball place or swimming pool) and distraction into small places, so you´re forced to go out more often, enhancing your social life.

- Living density is higher if people live in small places reducing energy wasting resulting from smaller shorter travel distances.

- If people live in denser areas they will get into each others way more easily forcing them to learn how to accept other people better resulting in a friendlier, general society (ok, ok, this is highly speculative)

[Lusankya]

I'm sorry, did I read that right at 18% interest?

I can't say for sure, but I imagine that you read it right. That was about the interest rate high in Australia under the last Labor government, so it would make sense for Korto to use it as a frame of reference when determining what he could/couldn't afford.

[Ryan Thunder]

I´m of the conviction that the ideal living space should be as small as possible as large as necessary.

- You have to waste less time on small maintenance and cleaning of small places

- You waste less money on small places

- You waste less energy on small places

- It´s harder to put a large diversity and quantity of entertainment (e.g. basketball place or swimming pool) and distraction into small places, so you´re forced to go out more often, enhancing your social life.

- Living density is higher if people live in small places reducing energy wasting resulting from smaller shorter travel distances.

- If people live in denser areas they will get into each others way more easily forcing them to learn how to accept other people better resulting in a friendlier, general society (ok, ok, this is highly speculative)

I can't say I disagree with anything you've said; it all makes good sense. But there are people like myself who would find such residences to be utterly depressing.

I will acknowledge that, yes, those are some smart arrangements you have there, but, in all seriousness, they would threaten my sanity.

[aerius]

I'm sorry, did I read that right at 18% interest?

http://www.bank-banque-canada.ca/pdf/annual_page48.pdf

Check out the rates in the early 80's. It's not like it hasn't happened before.

[ray245]

I´m of the conviction that the ideal living space should be as small as possible as large as necessary.

- You have to waste less time on small maintenance and cleaning of small places

- You waste less money on small places

- You waste less energy on small places

- It´s harder to put a large diversity and quantity of entertainment (e.g. basketball place or swimming pool) and distraction into small places, so you´re forced to go out more often, enhancing your social life.

- Living density is higher if people live in small places reducing energy wasting resulting from smaller shorter travel distances.

- If people live in denser areas they will get into each others way more easily forcing them to learn how to accept other people better resulting in a friendlier, general society (ok, ok, this is highly speculative)

Unless we can curb the nature of human greed, and the need for luxury to justify their hard work.

Spending time on this forum is another aspect of human greed.

Telling people to own smaller house isn't going to work...

[TithonusSyndrome]

That's all good and fine for salm to say, because while it makes perfect sense, I don't think Germany has much of a problem with McMansions.

[ArmorPierce]

...in any case, no, I couldn't rent a 'typical' apartment in this area for that money, either. Although I could probably find a guest-house or room to sublet within in a larger house in the area, for about that money.

You also don't need to put up $65K to rent an apartment. When you're comparing renting versus owning, you need to consider the time value of that down payment too.

Difference is that when you put down that 65k are just shifting wealth. From one hand to the other hand. Renting the apartment on the other hand have you just giving away your wealth.

[salm]

Unless we can curb the nature of human greed, and the need for luxury to justify their hard work.

Spending time on this forum is another aspect of human greed.

Telling people to own smaller house isn't going to work...

Of course it´s not going to work. Most people want to live in appartements and buildings as large as possible.
You´d probably have to do this either by law or by putting very large taxes on energy units spent over a certain amount or something similar. However, i´m not saying this should be done because i haven´t thought that out at all. I´m just saying why living in a small appartement makes sense.

That's all good and fine for salm to say, because while it makes perfect sense, I don't think Germany has much of a problem with McMansions.

Well, there has been a certain degree of suburbanisation in the recent decades here as well. I think it´s been getting better, thogh, in recent years.
However, why does the absence of this problem in Germany have anything to do with this?

[ArmorPierce]

For the people stating that money in the house doesn't count since it's tied up to the house and you can't get to it unless you sell the house, the same can be said about stocks. You might get minute dividend payments but other than that the wealth is tied up to the stock until you sell it.

[General Trelane (Retired)]

...in any case, no, I couldn't rent a 'typical' apartment in this area for that money, either. Although I could probably find a guest-house or room to sublet within in a larger house in the area, for about that money.

You also don't need to put up $65K to rent an apartment. When you're comparing renting versus owning, you need to consider the time value of that down payment too.

Difference is that when you put down that 65k are just shifting wealth. From one hand to the other hand. Renting the apartment on the other hand have you just giving away your wealth.

So the people who lost their houses due to foreclosure were just shifting their wealth from one hand to the other? The good news is that they weren't giving away their wealth by renting!

[TithonusSyndrome]

That's all good and fine for salm to say, because while it makes perfect sense, I don't think Germany has much of a problem with McMansions.

Well, there has been a certain degree of suburbanisation in the recent decades here as well. I think it´s been getting better, thogh, in recent years.
However, why does the absence of this problem in Germany have anything to do with this?

Nothing really, just that it's a lot easier for a person from a country that doesn't have this problem to come to this conclusion when seeing it from the outside.

[salm]

That's all good and fine for salm to say, because while it makes perfect sense, I don't think Germany has much of a problem with McMansions.

Well, there has been a certain degree of suburbanisation in the recent decades here as well. I think it´s been getting better, thogh, in recent years.
However, why does the absence of this problem in Germany have anything to do with this?

Nothing really, just that it's a lot easier for a person from a country that doesn't have this problem to come to this conclusion when seeing it from the outside.

Why do you think so? Social pressure?

[TithonusSyndrome]

It's only been mentioned at least ten times in this thread alone. Who wants to look like some pitiful failure at their high school reunion? Competition is one thing and some level of it is good for any economy, but America isn't characterized by mere competition at this point. It's degenerated into full-on paranoid insecure oneupmanship, and my country is absolutely no better for it's part.

[Themightytom]

Who wants to look like some pitiful failure at their high school reunion?

FUCK! its about housing? I don't do well at the reunion unless I own a house??? I have to get a house by Spring! I've been wasting all of my time getting the black belt and running the marathons and helping these damn homeless people! its all for nothing if I don't get a house! What do I do????? I am way too old for a swirlie.

[Kanastrous]

So the people who lost their houses due to foreclosure were just shifting their wealth from one hand to the other? The good news is that they weren't giving away their wealth by renting!

You can still lose the wealth if it's tied up in real estate, of course.

It's just not the sure-and-certain loss, bye-bye, never even possibly see the dollars again parting with your $$$, represented by renting.

[Master Arachnos]

So far the majority of this thread seems to be US based, but I thought I'd throw in a UK experience.

According to the thread title if you spend more than 1/2 your income on housing your stupid?

I'm spending a little under 40% of my income on my mortgage (although if you factor in council tax, water rates, buildings & contents it bumps upto about 45%.

Does this make me a little stupid, you may think so but if i wanted to rent an equivalent house (and I'm only talking a 2 bed terraced house) the rent is at least £50 p/month more than my mortgage (and I'd still have CT, WR & B+C to pay on top).

For some people buying was the only option (at pretty much whatever the cost). Being a 30 something living with your mam is not cool..

[Death from the Sea]

I'm going to offer a slightly different perspective here from someone who lives in an area that is by no means the national average.

I live in the Pennisula in the San Francisco Bay Area, and around here if you want a house, you are looking at $700k minimum for a place that isn't a burned out dump. And for that $700k you get a decent place with maybe 7,000 square foot LOT (maybe 1700 square foot house).

I have a fucking one bedroom apartment which, although granted is quite nice, costs me a whopping $2200 a month in rent. On average you are going to pay anywhere from $1300-$2000 for even a semi-decent one bedroom apartment.

Although I do very well for my age, an enormous percentage of my income goes toward my housing. If I was to buy a place right now, I would need at least $400k for a down payment if I wanted to be putting less than 50% of my income towards a combination of principal, interest, insurance and property tax. I figure I can afford a place, but only with the assumption that my wife is working and the possibility of her taking a break to have kids seems like a pipe dream.

I'm not going to argue that everyone has this problem, but it's a microcosm of the problem that the whole country faces. There are plenty of people like me who are getting into overwhelming mortgages and banking on real estate being their primary investment. Fortunately for them, very little devaluation of real estate has occurred around here but a drop in home prices would cause all of this house of cards to unravel and people with household incomes well into the six figure range would find themselves unable to pay their bills.

damn $2200 a month? here you could easily purchase a 3000 sqft home for nothing down and pay that a month. It is crazy to see what housing costs are in California.

[Kanastrous]

It is crazy to see what housing costs are in California.

Especially in the Bay area.

There was a very good documentary film I saw a few years ago (soon after the collapse of the tech bubble) all about the effects that the big influx of money and new renters had, on the SF housing market. And about how the bad effects somehow didn't recede much after the collapse, either.