February 23, 2005

• I'm still reading this, but this boggles the mind: They purchased a small home in the suburbs for $515,000. The yard was small and the homes were close together, but they didn’t seem to care. Folks, come to Flyover America. It is sooooooooo much cheaper here. And to think I've spent the last year talking about skyrocketing property values around here.
• No kidding... a $515,000 mortgage (and for a waitress and electrician)? I mean, I'm in Minneapolis, where $150,000 will still get you a well-built bungalow in a decent neighborhood.
• I know So. Cal. properties are through the roof, but I wonder if the NYC suburbs (the Archie Bunker type homes) are as bad.
• "Don't use credit to buy every goddam thing you see" seems to be the operative lesson here.
• That's a big part of what I got, too. Seems that they were a little too financing-happy, racking up credit card debts, home-equity loans, vacations... $4000 in credit card debt after Christmas, on their wages?
• Hey you assholes, this is America! I don't need to earn the things I want. Why do you fuckers go move to france if you hate freedom so much? :D
• Archie Bunker houses can be just as expensive...
• real estate values always amaze me. my best friend is making an offer on a *small* one-bedroom co-op in d.c. for $345k. gulp.
• That's insane. I'm in a three-bedroom brick bungalow, level and good-sized lot, detached garage, big backyard with wood privacy fence, hardwood floors, nearly ten-foot ceilings, and a screened-in porch for roughly $125k US. It's not big, just under 1500 square feet, but come on.
• Last October their mortgage payment went up by $100 a month after the bank raised their mortgage interest rate from 3% to 3.5%. They had expected an increase, but were a bit troubled after the mortgage company raised the rate another half a point. Aren't adjustable rate mortgages A Really Bad Idea? Does anyone have one?
• Here's your barrel trousers.
• The obvious and simple solution is, stop using those damn credit cards and don't try and buy something you can't afford.
• Shinything -- my brother in law here in Austin has an ARM on his new house. He won't even entertain the thought of locking in the interest rate. Go figure.
• When I was in Florida recently, I was reading an article in the local paper about people using the upswing in property values along with scary mortgages to essentially "house-hop". They interviewed a guy making $35K a year who had an $800K house. He bought a modest house, sold it in two years for $100K more, used the $100K and an interest only mortgage, sold that house before the mortgage terms got ugly, used that extra $150K, etc. etc. Heck of way to operate as long as values rise and rates remain low.... (we've got an ARM, but it's fixed for 7 years, then can only go up a certain amount each year to a specific (admittedly somewhat scary) cap, but I've got some time to take advantage of a lower payment and save...)
• Some friends in Santa Cruz are trying to buy a two-bedroom condo -- prices start at $460k and by the time ten or twenty people compete for the same property, it sells for $510k (unconditional/cash up front) or more.
• Just to piss everybody off... My almost sister-in-law just bought a small 2 bedroom, 1 bath, three story house - maybe 1300 square feet. She paid $12,500. Now, it is in Wheeling, West Virginia. But it does have electricity, central heating, running water, little yard, etc. Everything you think of when you think house. And it is only an hour from Pittsburgh. You could buy a neighboring house and have a crappy commute in an energy efficient car for the price of an SUV. Which is to say, $(house + small car) = $(larger car). And to make everybody feel better again, my fiancee and his friend paid more than 50 times that amount for the house in the SF Bay Area that we live in now.
• Events in Washington, a crisis on Wall Street and an escalation of the war in the Middle East would push them to the brink of insolvency. Hmph. They pushed themselves to the brink of insolvency. They started with a mortgage they wren't in any position to pay (with a variable rate, of all things), then piled credit card debt, lots of toys, more credit card debt, home equity loans to cover the credit card debt (which they promptly ran up again) until their mortgage was larger than the home's orignal value (egads) - but it was Alan Greenspan on the TV that made them nervous??? Good lord. A two week bout of the flu, a car accident, or their furnace dying would have broken them like a dry stick. Gordon Grecko (ha!) need not apply. The American economy is not as fragile as these guys portray - but neither is it immune to ups and downs. One can enjoy the ups, but you have to plan for the inevitable downs, too. That means living within one's means, eliminating with extreme prejudice credit card debt, and delaying gratification on the hot tub until you've saved up for it. It also means continually seeking better, more remunerative employment, acquiring education to springboard into better jobs, and SAVING. Tax deferred saving (your 401(k)) is best, but you have to sock away some of that after-tax take home pay too.
• One could conceivably plead that they were ignorant of both personal and national economics. And I'll readily concede: it's a BORING subject. It's dry, complicated and sometimes doesn't seem to make much sense ("Why doesn't my mortgage go down with Greenspan lowers rates...?") But you really have to learn it, at least a little. Seriously. The possibility of fucking yourself over like these hypotheticals did increases exponential in the presence of ignorance - but decreases exponentially in the presence of information. And they should SHOOT that real estate agent! In the head. Twice. And take his wallet.
• I would argue that you don't really have to understand economics if you avoid debt. That is nearly impossible to do if you want to own a house, but it can be done - although, perhaps not in SoCal if you are an electrician or waitress. But both of those jobs are portable. Nobody likes the idea of leaving a place they like, but free market mathematics assumes that people are infinitely portable and will simply leave or pursue different work if an area becomes unaffordable. Not accurate, but it is the construct people are working with when they come up with the economic models much of the time.
• yeah, so you've got your cheap house...now what do you do? is the diane arbus show coming to your local museum? no. is sandra bernhardt performing next week? no. can you get whatever you want at any time day or night? no. when's the next star-studded movie premiere? never. where's the closest restaurant that isn't an arby's? far. sorry, folks, it may be more expensive, but it's the city life for me! 'an hour away from pittsburg' sounds an awful lot like 'and then we're going to stick the bamboo slivers into your urethra" to my ears...
• He won't even entertain the thought of locking in the interest rate. Go figure. Out of curiosity, how old is he? Just wondering, because I'm young enough to remember inflation as a Bad Thing waiting to ambush the unwary.
• Yeah, real estate is outta control... I'm glad I don't pay rent.
• ahem. Purchased my home for $114K five years ago, sexy, and it's an eight-minute light rail ride to the heart of downtown Minneapolis, fifteen minute drive to downtown St. Paul. We don't have the star-studded movie premiere, but we have theatre, art galleries, top-flight restaurants, etc. that I spend my money on several times a week. I'm not bragging-- the point is that you could live in Chicago, Minneapolis, or a host of other metropoli for so much less. (In fact, the real rage just now being reported are people moving to towns with great liberal arts colleges-- usually great, inexpensive old homes and great culture.)
• You know, it's not always city vs. the sticks. I grew up at the Jersey Shore and my parents sold their house 5 years ago for 400K. Similar houses are now selling for 800K. And these are not those fabulous beach houses on the dunes that you read about, nor even the sterotypical little beach cottages. We're talking a completely average single-family home with vinyl siding and a tiny backyard. Basically, the residents either rent places or live in houses their parents bought in the 50s. Home ownership is pretty much out of reach there for the locals anymore.
• Hey, I'm not knocking the sticks, cabs. I think if you're in a portable profession, not a heavy user of city culture/amenities, and not surrounded by family where you are, you *should* consider Manhattan, Kansas rather than Manhattan. You could fund your entire retirement by selling property in the later and buying in that college town... imagine-- no more debt, and you can *stop working*.
• And that would be *latter*. meow.
• Actually, arch1, I live in Minneapolis myself and am firmly in the city column. I was just pointing out that rural-ish living is not always cheap either.
• Nal -- he is 32.
• Hey, south Minneapolis here. Longfellow neighborhood. Do I smell a meetup? We started house hunting in 2000, when people were buying shitholes sight unseen. Three years later the market had softened enough that we were able to get the seller to come down in price on a house that had been on the market for 4 months. It's in great shape and has a huge kitchen, but it needed lots of repainting, interior and exterior. Mauve and teal green. Yeccch. I don't understand all the new $400,000+ condos that are going up around the city. Who is buying them?
• I couldn't stop laughing at this typo in the article: "Greenspan was slashing interest rates with a furry never seen before." Good article, though; I'm still slogging through it.
• I'm glad I dig renting - sure, maybe it's money put out that won't ever bring in a return - but on the other hand, I can walk away from it any time I feel the need. The thought of having insane mortgages and property taxes, combined with the responsibilty of maintaining a house and being financially tied to it gives me the crawling heebie willies.
• ditto mj...right now i'm paying around 450/mo to share a house in L.A. ...it's sunny all the time (well, except for this last week *grumble*) and there's so much to do and see...so many new people and new ideas....i remember the suburban sprawl from my high school days...watching the adults shamble to work and shuffle home to the tv...circulating in ever-smaller social circles...till one day they find themselves old, cocooned in siding, looking at a photo album full of people in the same living room...which thanksgiving was that? does it matter?....the notion of letting that happen to myself gives me the howling fantods...i'd rather get hit by a city bus tomorrow....but then again, my biggest fear is hotel rooms...anything anonomous, prepackaged, safe, consistent, identical, or mass-produced...*shudder*
• People near me are buying 500K McMansions on tiny blocks. I bought an odd little house on a GREAT BIG block for a lot less. Which one of these will be worth more than the other in ten years? Twenty years?
• "is sandra bernhardt performing next week? no." Thank god!
• One big issue is that people think about money in absolute terms, rather than purchasing power. Sure, if I moved out of NYC and into the boonies, I'd see my income cut in half. However, I'd see my expenses reduced by 75% or more. And, if you find yourself a nice college town, you'll still have access to most of the culture that you give up by not living in a megalopolis. I figure I only have a few more years left in the big city. Once I finally find the right girl, get married, and start a family, I'm outta here. I'm compulsively saving up so that I can eventually buy a house with as small a mortgage as humanly possible, take a low-stress job, and enjoy my life with my future family.
• My parents refinanced their house to get rid of their credit card debt (they were barely treading water). Luckily, they got a good, honest financial adviser who told them that the first thing they had to do when they went home was to cut up the frickin credit cards, because if they built up the debt again, they were screwed. Even more luckily, my folks listened to him, and they were fine when my dad was off work for 7 months last year with cancer. (He's mostly ok now.) People who keep racking up credit card debt after they re-mortgage the house are looking for a fall.
• Sandra Bernhardt? Star-studded movie premiere? Not things I would cross the street for. Several non-Arby restaurants near here, thanks. With non-rude help, too. Can I get whatever I want anytime of the day or night? Well, yes, mostly because what I generally want at night is sleep. I am genuinely glad that so many people like living in cities. I wish more people did. Personally, I do not.
• I like living where I can get whatever I need without a car, what with not knowing how to drive. But it does matter where family are - if I had a choice on where to live (which I probably won't, if I ever do get any work in my field) - I would want to live near my family, even if that meant living in Toronto, which is damned expensive. If all my family up and moved to Vancouver, I would follow them. You don't want to be far from your family without a good reason, unless they really annoy you (I get on very well with my mother - and really wish I were living near here now.)
• *her. Really should, like, actually proof. Sorry.
• well, my sister's out here, too...part of the reason for my move from nyc....L.A. is underrated in the bang-for-your-buck department, IMHO... so answer me this erebus, without the star studded movie premieres, what do you do with all your rotten vegetables? sooo...missing the point, replace movie primeires with symphony, art gallery, and i mean Quality art gallery, auto or computer show, major monkey meetup, whatever floats your boat....getting it now? sandra bernhardt....nina hagen, cirque de soleil, emo phillips, the dead hensons (cool local band--they do muppet covers...people dress up)...do i have to throw any more bananas? do you get it now? yeah, i can understand wanting to live out in the country...or wanting to live in the city...but faceless generic suburban sprawl? eck. culture is not something you absorb. culture is something you have to actively participate in. wait, what was the subject again? Brazil?!? hoo boy, i'm way off...
• and culture very seldom involves a giant SUV or big screen TV
• sexyrobot, you live in LA? My husband's dept. just hired a guy who's *dying* to get out of LA. Nothing but horror stories. He and his wife pull down six figures and can't even afford to go to a movie (much less a movie premiere), because the everday expenses are so high. He spends hours in traffic just trying to get to work, no matter what time it is. Instead of "snow days," his dept. has "traffic days," in which the traffic is so bad, that no one can make it to class, so they just call it off. His dept. meets only once a month or so, because the profs can hardly get to school. He wanted to buy a house closer to school, but that was in East LA, where, although affordable, they would apparently be killed on sight for being Anglo. So he got a great deal on a house further out (don't know where, never been to LA) from a friend who was willing to sell below market just to get out of LA. Is it really that bad? How do you do manage to live there?
• Hey, south Minneapolis here. Longfellow neighborhood. Do I smell a meetup? Hey, why not? Although, I actually live across the river..hope you can still associate with me...
• Ewww! St. Paul cooties! ;)
• sexbot, I am not trying to convince you that you're wrong. As I said, I'm glad you like the city. Enjoy it. In fact, I now see the light! All of us who live in the surbs or the rur should sell our homes and move to the city! You guys go first; I'll catch up with you.
• Did anyone else read the entire article? What a letdown! What happened to our protagonists John and Terry? How did they fare? I need closure...
• I don't understand all the new $400,000+ condos that are going up around the city. Who is buying them? The barrel trousers brigade.
• Wow, Wednesday. Way to assume others have the same priorities as you do -- and after sexyrobot laid out exactly why people put up with the high prices and other inconveniences of living in a major urban area! To restate what sexyrobot said: If you're a film lover, in L.A. this week you'll be able to visit the Pan African Film Festival, or see films that probably aren't showing anywhere else like The Upside of Anger, with the writer/director as a guest speaker at the screening, at the Westside Pavillion Theaters; or those in the "Academy Award Nominated Shorts" program at the Spielberg Theater; or the "Susan Sontag Selects: Nine Classics of Japanese Cinema" program at the Los Angeles County Museum of Art; or the Black History Month screening of The History of Jazz Piano in Pasadena; or the "If I Were King: Ronald Coleman, Hollywood's Forgotten Star" program at the Rigler Theater; or Hiroshima Mon Amour and And God Created Women (Et Dieu...Crea la Femme); or an Otto Preminger program at the UCLA Film and Television Archive; or a documentary about the 1980s band the Minutemen, in San Pedro.... That's just film. Do the same thing for art, music, architecture, food and restaurants, politics, literature (e.g. book groups, or author appearances), scholarly lectures and such, dance, theater, and other cultural events. Get the picture? All that, and there's good surfing and mountain biking and hiking and skiing all right there or very close by. And then there are the people who work in some creative or other kind of field such that they can only find a thriving community of people like themselves in big cities. If you have priorities other than making mortgage payments and programming your TiVo, the big city can seem really really worth it.
• Big cities aren't always insanely expensive - sometimes you just choose to live in a very small apartment, or in that neighbourhood with the non-Anglo people (I've lived in these places - you don't get hurt when you live there, just don't interfeer with the guys exchanging the money and the little plastic bags.) The article isn't about where you like to live - where ever that is - it's about how people make their money choices. Poverty, real and inescapable, does exist - people who work hard, plan right, don't buy luxuries and still struggle simply because they are paid too little. But there are also the rest of us who make plenty to live on, but don't always make the right choices about how to spend what we have. I know people on my stipend level (a notably generous one) - single, no dependents - who are going into debt to support the way they live. I save $300 a month, for expenses like travel and research. Sorry for boasting, but I'm kind of proud that I will have saved enough to fund my research this summer without a supplementary grant (which I forgot was due last week anyways). To get this, I have no cell phone (apparently an increasingly rare species), smaller apartment (sharing 750 sq feet), rarely buy clothes, rarely eat in restaurants with actual cutlery, don't buy many books, etc. Well, actually, I just take the money off my check to begin, and live off the rest. And definitely NO CREDIT CARD. They are evil. If you don't have the cash in your account, you really have to think about whether you should be getting it (food and research expenses you will later receive funding for excepted, of course.)
• Oh - and at the same time, if people spent properly, the economy would collapse because our world is based on overconsumption. It's a frickin' house of cards, and totally messed up.