Dream of owning home slips further from some | AP

[BootinUp]

Once-affordable cities too pricey for low- and moderate-income families

The Associated Press
Updated: 12:01 a.m. ET Aug. 9, 2005

WASHINGTON - Housing prices are far outstripping salary increases for low- and moderate-income jobs, putting the American dream of owning a home beyond the reach of teachers, firefighters and other community workers in many cities, said a study being released Tuesday.

snip

The study found the median price of a home in the United States rose 20 percent in just 18 months, to $225,000. During the same period, wages for teachers, firefighters and nurses in most cities remained flat or increased slightly, but still fell far short of the annual salary needed to buy a home, the report from the Center for Housing Policy said.

For example, the median household income for a nurse rose 10 percent between 2003 and 2005, to about $36,000. For a firefighter, wages were flat, remaining at about $37,000 a year.

Those salaries don’t come close to the $71,000 annual income needed to qualify to purchase a $225,000 home. The number is based on a down payment of 10 percent.

http://www.msnbc.msn.com/id/8875159/

[Joebert]

1. We keep hearing about the ownership society

I'd like to see a breakdown showing how many houses some people own.

Houses are getting outrageuous for many reasons, but when you hear about people flipping houses 10 at a time, you get a feeling that we're going to see a huge crash.

Where I live, there are SO many new houses being built that cities are crashing together.

YET, we've had thousands of layoffs in an area with 150,000 people.

Who are these people, where do they work?

[Erika]

3. Same here

I looked through the houses for sale and the cheapest was $119,000. Our average wage worker earns $12.50 an hour.

It won't happen. Bush's ownership society is a farce.

[expatriot]

7. exactly... it is more like the "debtor society"

Just because you live in a nice house, drive a new car or surf the internet on the latest PC doesn't mean you own anything, it means that the creditors own you.

[expatriot]

5. Sounds like where I live.

Yuma, Arizona. Growth is insane. Developments with hundreds of homes spring up overnight, real estate has jumped in some neighborhoods 50% in in ONE year. My wife and I are looking at homes and saw a trailer selling for 68 two months ago. The exact same trailer went back on the market this month for 88K and it is no longer being listed. insane. There is a 2 year waiting list to build and a 2 month waiting list to get an appraisal. But there is no new jobs here except new service jobs. What is happening is Californians are cashing out there 500K+ homes and buying here. Tons of investors too. Who knows, though... they say that Yuma and other Arizona hotspots shouldn't worry about too much of a bubble because of population pressures and the natural allure of the place will provide a firm floor in the event of an implosion. I don't know.

[Joebert]

9. The Californians are blamed for our growth too.

If that were true, with all the "Californians" moving here, to Arizona, and Nevada, California should be completely empty.

The line about natural allure is what my realtor said when I asked what his opinion on the bubble was.

"Oh, that's just the coasts..."

[Heddi]

18. They say it about Washington and Oregon too....

those "Californians" are moving up in droves and pricing out the locals.

Strange, though, because in the 4 years I've lived in Seattle, I've met alot of people from alot of places, but only ONE Californinan, and he's lived in Seattle since the mid 1980's.

Where *ARE* those dang Californians?

[KT2000]

8. Flipping!

Read in The Week that 20% of home sales nationally are to flippers. In hot markets though it gets as high as 70%.

The lower cost houses in my community are going to flippers, cosmetically fixed up and put back on the market for a lot more. The young family that can live with an outdated kitchen and make improvements as they go along are being priced out of the market.

I got a market analysis and it was so low I am pretty sure that the realtor planned on some kind of flipping arrangement.

Another thing in my area is that lower cost homes are being used as "vacation rentals." Two groups hold most of them.

We also have rapid development.

We get retirees.

[slamthecrank]

14. Ok, Folks - LISTEN UP!

The term "flipping" is being thrown around here all willy-nilly, and it's not at all what you guys are referring to. So, here's a brush up:

1) buying a house at a cheap rate (out of foreclosure, etc.), then doing a little/none work, selling at a higher price is known as: "a good investment.

In contrast to:

2) "flipping" -- the act of fraudulently inflating the value of a home or homes in the appearance of making a good investment. Flipping is a felony, and in most states equals 20 years in prison and a $1 million fine per offense. This term was coined after the late 80's bubble that Papa Bush and Dumbass Reagan propelled into S&L scandals etc.

For an example of "flipping", here ya go:
Tom buys two houses in an old mill neighborhood out of foreclosure from a bank. Tom knows a friend named Jim who also bought some houses in this neighborhood. Tom sells his two houses to Jim for $30,000 more than he paid for them. Usually on the same day/same week, Jim sells them back to Tom for another $30,000 over. Now, on paper/deeds, an appraiser will see that the lates sale in the neighbohood is ...say $150,000. Then, to an appraiser, that's what the market value of the home is (since, duh, that's what it sold for.) In actuality, these transactions were not subject to the free market, and were fraudulently inflated, thus creating a fraudulent inflation of similar homes in the market area. This is a goldmine for investors, and usually when they all cozy up to each other and sell their properties to people who are actually in the free market for inflated values. The investors walk away usually millionaires, and the homes eventually go back into foreclosure, re-starting the war against the poor/working poor with bad credit. THAT is "flipping".

I hope that cleared some things up. "Flipping" is a bad word! And always insinuates a class-war.

(fyi - yes, I'm an appraiser, and in my many years, I have turned many, many, investors in to the secret service for indictments and jail time for "flipping". It is the appraiser's job to research the sales history of a home and inform on these type scams. If the appraiser happens to miss the scam, they can be held responsible as an advocate for the 'flipper' and the fine/jail time is exactly the same.)

[Joebert]

15. Neat info!

I know that when I hear "flip" on the news, or from people I work with, they're referring to the TV get rich quick, buy the house, and then sell it before the first payment for X thousand profit.

Is there a more proper term for what I think we're all talking about, since flipping is for a specific action?

Just curious.

[krkaufman]

28. speculation n/t

[KT2000]

16. Thanks for that info

I think that media is misusing the term flipping too. Just yesterday the NYT used it to describe what a man was doing when he bought houses, did cosmetic improvements and put them back on the market for about twice what he bought them for.

At any rate, the late night ads for this practice have definately altered the market.

[Gormy Cuss]

22. That's the legal definition of flipping.

I too was trained to reserve the term "flipping" for the illegal scam as you described it. In the past couple of years I've noticed that media and even some real estate agents have been using 'flipping' for any buy cheap-quick turnover for profit sales. I corrected a friend recently when she said she had flipped an investment property. It grates on me when I hear the term used this way but it seems to be a losing battle.

[Catfight]

23. That's interesting info, thanks for the education. nt

[Ilsa]

26. Thanks for the clarification. I've heard real

estate bankers misuse this one.

[no_hypocrisy]

27. An attorney I worked for would have lots of deals where his cousin

would provide a Buyer for a piece of property AND a Seller for the same property BEFORE the contract for the purchase was even a firm contract (i.e., not signed). That's gotta be flipping.

BTW this was two years ago before the market got heated.

[slamthecrank]

29. Oh yeah.

You are describing a form of 'flipping' where the contracts are fraudulent - in that, in some cases, the "buyer" doesn't even exist. They only exist on paper as a purchaser, and then they commence to inflate the value of the property the same way other schemes do.

The attorney you worked for should be in jail. The actions of lawyers like that reek havok on the market and create the gigantic problem that this news story is based on.

[expatriot]

2. to compensate, the real estate ind. reformulates typical % of income

which should go to housing costs.

My wife and I are late in purchasing a home and were shocked that the mortgage people were telling us that people with good credit are very commonly approved for mortgages with yearly payments that equal 48% or more of the household's gross annual income. That is PRE-tax dollars. I am young, but I remember the general rule in high school economics and just my parents talking, that 25% of your income should go to housing costs. One of the books my wife got from the library on the subject said 30-35% and that was published about 7 years ago. A more recent book said up to 40% and now the mortgage industry (multiple lenders told us this) tells us that we should not be afraid of payments of up to 48% of our income! It is insane. The loan officer said we could easily get pre-approved for at least 250 conventional and more if we went with the new fang dangled loan shark options. We told her we only wanted up to 150 and are looking for nothing more than 130. Which will only buy us a one bedroom on a small lot in a modest neighborhood but we fear debt like the plague and also fear a bubble as much as we fear continued renting.... so we are going in but only to our waists.

[Joebert]

4. You are very smart

Out here they're still advertising the interest only loans, etc.

It's only a matter of time. Those interest only loans are going to start converting to principal+interest.

When that happens, foreclosures galore. People walking away from houses with zero equity. Smaller banks going under. Medium banks going under...

And remember who ACTUALLY owns the house.

Not the person living in it.
Not the bank that made the loan.
But the Chinese or Japanese bank that bought the mortgage in a bundled bond.

When you take the housing market, oil prices, loss of jobs, growing poor, lack of education and health insurance, the next 5 - 10 years are going to be unlike anything ever seen in world history.

[Erika]

10. Agreed

Ten years from now, this will be a third world country. It scares me badly. I am trying to horde what I can to protect mine but I know that the majority in this country will be hurting badly. They won't be able to afford housing, there will be no health insurance, and baby boomers will be starving.

Brave new world via George W Bush. He exploited the working class to the point of their decimation. Corporate globalists love him. He succeeded in their mission.

[Joebert]

12. I wonder if you meant to use that line.

Brave New World.

Where, in the book, it's New Mexico (if I recall correctly) that is the getaway for the rich.

In our new world, it will be the USA that is the getaway for the rich.

With no real jobs left after outsourcing, etc., we're tour guides, cleaning hotels, and selling film.

[expatriot]

11. wow, when you look at it like that I don't know how smart we are....

...for even thinking of buying _anything_ right now. But the way we look at it, we have no other debt and even will have reserves left over after the down payment (yes, a down payment.... how novel! Of the four couples I know off hand who bought a first home in the past 2 or so years... only one made a down payment. Even mortgage lenders we talked to were a bit surpirsed that we were planning on putting 5 or 10% down.) even after the down payment, we will have reserves enough to cover the mortgage for any long period and she has a stable secure job with the state and we plan on living here until she can retire fully at age 51 so the worst case scenario we have to sit on a devalued house for a while.

It's all my wife's doing, I can't take any credit for it. She is a penny pinching miser who treats debt like the plague. Our entertainment budget is like $3/month and that is IF we get 99 cent movie rental coupons in the mail. Most of the time we check out travel videos from the library.

[Joebert]

13. Once again, you're setting the excellent example.

Buying is not bad.

Debt that you can't service is bad.

Financial solvency is not a skill that is appreciated these days.

I'm 32, but taught myself about saving/investing at a young age. I help my friends at work with their finances in a generic manner.

Questions like:

Do you have emergency savings?
Are you getting the max-match on your 401k?
Are you saving for 1-3-6 months of pay in case of a job loss?
If you're looking at the house, are you putting money down, with more saved for the expenses to come during the move?

Stuff like that. It is amazing that I have to bring this up with people in their 30's, 40's, FIFTIES!

So don't hyperventilate, keep doing the right things, keep the savings available.

But, when you can, don't forget to enjoy yourself once in a while.

You've both earned it.

[Heddi]

17. Dude! You're TOTALLY like me and my husband

He's the budget maker. And we TOTALLY do budgets. We have two checking accounts--one for actual 'bills' and one for savings and paychecks. When we get our check, we parse out the money for those 2 weeks for groceries & beer, gas, and 'miscellaneous'. We pay rent automatically first of the month, and we have a monthly budget where we pull out the amount for phone, electricity, cable, and water (they're pretty stable bills). Everything else is untouchable savings.

We went from always carrying cash, to never carrying cash, back to carrying cash, but only what we're willing to spend. We budget $70 a week in groceries for the 2 of us, so when we go to the store, we bring $70. That's all we're going to spend that week.

It's saved us, though. It's allowed us to only live on one income as we've both switched going to school 2 years at a time. And neither of us ever cleared $32k before taxes AND we live in Washington State (the last 4 years in Seattle, though more east now).

From July 29, 2000 til July 11, 2001, we were able to save $22,000, which was pretty much 99% of my salary at the time. We lived on his salary of $28k and just saved the rest. That allowed us to move from SC to WA, buy a car out here, buy furniture out here, etc.

It's a pain in the ass when you want some Taco Bell but know you're being "gluttonous" if you spend more than $15 a month on entertainment. But God does it feel good to be 29, no debt, and nearly $10k in the bank after not having worked for the last 2 years and not again for the next year as I complete my nursing degree. At which point I'll be the worker while my husband goes to school for 2 more years to get HIS nursing degree.

THAT is financial freedom :)

[demzilla]

19. Risking financial suicide

It sounds like you're ready and responsible to handle owning a home. But I am amazed by the number of people who are putting zero down, taking interest-only mortgages, and placing themselves totally at the mercy of market and economic forces that afford them NO security. . . . When we bought our first home, in 1984, there was no way we could get a loan without putting 20% down, showing we had six months of mortgage payments in the bank -- and interest rates were 13%! Nowadays people are getting "it's too good to be true" loans to afford inflated housing. Something will have to give, and for those who stretch themselves too thin, it won't be pretty.

[Vinca]

21. You and your wife should look for the worst houses in the best

locations and make low offers. After a little sweat equity you can bring the property up to par with the neighborhood and be living in a giant nest egg. From the sounds of it, you'd be more enthusiastic about carrying the debt if you did something like that.

[nookiemonster]

20. Personally, I think this"interest only" loan crap

is one of the stupidest fucking things I've ever heard of. I'm no economist, but won't some of these people get stuck with balloon payments?

Foreclosures are coming, no doubt.

[Blue_Tires]

6. i know i'm a LONG way from even thinking about owning a home

maybe i can save up enough $$$$ in a few years to buy some shack in south america or south asia

[BiggJawn]

24. It ain't just Collie-For-Nya....

http://www.lafayettejc.com/apps/pbcs.dll/article?AID=/20050807/NEWS/508070328/-1/ARCHIVE

On the first Monday of the month, the lobby of the Tippecanoe County jail is frequented by a crowd of people who aren't there to visit their incarcerated sons, wives or brothers.

Instead, these visitors come for the sheriff's sale, where properties that have been the subject of foreclosure are sold at auction to the highest bidder.

Edmundo Salazar, a Lafayette machinist and landlord, attended this past week's sale. With local home prices stagnant for more than a year, there are bargains to be found, he said. But behind each foreclosure is a personal tragedy.

<snip>

Since January 2004, an average of 23 foreclosed homes a month have been scheduled for auction by the sheriff of Tippecanoe County. It's an unprecedented number, officials say, that affects not only the homeowners but the community at large.

<more at link>

Houses going on the Sheriff's block, market stagnant, yet people are building like crazy on the far-east and far-north side of town.

Prices are so obscene that there's no way in hell I'll ever be able to afford a house.

But that's OK, because I got burned badly on a house 5 years ago and I'll never make THAT mistake again.

[Roland99]

25. If home ownership is at an all-time high, who's buying the houses?

Does this mean we have fewer and fewer nurses, firefighters, and policemen? Did they all suddenly become CEOs or doctors? Maybe their 401(k) plans are going like gangbusters (despite the fact the Dow is, essentially, unchanged from when the Propagandist took office in 2001).

Or, maybe they're busting their asses in second jobs and relying upon risky loans like interest-only mortgages in order to afford a house of some sort?