Amazing Mental Rot (James Kunstler)

[Tace]

James Kunstler -- World News Trust

March 19, 2007

From the Florida Sun-Sentinel:

BOCA RATON -- Retired Federal Reserve Chairman Alan Greenspan, speaking at a Futures Industry Association annual conference here on Thursday, said the problems of the subprime mortgage market had more to do with home prices than easy credit. "If we could wave a wand and housing prices go up 10 percent, the subprime mortgage problem would disappear," he said.

What kind of a rock does this fucking idiot Alan Greenspan live under?

The median price for a house in my region of the United States (northeast) was $380,000 in the third quarter of 2006. Median annual income, meanwhile, was about $46,000. If, by some miracle (in a land of negative savings) someone with an income of $46,000 had managed to save enough to make a 20 percent down payment ($76,000) on the aforesaid median-priced house and got a 30-year mortgage for the remainder ($314,000) at 7 percent interest, his monthly payment would be $2089. Add to that $250 a month in local property and school taxes and insurance and that brings it up to $2339. That adds up to $28,068 a year in house payments. Let's say the poor bastard pays $8,000 a year in combined income tax and FICA witholding. That leaves him with a grand total of $9,932 for everything else. Then there's the yearly cost of owning a car, including installment payments, insurance, gasoline, and maintenance: around $6,000 a year. Oh yeah, if he's a prudent fellow, he's got health insurance, let's say a practically useless high-deductible policy costing $3,000 a year. That leaves approximately $57 a week for groceries, laundry, the collection plate at church, and everything else. (Too bad he can't afford cable TV and the Internet.

So, if housing prices went up 10 percent, how fucked would Mr. Median Income be?

Of course, the scenario above was based on the most conservative type of mortgage. If Mr. Median Income had gotten a creative mortgage, let's say a no money down, interest only, payment option, adjustable rate mortgage, he would have been a little more solvent until the re-set. Then after enjoying the place for a year or so, he'd either have to sell it pronto, or default on his payments. And because all his payment option shortfalls would have been back-loaded onto the principal, the mortgage obligation would be more like $400,000 now. This is a bummer, selling into a down market.

more

http://www.worldnewstrust.com/index.php?option=com_content&task=view&id=1652&Itemid=10029

[Warpy]

1. Greenspan is a sour old miser who hates to see an

honest working person get any sort of a break.

May he drown in his own bile, and soon.

[Tace]

5. Kunstler Has Been Going On And On...

...about how the average American is coming under tremendous financial stress, and it's going to be a disaster for millions of people... and that's just for starters. He's basicallly a Peak Oil guy.

[Jackpine Radical]

2. Who cares about Mr. Median? The real question is,

"Can I afford a modest 20,000 sq ft home in Vail, plus the staff to run it, and still have enough left over to pay for the new 140-foot yacht?"

And, in today's economy, the answer is an overwhelming "Yes." Remember, according to Forbes, there were more new billionaires created in 2005 than ever before in history.

[Faux pas]

3. Will all of them be republicans and/or members of the cabinet? n/t

[libodem]

4. Seems like most of the real estate prices

around here are 300,000 and up. I wondered what a mortgage payment would be. Over $2000.00 a month, wow.