HOW MANY TIMES DO YOU HAVE TO BE TOLD? Half of Americans can’t afford their house

2 Responses to HOW MANY TIMES DO YOU HAVE TO BE TOLD? Half of Americans can’t afford their house

1. 

   Michael June 6, 2014 at 2:31 pm #

   I rent. I live directly on the beach. It’s beautiful. However the Greater Los Angeles Area is not where I want to permanently reside. Florida is . But my clients are in Los Angeles. So I am forced to live here for work. I have to appear in person etc. It’s frustrating when you earn well over a mid six figure income, yet are still renting into your mid thirties! In other words: I’m throwing my money down the commode every month just to live in Los Angeles.

   If you want to live in a safe clean beach-side community in Los Angeles, your mortgage payment will be $15,000.00 – $20,000.00 per month. The reason is because of A) supply and demand and B) CA Proposition 13 (which ironically, I support the abolition of property taxes as a libertarian).

   I worked really hard to make more than 90% of the national population income percentile. Yet I am still a LOSER. I don’t own my own home.

   Yesterday the Wall Street Journal Channel reported housing prices increased this quarter. In spite of tight credit restrictions from banks. How can this be? No clue. But rental rates also increased.

   There is an old phrase, so goes Los Angeles, so goes the rest of the country. Or maybe it’s so goes California so goes the rest of the country. Not sure.

   In any instance 60% of the population in Los Angeles rents. And this country is turning into a nation of renters. Real Estate holding corporations are buying up houses left and right and renting them out, knowing they are permanent wealth generating asset. Houses will always produce rental income, and the value of the home will always increase historically, as long as the economy holds. Especially if you are in CA due to CA Proposition 13.

   In the meantime housing has become completely unaffordable for first time buyers.

   In 1979 a lot directly on the beach in Florida where I grew up was $10,000! $10,000! In 1989 my parents built a four story house on the lot for $150,000.00. Their combined gross salary ratio (gross combined income before taxes vs. total cost of house without using a Realtor) was almost 1 to 1. Today my parents house is worth over a million dollars and current gross income to home ratios in that area are easily 10 to 1. or 12 to 1.

   As long as housing continues to rise, and these people can afford their monthly payments, these “paper home owners” will get back everything they spent on housing. This includes mortgage payment, mortgage insurance, mortgage interest, housing and earthquake insurances, Realtors fees, maintenance and taxes (minus inflation). I’m not including opportunity cost because it cannot be quantified properly. This goes without mentioning that if you miss your mortgage payment, foreclosure can be extended for months or years. This gives you time to get back on your feet and negotiate with the bank.

   Now compare this to renting. If you miss your rent payment, you will be thrown out on your ass in 30 days.

   Even if worse comes to worse and these paper home owners get 60-70%, of their money back spent over 20-30 years, it will be more than a me. I’m throwing my money away. Every month. With nothing to show for it. I need to find a way to run my business in Los Angeles without living here. It’s so frustrating.

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2. 

   el kapitan June 7, 2014 at 2:35 am #

   michael:

   in vancouver, bc , the average price of a detached home is over 1 million dollars. not on the beach or any sort of good area. good areas are about 2 million average. the average family income before tax is just over 80,000.

   i’m in my mid-thirties as well and will never own a house in this city. unlike you however, i don’t consider myself a loser. i consider someone who makes 60 000 a year and puts 5% down on a million dollar beat up old shack in a poor area of town to be a loser… and vancouver is full of them…

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