Comment of the Week: Impulsive Behavior Disorder

This comment of the week is brought to you by Jonness:

All’s I know is my household income is 6 figures, I have no kids, I have 20% down, and I still don’t feel like I can afford a house priced $400K. How people are pulling the FHA trigger with 3.5% down and $70K in household income is beyond me. I mean, what happens if a spouse loses a job or a family member gets ill? Don’t people care about long-term stability in their lives? It appears to me, a lot of people borrow as much as they possibly can at every new moment in time.

IMO, no houses are affordable right now, because buyers like me have to compete with 10 flaky families overstretching themselves to get a dump on a 6K sq. ft. lot. They do this purely out of ignorance and an inability to control their impulsive behavior disorder. Then when they default, I pay taxes to bail their irresponsible arses out. Meanwhile, the govt. floods the market with borrowed dollars in order to artificially inflate the price of the foreclosed home so that the crazy banker who made the outrageously risky loan can continue to live in a house that I cannot afford to buy.

This game is crazy.

So what’s the cure for impulsive behavior disorder? Is there one? Surely there must be a way out of this self-destructive cycle, right?

  

About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

198 comments:

  1. 1
    Acerun says:

    You could go Ted Kaczynski style but that would hurt the six figure income.
    There are all sorts of “games” in life and life is not fair.
    The only way out will be a reset of the economy but that could also reset civilization as we know it.

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  2. 2
    Plastic Bags says:

    I completely agree with everyone here that houses are still overpriced. That being said, just because you don’t feel comfortable making a purchase doesn’t mean that is where the line is drawn and everyone making less than you should come to the same conclusion. Of course people will lose jobs or get ill, which is why we keep emergency funds and have the best insurance we can afford. I wish when lenders are looking over your assets they would take into account whether you have any money left over after your down payment for an emergency fund. But I suppose it’s not to their benefit to do so.
    We’re going FHA because we’re afraid of throwing a bunch of money at a house that’s declining in value, and would rather keep the extra cash in reserves in case of emergency. I don’t know if that’s irresponsible or not, but I’ll feel a lot safer at night knowing if one of us loses a job we’ll have plenty of time to find a new one.

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  3. 3
    Nathan says:

    I think it’s ridiculous to say that with $100,000 in cash and a six-figure salary that you can’t afford a house here. Just because you don’t want to spend your money doesn’t no one else should either. Your monthly payment would be less than $1,500/month. Are you really trying to claim that you can’t afford that? The real people who can’t afford to buy in Seattle are the ones working here for $30,000-$50,000 a year and living in Tacoma.

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  4. 4
    Kary L. Krismer says:

    I’ve said this before, but this is just a case of some of you not valuing houses as highly as others.

    Me I don’t value $40,000+ cars as highly as others, so I drive a 20 year old pickup truck, and when we do shop for new vehicles the price limit is around $20,000 (our other car is a 2005 Rav4 bought new). But do you see me going around the web complaining that the prices of cars are too high because I don’t value them as much as others? No. I accept that the market is what is is, and other people are what they are.

    And I’d add that historically car purchases have probably put far more people into bankruptcy than house purchases. Years ago one trustee I know mentioned that the average debtor has a car (or cars) that are less than two years old. After hearing him say that, I started noticing, and it was amazingly true. And also, for the most part, cars only depreciate.

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  5. 5
    Kary L. Krismer says:

    BTW, Tim, I like this concept. Having a thread based on a single comment, or maybe even a single sentence in a comment.

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  6. 6
    Jared says:

    Ignore for a moment those who are completely dillusional about how much they can afford. Everyone else has varying degrees of pain tolerance for the cost of housing. If my math is correct, you have $80,000+ in cash and gross $8300+/mo in income; I don’t think a $2400 monthly mortgage is unreasonable. How much are you currently paying each month to contribute to someone else’s equity?

    I’m just playing the devil’s advocate here.

    That being said, you seem to be doing better than most of us at managing your money (and earning it). Good on ya.

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  7. 7
    realfi says:

    I’m not seeing how our taxes are bailing out individual homeowners. Could someone connect the dots for me on that one? Not being sarcastic either.

    I do see taxes bailing out lenders that were handing out money without properly assessing risk. I understand that the person taking on unreasonable debt is shoulders some of the blame but it is a lender’s primary job to sort out bad risks from good. Guess I blame the lenders more than the borrowers.

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  8. 8
    Jared says:

    Nathan,

    You are obviously making the same point as me, but how did you come up with $1500/mo on a $320,000 principal? I want to know about this loan program. Even at 5.5% interest for 30 years, I’m coming up with a total monthly loan payment of $2,360.25 ( PI ($1,816.92) + Hazard Insurance ($143.33) + Property Tax ($400) ) .

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  9. 9
    David McManus says:

    RE: Plastic Bags @ 2 – Then why are you buying? Are you forced into buying a home? Have something against renting? When I hear something like “We’re going FHA because we’re afraid of throwing a bunch of money at a house that’s declining in value, and would rather keep the extra cash in reserves in case of emergency”, I instantly get the statement of “Then don’t do it!” popping into my head.

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  10. 10
    Kary L. Krismer says:

    RE: realfi @ 7 – Well the 8k tax credit probably helps existing owners sell more than it helps new buyers buy, because the prices go up with the credit. I’ve always called most first time home buyer programs second time home-buyer programs for that reason.

    It does help the banks too, to some extent, but I think just the artificially low interest rates have done a lot more of that. Far more people have refinanced than bought.

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  11. 11
    Nathan says:

    RE: Jared @ 8 – I left out insurance and tax, and i rounded greatly. But my point remains.

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  12. 12
    Chrish says:

    Krismer @ 5

    “And I’d add that historically car purchases have probably put far more people into bankruptcy than house purchases. Years ago one trustee I know mentioned that the average debtor has a car (or cars) that are less than two years old. After hearing him say that, I started noticing, and it was amazingly true. And also, for the most part, cars only depreciate.”

    You are totally undermining your own argument because this example perfectly illustrates the OP’s issue. Namely, the idiots who put themselves in bancruptcy at least in part by buying a car they can’t afford creates a loss (the lender takes that loss) that eventually gets built into the cost of the car that a responsible person buys, even a RAV4 or something more reasonably priced. I mean think about it, the bank is always going to get its pound of flesh and that means the losses incurred due to buyer X are going to be made up partly by buyers Y and Z.

    Here, many of the losses the banks of incurred making bad loans on homes have not yet been realized by the banks and they are using the government to prop up the market, to slow down the deflating bubble and, if possible, re-inflate the bubble somewhat so they can unload their crap and let someone else take the loss when the bubble inevitably again deflates. This process builds an extra cost into the home that wouldn’t be there but-for the irrational behavior of the banks, the government and many buyers who stepping up to buy houses that are still way too expensive. That is exactly the same as the car example and exactly the OP’s point.

    And you know, it is even worse than that. It isn’t only homebuyers who are paying for part of these losses. Many people who have not participated in this market one iota are taking a hit too…. the taxpayers.

    So anyhow, painting this as simply price aversion is really way too simplistic.

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  13. 13
    patient says:

    No worries, FHA will blow up one of these days and then the game is over and you don’t have to compete with irresponsible gamblers or straight out fraudsters anymore. If you need 20% down it changes everything, to the better.

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  14. 14
    WestSeattleDave says:

    Realfi…

    “I’m not seeing how our taxes are bailing out individual homeowners. Could someone connect the dots for me on that one? Not being sarcastic either.”

    Don’t worry, our taxes aren’t paying for anything. It’s all borrowed money, baby! Which makes it that much easier to spend it. In fact, the government has the same attitude towards borrowing money without knowing how to pay it back as a lot of homeowners do when they buy a house that they can’t afford.

    I realize that some people “value” a house more than other people. However, value is not as important as the ability to pay for it. There are plenty of folks out there who valued there house, and then lost it to foreclosure because they paid too much and couldn’t afford it.

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  15. 15
    S-Crow says:

    RE: Kary L. Krismer @ 4 – And I’d add that historically car purchases have probably put far more people into bankruptcy than house purchases.

    I agree. I can’t tell you how much I’ve learned how destructive some car buying is by watching my hand sign escrow checks to finance companies of car manufacturers over the past several years.

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  16. 16
    johnnybigspenda says:

    funny. I ranted with almost the same sentiment last night in the open thread (but since there’s a new open thread, its kind of buried)…. here it is again:

    The stock market just keeps going up and up. Day after day, it continues to defy logic. Articles titled “the Market is broken” and the likes are appearing left and right. I know I have not bought a stock in 4 months now… who the heck IS chasing stocks at these prices?

    I have a fear. I worry that my nice little down payment is going to get smoked by some crazy double digit inflation. I’m worried that by living within my means, saving money and being conservative on what I WANT to afford that somehow I’m going to be penalized, while the dipstick down the street with his 2 car loans and 95% LTV is going to be laughing again while my money gets eaten away by inflation.

    It makes me mad just to write this post.

    Why the heck can’t we actually fix the things that are broken? Mark to market is allowing banks to declare ‘record profits’… those same bankers that got bailed out are now getting paid 7 figure bonuses. WTF? Can this utter ridiculousness continue?

    Based on these fantasy profits, will Bernake actually declare that things are improving and eventually hit the brakes by raising rates? Am I going to end up paying 7.5% interest on a mortgage next year?

    I know, I know… we need wage inflation to support ‘affordability’… but these crazy sellers are still hopeful that things will turn around and haven’t been willing to move their price to something within the realm of reality. All these stories about the NYSE going up 7 days in a row and banks making record earnings will continue to give these sellers hope.

    You can almost see the next housing bubble coming… while we all sit here in disbelief, dumbfounded. Many won’t believe it for a long time. At some point, some will crack and buy in… just in time for the really big bubble burst.

    Why can’t things just make sense?

    I truly hope that Case Shiller goes negative again come September and that inventory levels continue to rise… after a couple of months in a row, I’m beginning to question my intestinal fortitude to NOT buy.

    Help!

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  17. 17
    S-Crow says:

    RE: patient @ 13 – Sadly, I think you are correct.

    Some of these FHA Streamline and VA transactions that fore go appraisals are absolutely headed for future delinquency/foreclosure.

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  18. 18
    Jared says:

    RE: Nathan @ 11 – Fair enough. I just wanted the name of your mortgage broker. ;)

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  19. 19
    Back to Basic says:

    I agree 6 digital income, 20% down still can’t buy a decent 2000sft , 3bed SFH in a good place Seattle. That’s because the last 10 years price run up create the bubble so big which is still not fully deflate yet. Many people stretch too much on their budget on housing. I am from Midwest rusty belt. If you have a job and 6 dig income you pretty much buy a brick 3000 sft 4bed, 2.5 bath with full basement, 3 car garage on a large lot for 350k which put you price/income ratio to 3~3.5. Tax is higher there but school is fully funded and better quality. I knew there is something going on here when I move here 3 years ago, people bought several houses and highly leveaged and become overnite millionaire on paper. However, rent here is same as midwest, so I guess people depend on house appreciation to justify the inflated price. I was right I choose rent instead to buy. Now people know what happens. House price is very sticky and I am see there will be false bottom. No matter what, if you use historical ratio as measure, today’s housing price is still a bubble and won’t last for long. So I do suggest keep renting and put your saving into mix of stock, hard commedity as hedge to inflation. Around 2011 or later, people will finally realize that the property they own is a financial drag, not a enjoyment and then you should buy at a fair price. So now, you really should relax and watachthe downfall of housing bubble. Good luck in house hunting

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  20. 20
    bubblebuyer says:

    As others have pointed out the reason house prices are higher than you’d like is that others value home ownership more highly than the poster does. Is that good or bad – who knows?

    Also, buying your first home is a somewhat uncomfortable experience. I know it was for me as I was used to paying a significantly lower rent on my apartment than my first mortgage payment (about 40% lower) – I moved from out of state. I also liked the flexibility of being able to give notice and moving which provided me with a sense of security if I lost my job and had to move for another job or move to a cheaper apartment. Obviously, you have less flexibility if you own a home and potentially could be forced to realize a loss if you were forced to move.

    In the end, I decided I wanted to own a home and so I made sure I had a big down payment saved up, that the mortgage payments were affordable and that I had a cash buffer that could support me for 12 months if I lost my job. In the end, you take on risk when you buy your first home but there are no guarantees in life. However, you can manage and minimize risk. Sometimes you have to do what you have to do. Since buying, I have refinanced and my mortgage payment and property taxes after tax deductions are less than my rent. With a fixed rate mortgage I expect my housing costs to decrease in real terms with inflation over time.

    In the end, if you have the means, are ready to buy and find a home you like then buy. If peace of mind, a good nights sleep, minimizing cost and flexibility is more highly valued then rent. The good news is that even if you buy and house prices continue to fall your downside is significantly lower than for the people that bought during the past 2 – 3 years. That is one thing I know!

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  21. 21
    Eric Arrr says:

    Kary @4,

    If these “other buyers” (of whom the OP complains, and whom we all agree place a higher value on the goods in question) could actually pay for the goods, you’d have your point.

    But in so many cases, they can’t actually pay for the goods. All they can do is close the sale.

    And so we end up with this hollowed-out rotten thing that looks deceptively like a functional market. Just look, the seller got paid! Look, the agents and facilitators of the transaction got paid! Look, home prices are set by supply and demand — well, to the extent that a doomed borrower’s temporary endowment with purchasing power can be called “demand…”

    And as long as the “demand” expressed by those who borrow (and lend!) beyond their means is subsidized by the public at large, prices will remain higher than they would be otherwise.

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  22. 22

    1. Impulsive behavior disorder is far less of a problem than it was three or four years ago, when buyers were tripping over each other to make offers above asking prices.

    2. Some people buy precisely because they value long term stability in their lives. Maybe it’s short sighted, but some people don’t like being subject to the whims of landlords.

    3. Buying a house is not simply a practical financial matter, even if it should be. It’s pretty deeply ingrained in our society that being a homeowner is a good thing to do, and between the nesting urge and the media onslaught, it seems unlikely to me that we’re ever going to become a nation of renters entirely. And really? it’s fun to have the freedom to do to a house what you want, some of which a landlord won’t allow. Dig up a lawn and plant rutabagas. Paint the house black and purple. Let the grass grow knee high and tick off the neighbors. Tear out the granite countertops and replace them with psychedelic patterned formica. It’s all your call. I’m not saying that these are reasons to buy or not buy a house. Just that homeowning is a combination of fun and slavery.

    4. Impulsive behavior disorder is what makes our economy tick. We’re not told to save, we’re told to spend. Maybe they’re couching it in different terms these days, but debt is still being strongly encouraged. Cash for clunkers. You’re not simply walking into a dealership, bringing them your clunker, and walking out with cash. You’re buying a new car, and either acquiring new debt, or bringing in cash for a future clunker.

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  23. 23
    Eric Arrr says:

    And let me add to my original point by directly answering The Tim’s original question, “So what’s the cure for impulsive behavior disorder? Is there one?”

    The way out of this is to eliminate the public subsidy from the demand side of the market. If lenders could only lend within the limits of their own ability to absorb risk, we’d be out of the woods already.

    But you knew that.

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  24. 24
    Geek says:

    The cure for disorders is therapy and medication, in all seriousness.

    However the cure for this impulsive home buyiing is to have public figures and media stop placing so much emphasis on owning big houses.

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  25. 25
    Tyler says:

    Recently I have been reading a lot about people’s ability to delay gratification being linked very tightly with their overall success (in whatever the apply themselves too).

    My first babystep is to try to not check back here for new posts/comments too many times a day!

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  26. 26
    Kary L. Krismer says:

    RE: Chrish @ 12 – Well first, if I pay cash for a car the defaults by others don’t affect me.

    Second, cars would probably be more expensive if there was tougher credit and fewer defaults. Credit card companies can still make money despite high levels of defaults. Some will even make offers to those already in financial trouble.

    This wouldn’t apply to housing because you don’t get the same efficiencies from volume production that you get from car manufacturing.

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  27. 27
    Flying Ape says:

    They should stop mortgage interest tax write offs. This loophole is essentially a subsidy. I hate hearing homeowners blab about how much tax money they are saving by purchasing a home. Government coffers are empty and they could raise additional funds without a real tax hike.

    But we will probably see both once the recovery gains some traction…

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  28. 28
    Kary L. Krismer says:

    By S-Crow @ 15:

    RE: Kary L. Krismer @ 4 – And Iâ��d add that historically car purchases have probably put far more people into bankruptcy than house purchases.

    I agree. I can’t tell you how much I’ve learned how destructive some car buying is by watching my hand sign escrow checks to finance companies of car manufacturers over the past several years.

    And what is nuts is one of the biggest beneficiaries in the new bankruptcy legislation about 5 years ago was auto-financiers. In many cases they’re merely the assignees of car dealers which practically defrauded the buyer, but they get protected by Congress. It just shows that we have the best government money can buy.

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  29. 29
    Kary L. Krismer says:

    RE: Back to Basic @ 19 – Part of what’s not being considered when looking at this high income situation is houses are not bought on income alone–especially high priced houses. People who buy high priced homes tend to have high asset valuations, and they liquidate part of those assets to buy the high priced home, and thus end up with a mortgage payment that isn’t that much higher than others.

    In comment 64 I breakdown the loans the last time I ran numbers:

    http://seattlebubble.com/blog/2009/02/25/case-shiller-tiers-low-tier-falls-over-15-in-a-year/#comment-67108

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  30. 30
    Kary L. Krismer says:

    RE: Eric Arrr @ 21 – My response to this would be the same as Ira’s first paragraph in post 22. It’s not as big of a problem as it used to be.

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  31. 31
    Matsayswhat says:

    By Plastic Bags @ 2:

    I completely agree with everyone here that houses are still overpriced. That being said, just because you don’t feel comfortable making a purchase doesn’t mean that is where the line is drawn and everyone making less than you should come to the same conclusion. Of course people will lose jobs or get ill, which is why we keep emergency funds and have the best insurance we can afford. I wish when lenders are looking over your assets they would take into account whether you have any money left over after your down payment for an emergency fund. But I suppose it’s not to their benefit to do so.
    We’re going FHA because we’re afraid of throwing a bunch of money at a house that’s declining in value, and would rather keep the extra cash in reserves in case of emergency. I don’t know if that’s irresponsible or not, but I’ll feel a lot safer at night knowing if one of us loses a job we’ll have plenty of time to find a new one.

    I couldn’t agree more with this or said it better myself. When I recently bought a home, my wife and I could have put 20% down, but instead we put 10% down and are keeping the rest to add to our safety net. That way instead of being good for maybe just a year if we both lose our jobs, we’re good for around two. The downside is that in the short term we pay a little more interest, but it’s not hard to make additional payments to principle once we feel more comfortable doing so, or have additional savings.

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  32. 32
    tomtom says:

    By Jared @ 6:

    How much are you currently paying each month to contribute to someone else’s equity?

    In my case, I pay $1000/month.

    But I know that that also pays sewer and water, property taxes, maintenance and repair, as well as the interest on the loan they used to buy the building.

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  33. 33
    Trigger says:

    Tim – I agree with this. This is actually why those houses are so expensive. Made of plywood or hard pressed wood as they call them – and with wall to wall carpeting, cheap technology. And yet such shacks sell for 400K. Some houses for 400K are suitable to become social housing for poor families. Yet normal people move into them. It beats me.

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  34. 34
    Kary L. Krismer says:

    RE: tomtom @ 32 – I wouldn’t even look at it either way (Tomtom’s or Jared’s).

    Tomtom is just out of the market. No risk of loss, no possibility of gain.

    It’s sort of like me an Boeing stock. I don’t own it, I don’t have a short position in it. That doesn’t mean I can’t have an opinion about Boeing.

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  35. 35
    Markor says:

    I think the cure goes to the whole issue of sustainability. When we can have high confidence that living conditions will remain largely the same or improve for the next 10000+ years, then I think we’ll also not have much problem with impulsive behavior disorder. Make it harder to get a loan, and harder to not pay it back. A huge problem in our society is subsidies of all types. They’re everywhere now, from the people who get free health care if they don’t have insurance, to the corporations that don’t have to clean up their toxic wastes. When it’s no longer more profitable to be reckless than responsible, people won’t be as impulsive.

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  36. 36
    BillE says:

    They all keep focusing on the 8k tax credit without doing the math. On a 250k home, that 8k is only about 3%. 3% is nothing. But hey, people want to get in on that tax credit!

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  37. 37
    kfhoz says:

    Many people have told me that their home is an enforced savings plan. This actually works okay a long term normal market (not the bubble-popping of the past few years). Having to pay the mortgage stops “impulsive behavior disorder” on something like a new car or expensive vacation because the money is already gone, spent on the house.

    Even if a house loses ground financially, in normal markets it retains more residual financial value than an impulsive purchase new luxury car or a cruise.

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  38. 38
    WestSeattleDave says:

    kfhoz — I think just the opposite may be at work. Once you own a home, it seems that you can borrow way more money (through refinancing, second mortgages, HELOC’s, etc.). Awhile back I read an article that compared debt-to-income ratios of renters and homeowners, in 1980 and 2007. In 1980, owners and renters had roughly the same ratio of debt to income. By 2007, the renters had about the same ratio as 1980, but the owners had a roughly 50% higher ratio than before (both adjusted for differing housing costs). The implication was clear — owning a home lead to greater borrowing.

    When homeowners get foreclosed on, there is ofter significant debt besides the mortgage. So their “enforced savings” doesn’t seem to help them much, as it is tied up in the house and not available in a bank account.

    And besides, the enforced savings comes from the house appreciating, not from making the house payment. Most of the payment goes to the bank in the form of interest on the loan. Maybe we should call it “enforced bank profit” instead!

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  39. 39
    Markor says:

    RE: BillE @ 36

    And the $250K house would be $242K if not for the credit.

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  40. 40
    The Tim says:

    By WestSeattleDave @ 38:

    Maybe we should call it “enforced bank profit” instead!

    No doubt. I made a similar point in a post a couple years ago:

    …if home buying is like a savings plan, it’s probably the worst savings plan on Earth. Would you voluntarily sign up for a savings plan where well over half of the money you deposit in the first 20 years simply vanishes, and from which you can only withdraw money by relocating and paying a 6-9% fee (not on the amount you have “saved” mind you, but on the total sale price of the home)? Of course not. That doesn’t sound anything like a savings plan.

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  41. 41
    Indy says:

    So what’s the cure for impulsive behavior disorder? Is there one? Surely there must be a way out of this self-destructive cycle, right?

    I don’t know if there’s any good cure for “impulsiveness” in general – that internal, overwhelming temptation to act on one’s desires even in the face of negative consequences, – but behavior is different than desire, and since one can only act within his limits, the constraints of reality prevent a lot of detrimental decisions. Impossibility denies Impulse.

    But that’s the thing about credit and debt – they expand the possible and they enable people to do very risky things that they wouldn’t be able to do if they had to rely on their own resources. For some people – this just smooths out consumption and can be tremendously helpful. But for others it leads down the path to hell – it just enables their reckless impulsiveness at larger scale.

    Of course, creditors, prudently looking out for their own interests, are supposed to make sure their money is safe – you know, setting limits, conservatively appraising collateral, and performing due diligence to ensure the debtor can afford the debt and is not blowing his entire income on some foolish speculative whim that must be expensively repossessed should even the smallest things go wrong in his life. In other words – they’re supposed to say “no” occasionally, and act as a bar to impulsive behavior.

    Too bad we didn’t have many lenders like that in the last few years.

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  42. 42
    tomtom says:

    By Kary L. Krismer @ 34:

    I wouldn’t even look at it either way (Tomtom’s or Jared’s).

    Tomtom is just out of the market. No risk of loss, no possibility of gain.

    Actually, it’s not quite that simple.

    I have a salary, and beyond paying for a place to live there is leftover money. I have to decide what to do with it. I can use it (and my rent) to buy a house, I can hide it under the mattress (or checking account), invest it in mutual funds, or spend it on hookers and blow (or buy a different kind of Hummer). These different markets have different benefits, opportunity costs and potential returns.

    Currently, I think the order of potential returns is mutual funds, mattress, hookers and blow, and homeownership. Of course, I could be wrong.

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  43. 43
    what goes up must come down says:

    kary are not opinions like A holes we all have them?

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  44. 44
    CCG says:

    Craigslist is your friend folks. My year lease is ending and the property manager offered to let me renew at the same rent or go month-to-month for only $100 more. What a deal! Instead I spent 10 minutes on CL and cut my rent by 30% AND got a bigger/nicer place. There were 180 new listings for the Seattle area that day alone (Wednesday). Good luck out there.

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  45. 45
    The Tim says:

    RE: The Tim @ 40 – So I was reading back through that post I linked, which was originally published on Get Rich Slowly in July 2007, and I noticed the line where I said:

    If your goal is to build wealth, you will be much better off investing your money in the stock market than buying a home.

    Oh, snap! That was probably some pretty dumb advice, right? After all, stocks tumbled far more than housing. However, stock purchases aren’t leveraged like housing is, so I wasn’t really sure which one would actually come out on top.

    So of course, I took the renting vs. buying scenario I described in my post and ran the numbers from July 2007 through today. I made a few generous assumptions in favor of the buyer: taxes remain constant, home prices have risen slightly since the last available Case-Shiller data (June), and that the renter experienced a ten percent hike in rent in January 2008 and January 2009.

    Here’s the resulting comparison of equity:

    I should also point out that the above chart does add the monthly principal payment amount ($320-$370) of the homebuyer to their monthly equity.

    Looks like I’ve pretty much written Monday’s post :^)

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  46. 46
    CCG says:

    By what goes up must come down @ 43:

    kary are not opinions like A holes we all have them?

    RE: what goes up must come down @ 43

    “And they all stink except mine!”

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  47. 47
    Sniglet says:

    Some of these FHA Streamline and VA transactions that fore go appraisals are absolutely headed for future delinquency/foreclosure.

    Truer words could not be said. The government is so eager to prop-up the market that they are giving money to ever riskier borrowers. Defaults on NEW FHA backed, or GSE, loans are breaking records. We are setting ourselves up for yet another massive wave of foreclosures.

    http://surkanstance.blogspot.com/2009/08/fha-leads-way-towards-sub-prime.html

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  48. 48
    what goes up must come down says:

    CCG — SCORE

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  49. 49

    The only way out of this is to “properly” manage and control the money people have, whether they are making $50K or $150K. This is very hard thing to do especially when the odds are stacked against them, massive advertising, ease of shopping, false sense of job security, credit card galore etc. 65% of the people live paycheck to paycheck. This is a huge number (every other person!!!). Take that paycheck away and it is a disaster for them.

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  50. 50
    kfhoz says:

    RE: WestSeattleDave @ 38 – Yeah, you are perfectly right. I keep forgetting about those HELOCs! The horse in my photo was bought with a HELOC, I only leased the animal. The owner’s house has been in and out of foreclosure, I do not know what the status is now.

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  51. 51
    Civil Servant says:

    Jonness didn’t say he couldn’t afford a house, he said he didn’t feel like he could. (Although as some commenters point out, by various evaluative standards he totally “can.”) As a fellow “can”-but-won’t-yet buyer, I feel the same way. And in the same regard I love seeing the proliferation of that attitude in recent months. It sure beats the “I don’t feel like I can, but I know I should” that caused many people to get in over their heads the last several years. Many people’s standards of reasonableness — how big a house to get, how much debt to take on, how long to plan on staying in the house, etc. — have changed. It’s impossible not to believe that this will have some impact on the market, in addition to local and national economic factors.

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  52. 52

    RE: Kary L. Krismer @ 4 – Really? Kary, do you have data that shows that buying a car creates more BKs than buying a home? It seems amazing to me.

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  53. 53

    RE: S-Crow @ 17 – What’s extra scary with the streamline refi’s is that no income is *required* to be verified. A spouse could have lost their job (or even both) and are refinancing just to skip a payment and buy some time before it goes back to the bank.

    Our company is verifying employment and income with streamlines (even though it’s not an FHA/VA guideline)…if the borrower winds up not making at least 3 mortgage payments (4 months) then the banks will cram the mortgage back down the originating mortgage company/correspondent lender.

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  54. 54
    fool me once says:

    going back to the original idea of Impulsive Behavior Disorder and the poster’s question/opinions

    All’s I know is my household income is 6 figures, I have no kids, I have 20% down, and I still don’t feel like I can afford a house priced $400K. How people are pulling the FHA trigger with 3.5% down and $70K in household income is beyond me. I mean, what happens if a spouse loses a job or a family member gets ill? Don’t people care about long-term stability in their lives? It appears to me, a lot of people borrow as much as they possibly can at every new moment in time.

    I learned from being a “homeowner” that the bookkeeping exercise of “i can afford this payment” is just an exercise. In real life, with an income and a mortgage amount/payment similar to what the poster is describing, I could not afford to save for retirement and I was constantly upended and disrupted financially, having to pay for repairs and maintenance, taxes, insurance, watch my paperwork, and records etc. I never went on vacation. I thought that spending $10 for a bag of dirt for my yard was normal. I was not in control and that led me to make even poorer decisions as time went on. I literally wasted years of my life maintaining a building and yard… go to work, pay the mortgage, pay the taxes, pay the yard man, repair the building, rinse, repeat.

    In the end, I dumped – er , sold –my house at a huge loss (I absorbed the loss – I did not have a short sale or abandon the payments.) Now I live in an apartment, I save money, I enjoy my life and I am more in control. I am not in denial any more, thinking I’ve got an “investment” or some sophisticated way to make money and also have a swell house everyone (I hope) will envy. I urge everyone thinking about getting a mortgage to remember that when you are old and frail, you will need every cent you can get to help you pay your bills.

    I hope I never ever have a mortgage again because now I have a life I can enjoy.

    I have a long way to go still. Good luck to the person who posted the comment/question, we all make the best choices we know how to at the time we make them.

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  55. 55
    Kary L. Krismer says:

    By BillE @ 36:

    They all keep focusing on the 8k tax credit without doing the math. On a 250k home, that 8k is only about 3%. 3% is nothing.

    According to some, that “nothing” is more than what you should pay to have someone experience guide you through the transaction and look out for your interests. ;-)

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  56. 56
    Adam says:

    I can tell you where IBD (irrational behavior disorder) comes from, family and the need for stability. I was transferred to Seattle in February when my division was shut down. We sold our house (bought in Portland in 2005) in the nick of time, making a small profit. We left all of our friends and our 3 year old daughter’s friends behind. Our world revolved around the other parents/friends we met and family life. Number 2 is on the way and school is just a few years away for our oldest. We want to start putting down roots and re-establishing that sense of community and it’s much harder to do when you don’t know where you’ll be living in a year or two. I’ve found surprisingly great stability at work. To boot, moving isn’t fun and probably not all that great for little ones (we know from recent experience).

    So, we’re on the fence. I know that we’ll lose some equity before ever making it back. But with kids we don’t plan on any elaborate European vacations in the near future. Stability and community on one hand and financial prudence on the other (and they are definitely not mutually exclusive) or some mix thereof.

    One great fear is that the house you chose to rent for the long term will be sold out from underneath you when the market does finally hit bottom and begin to rebound. So now you’re worried about market timing. We’re not unlike Jonness in financial terms so if we get caught in a wave of sidelined players rushing into the field we’ll be out of contention to buy where we want and without a good rental option… enter IBD.

    I’ll end with this; My friend who works for a hedge fund that watches real estate primarily believes that 25% of the
    Ginnie Mae purchases will go under. It’s not over yet.

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  57. 57
    Kary L. Krismer says:

    By Rhonda Porter @ 52:

    RE: Kary L. Krismer @ 4 – Really? Kary, do you have data that shows that buying a car creates more BKs than buying a home? It seems amazing to me.

    Well keep in mind that back when I practiced owning a home meant people could borrow more money to stay out of bankruptcy. It might very well be different now.

    But yes, car loans were a big problem. I had many clients where even after you wiped out all their non-secured debt, they had little or less than nothing left on a month to month basis. But to keep their car they had to keep the payments current. The law change I referenced required that they “reaffirm” the debt to be able to keep the car, which meant that if they defaulted, they’d be liable for the deficiency. And their attorney would have to sign off saying that it wasn’t an undue hardship for them to make such payments. This was actually one of the major reasons I gave up practicing law, because I didn’t want to be put into the position of having to claim it wasn’t an undue hardship, or having my client lose their car. (The other main reason was 20 years of doing it was long enough–it was getting boring.)

    BTW, car loan availability was a joke. One year I had a client in a Chapter 13 “wage-earner” reorganization get financing to buy brand new Ford Expedition! These were people IN bankruptcy.

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  58. 58
    Kary L. Krismer says:

    By Adam @ 56:

    I can tell you where IBD (irrational behavior disorder) comes from, family and the need for stability.

    You didn’t quite go where I was expecting of that, but it reminded me of another car analogy.

    Several years ago I had to pick up my mom’s car from a body shop because she was out of town. Driving up to the house on a summer day, several people saw me in her car and asked excitingly if I’d bought a new car.

    Preferably they should have come up to me in despair asking what bad thing happened to my old car that I’d be forced to buy a new one. But instead, spending money on a new car is seen as a good thing.

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  59. 59

    RE: Adam @ 56

    Just because you buy a house doesn’t mean you’re exhibiting signs of Irrational Behavior Disorder ( and I can just see those late night infomercials, the deep voiced announcer asking ” Are you suffering from Irrational Behavior Disorder?”)
    The irrationality plays both ways. Absolutely, people lunge into home buying without clear thinking, but at the same time, right now there is the ” I’m going to buy a house but I’m convinced that prices here are going to drop another 60%, so I’m just going to wait until that happens.” It might be an eternal wait, or at least a very long one.
    Sure, it’s possible, but I think a 15% drop is a lot more likely than 60% . A rational person might come to the conclusion that they don’t HAVE to live in Wallingford, or that they might need to spend a little more than they had originally anticipated, but a rational person is also not going to get into bidding wars, or buy a house which brings them too close to the edge financially.

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  60. 60
    alex says:

    I find it really interesting that none of the many commenters mentioned the case of a person who OWNS a house for real – no mortgage, no liens.

    It is amazing how rare this situation has become in our society. We only consider the choice between “owning” (with a huge loan larger than half the value of the house) and renting.

    Isn’t that very fact (the fact that most people can’t afford to really OWN) an ULTRA-CLEAR indication that prices are too high?

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  61. 61
    David Losh says:

    RE: Ira Sacharoff @ 59

    Even Ira’s saying it’s a good time to buy,

    I find it strange that the year redfin turned a profit, zillow starts selling mortgages, and Rain City Guide gets into the brokerage back end that prices are going up, and up.

    I think the Doctor Schiller guy is on to something with the group think theory.

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  62. 62
    David Losh says:

    RE: alex @ 60

    Thank you, that is very correct. I have never seen a time when owning free and clear was so far removed from purchase price.

    I checked the Multiple to find 265 pending sales in the Wallinford/Ballard, North to 145th area. One property that I know went on the market for about $500K, sold within a week, after the owner was reviewing offers.
    It’s an insane market. Another was bought at a pre forclosure sale and is pending for $95K more in 4 months. This is more unbelievable than 2007.

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  63. 63
    Markor says:

    RE: The Tim @ 45

    If you went back to 1995 houses would have outperformed stocks. Of course the housing bubble would’ve helped big time, but the stock market forms bubbles too (could be one right now). I’m sticking to the advice I gave here in 2007, that it’s a better bet to pay off a house before investing in stocks. Big housing bubbles are more obvious (obviously!), so one can sell the house and rent (like I did), the easier the more equity has been accumulated. After selling the house I chose to put my equity and savings between renting and buying into CDs and savings accounts. Had I done stocks at each point instead I’d have done a lot worse.

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  64. 64

    RE: David Losh @ 61
    I never said it was a good time to buy. It’s not the worst time to buy ( that was a couple of years ago), and from a financial standpoint it’ll probably be better a year from now, but I would never say ” It’s a good time to buy” even if I believed it. It just sounds so much like trite real estate agent pablum.

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  65. 65
    Markor says:

    RE: alex @ 60

    My elderly neighbor owns his house outright. I wonder how much lower house prices would be if it were not for senior exemptions on property taxes, yet another unfair & unsustainable subsidy despite its tug on heartstrings.

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  66. 66

    RE: alex @ 60
    Interesting point, Alex. You might be right. I own my house free and clear with no mortgage and no liens. This was possible because of selling the last house at an insane profit, downsizing, and paying cash for this one, in 1998.
    What occurs to me is: Did more people own their own homes outright five, ten, or fifteen years ago, or did they just owe less because homes were cheaper?.

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  67. 67

    By Markor @ 65:

    RE: alex @ 60

    My elderly neighbor owns his house outright. I wonder how much lower house prices would be if it were not for senior exemptions on property taxes, yet another unfair & unsustainable subsidy despite its tug on heartstrings.

    You don’t get an exemption because you’re old. You get the exemption because you’re old and poor, or disabled and poor…There is I believe a 35,000 household annual income limit to qualify for this. How is this unsustainable?
    Are there going to be a lot more poor old people? It’s not like social security, where you can be a billionaire and still collect. I remember Nelson Rockefeller proudly displaying his social security check, about eight years before he died of a heart attack during sexual intercourse with his twenty eight year old secretary.

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  68. 68
    Markor says:

    By Ira Sacharoff @ 67:

    Are there going to be a lot more poor old people?

    Yes of course! Millions more.

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  69. 69
    peckhammer says:

    “All’s I know is my household income is 6 figures, I have no kids, I have 20% down, and I still don’t feel like I can afford a house priced $400K.”

    Get this: My houshold income is also six figures, and our net worth is seven figures. No debt, no kids, and all of our monthly housing expenses combined equal about $400. I don’t feel like I can afford a house priced at $400K in Seattle either, but that’s a value equation. The housing stock here is absolute junk. A few years ago, I made the claim that if someone were to take a crap in Ballard — and call it a house — someone would buy it.

    So until prices reflect actual value, I cannot/will not afford a house in Seattle.

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  70. 70

    “A few years ago, I made the claim that if someone were to take a crap in Ballard — and call it a house — someone would buy it.”

    I showed that house. The listing agent described it as being ” locally produced organic crap” and having ” rustic charm”.

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  71. 71
    peckhammer says:

    RE: Markor @ 63

    Had I done stocks at each point instead I’d have done a lot worse.

    Maybe. I’ve made an enormous amount of money in the stock market in the last year just by rebalancing my mutual funds to reflect the sectors I think will perform well in this environment. If you don’t steer your ship, well, results may vary.

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  72. 72
    Markor says:

    RE: peckhammer @ 71

    Good for you. If you do better than a broad stock market index in the long run, you’re doing better than 85% of professional fund managers. You won’t know for sure until the long run is over. I might make that bet, but not until I have secured a place to live.

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  73. 73
    TJ_98370 says:

    Tyler @ 25 said:

    Recently I have been reading a lot about people’s ability to delay gratification being linked very tightly with their overall success (in whatever the apply themselves too).

    My first babystep is to try to not check back here for new posts/comments too many times a day!

    Tyler, checking out Tim’s blog several times a day is a GOOD impulsive behavior disorder!

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  74. 74
    TJ_98370 says:

    Ira Sacharoff @ 67 said:

    ……I remember Nelson Rockefeller proudly displaying his social security check, about eight years before he died of a heart attack during sexual intercourse with his twenty eight year old secretary.

    You are in fine form today, Ira.

    If you gotta go, that’s the way to do it !!! Mr. Rockefeller obviously had his priorities figured out. :-)
    .

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  75. 75
    ray pepper says:

    If Ira and Ardell says its time to buy >>IM ALL IN!

    Hurry up Tim! Xmas is just around the corner. Imagine that flocked tree with the new lights glowing…Or maybe a Menorah shining on the mantle…….Just think of the new home smell around the holidays!

    Kary…20 year old truck? …………..come on….time for an upgrade…..loosen up the purse strings….I did recently. 1995 F 150 for 2k and it runs like a dream…2 gas tanks and a V6 with a stick…because I care …….no V8 here!…….

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  76. 76
    peckhammer says:

    RE: Markor @ 72
    ” If you do better than a broad stock market index in the long run, you’re doing better than 85% of professional fund managers.”

    We’ll I guess I’m doing better than 85% of professional fund managers. I don’t believe in index funds unless you very actively manage your portfolio. I am lazy, and willing to accept a $100K/year increase in net worth (plus compounding with reinvestment) just for being semi-conscious.

    What’s my secret? Spend less than you make — save/invest the rest.

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  77. 77
    The Tim says:

    By Markor @ 63:

    If you went back to 1995 houses would have outperformed stocks. Of course the housing bubble would’ve helped big time, but the stock market forms bubbles too (could be one right now). I’m sticking to the advice I gave here in 2007, that it’s a better bet to pay off a house before investing in stocks.

    Yes, if you run similar numbers starting in 1995, the home buyer would currently have ~$240k in equity while the stock buyer would have ~$100k. The stock buyer still did better in the short term, from 1995 through late 2000. Then of course the simultaneous deflation of the dot-com stocks bubble and the inflation of the housing bubble made stocks a losing proposition.

    Of course, I didn’t give the advice “invest in stocks instead of a house” in 1995, I gave it in 2007.

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  78. 78
    Markor says:

    RE: peckhammer @ 76

    We’ll I guess I’m doing better than 85% of professional fund managers.

    A short-term track record could just be luck. If you’re that confident and can show a long-term track record that handily beats the broad market index, why not become a fund manager? Rake in big bonuses when your bets pay off, lose nothing (except maybe your job) when they don’t. Other people’s money!

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  79. 79
    Adam says:

    @ Kary 58 and @ Ira 59

    You both seize on exactly what’s going on (Kary great analogy, so here’s an aside; We had to buy another used car because of the loss of a company vehicle. Friends sold us a very nice Audi for really cheap to supplement our beater, but truth be told I would give anything to go back to when we just had the 15 year old Toyota truck. Hard to get excited about the German luxury ride. You were more spot on than you thought).

    It’s easy to distill the back and forth into black and white but things like kids, community job security/happiness really weigh into risk assessment.

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  80. 80
    TJ_98370 says:

    alex @ 60 said:

    I find it really interesting that none of the many commenters mentioned the case of a person who OWNS a house for real – no mortgage, no liens.

    It is amazing how rare this situation has become in our society. We only consider the choice between “owning” (with a huge loan larger than half the value of the house) and renting.

    Isn’t that very fact (the fact that most people can’t afford to really OWN) an ULTRA-CLEAR indication that prices are too high?
    .
    In the case of the “Greatest Generation”, the “GI Generation” or whatever you want to call Americans who grew up during the “Great Depression” and then were sent off to fight WWII, they avoided debt like it was a plague. When they bought a house, it was a priority to pay it off as quickly as possible. IMHO, having a whole generation where the majority had a mind-set of “DEBT IS BAD”, kept housing affordable. Most recently, we had the “DEBT IS THE NEW WEALTH” mantra. As long as you can meet the monthly payments on all the stuff you are buying, everything is good. A median price of $400K could not be sustainable if everybody refused to pay that much for a house, right?
    .

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  81. 81
    Markor says:

    By The Tim @ 77:

    Yes, if you run similar numbers starting in 1995, the home buyer would currently have ~$240k in equity while the stock buyer would have ~$100k.

    I must have been astoundingly prescient to have put all my spare funds into the house and nothing in stocks from 1995 to 2007, not even the 401k. Actually it’s just that by 1995 I saw the stock market as the gigantic Ponzi scheme it is, so that just wasn’t a risk I was willing to take.

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  82. 82
    David Losh says:

    The term impulsive behavior disorder really addresses the issue. It’s impulsive to think that prices have declined so now you are getting a bargain.

    When prices were rising in 2007 it made sense to me. Global markets were opening up and demand for commodities was going to give us the greatest rate of inflation we had ever experienced. It made sense that every one in the world would want to live here in the United states so there would be a demand for all the new housing units.

    Well now, after being beaten up by the Seattle Bubble for two years I know that the Global markets are as far in debt as we are. The good news is that the developing countries with cash economies are still strong.

    On NPR today, yes, the Bubble bloggers even have me listening to NPR for alternative news, some guy was talking about “building” affordable housing in West Chester. Evidently they have been doing it for over a decade so why not just keep doing it?

    My question is who is going to want all the carp housing we have already thrown together? We have millions of surplus housing units and people are still paying a half a million dollars for two bedrooms 1.75 baths. Is a .75 bath really worth an extra $150K?

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  83. 83
    peckhammer says:

    RE: Markor @ 81

    Prescient? Gun shy maybe. This is the exact period when I became a millionare, largely due to dollar cost averaging into the stock market. Just before the tech bubble burst, I moved 50% of my mutual funds into the bond sector. When 9/11 happened, I moved all of that money back into stocks. In the latest down turn, I moved large portions of my portfolio into US and international growth funds, plus some emerging markets. I would be willing to bet that I outperformed your house investment.

    Housing is a lousy investment — especially if it is your primary residence by a wide margin.

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  84. 84
    peckhammer says:

    RE: The Tim @ 77
    Yes, if you run similar numbers starting in 1995, the home buyer would currently have ~$240k in equity while the stock buyer would have ~$100k.

    You cannot make such a claim without some qualifying conditions, such as the investor fell into a coma and their money tanked while they were out. Money in the stock market can ce reallocated in minutes, unlike money in a home.

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  85. 85
    Kary L. Krismer says:

    Tim’s assumptions are not apples to apples because one is leveraged and one is cash.

    Let’s change it up and for the homeowner assume a cash purchase of a house at $400,000, and then putting the savings in rent, less taxes paid, into an account. And for the stock investor, assume that in June 2007 they bought $400,000 of stock on margin, with only $85,000 of cash.

    I’m guessing the result would be the homeowner having over $344,000 in assets, and the stock investor being bust due to repeated margin calls

    If you made it apples and apples, with both cash, the homeowner would still be at $344,000 and the stock investor at one point would have been down 50%.

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  86. 86
    The Tim says:

    RE: Kary L. Krismer @ 85 – Okay so my hypothetical situation of a potential July 2007 homebuyer who has $85k to use as either a down payment or a stock investment is admittedly unrealistic. But buying a $400k house with cash is even more ridiculous compared to what most people were really doing.

    If we want to look at something more like what people were really doing in 2007, a much more realistic scenario to run the numbers for would be buying maybe a $250,000 house with 3.5% down ($8,750) vs. putting that $8,750 into the stock market.

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  87. 87
    peckhammer says:

    RE: Kary L. Krismer @ 85
    If you made it apples and apples, with both cash, the homeowner would still be at $344,000 and the stock investor at one point would have been down 50%.

    This is a seroiusly flawed example, IMO. The stock investor can change thier allocation on a dime. The housing “investor” cannot.

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  88. 88
    Jonness says:

    By Jared @ 6:

    If my math is correct, you have $80,000+ in cash and gross $8300+/mo in income; I don’t think a $2400 monthly mortgage is unreasonable.

    20% of $400,000 = $80,000

    $320,000 at 5.5% interest for 15 years = $2530/mo.
    + $570 tax and insurance = $3100/mo.

    $200/mo maintenance fees = $3300/mo.

    Upgrades as desired $200/mo = $3500/mo.

    Let’s say I take home $6000/mo. after taxes, health insurance, etc. That leaves $2500/mo to live on and pay all my other bills–student loans, cable, car payment, auto insurance, heat, water, blah, blah, blah. That leaves $0/mo to put in savings, invest, or go on a nice vacation. Now pretend I’m the average family earning what I do. That means a boat, 2 new cars, 2 kids, clothes, food, etc. Now, I absolutely HAVE to take out a 30-year loan instead of a 15-year loan, because I don’t make enough to buy an average house and raise my family. Now let’s pretend for a moment that I want to start a savings plan for my kids and a savings plan for myself. In order to send my kids to college, I’m forced to get the 1500 sq. ft dump in the bad neighborhood. Now let’s pretend for a moment that I have a family, make the median salary, and wish to live in the median-priced cracker-box in the decent neighborhood…Now consider what will happen to me if I lose my job.

    If you think I’m making up the claim of “impulsive behavior disorder,” keep in mind we just set a new all-time national foreclosure record. The moral of the story is, Kary is right–“most people value homes more than I do,” and the ever increasing record number of foreclosure proves it.

    People who have never done so seriously need to save $50,000 in order to find out just how much money that represents and just how hard and long you have to work to get it. Then take another look at that $400,000 cracker-box down the street.

    How much are you currently paying each month to contribute to someone else’s equity?

    My current payment is $0/mo.

    I think most people are forgetting they’re going to get old someday. If you don’t start planning for that now, you are in a heap of trouble when you get there.

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  89. 89
    TJ_98370 says:

    Jonness @ 88 said:

    ……People who have never done so seriously need to save $50,000 in order to find out just how much money that represents and just how hard and long you have to work to get it. Then take another look at that $400,000 cracker-box down the street……
    .
    Testify brother!!! Testify!!!

    .

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  90. 90
    Jonness says:

    $320,000 at 5.5% interest for 15 years = $2530/mo.
    + $570 tax and insurance = $3100/mo.

    Sorry, that should be at 5% interest = $3100/mo.

    Not so long ago, I was the average American. I ran up my credit cards, and I felt as though I didn’t have any money (I was going to CS school at the time). The lack of money drove my impulsive behavior disorder and drove me to spend what I didn’t have. When I gave in to the urge and made a purchase I couldn’t afford, it would immediately make me feel really good. But soon afterward, I would get a really awful case of buyer’s remorse (a sick feeling of being forever trapped and sinking into the abyss).

    After I graduated from college, I lived paycheck to paycheck and maintained debt on my credit cards, and the impulsive behavior disorder remained. Then one day I decided to pay off all the credit and start a savings account. I lived as frugally as possible and began saving over 50% of my take-home pay.

    Something amazing happened to me at this time. The impulsive spending disorder went away. The coin flipped, and I began to get the same sense of satisfaction from saving money that I used to get when I spent it–only this time I never felt after-the-fact remorse. Instead, I always felt good and still do.

    It’s a new way to live, but IMO, it’s the best way to live. I’ll wait a few years for the people trapped in the impulsive spending pattern to lose their half million dollar homes, and then I’ll pick one up nice and cheap.

    Anybody who thinks house prices are going up around here during a period of rising unemployment and foreclosures is dreaming. I’ll bide my time and continue to save. When the time is right, I’ll live comfortably in the same house that so many others will live in under extreme financial misery and duress. Living the good life starts with exercising a little bit of self-control.

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  91. 91
    peckhammer says:

    RE: Jonness @ 88
    “I think most people are forgetting they’re going to get old someday. If you don’t start planning for that now, you are in a heap of trouble when you get there. “

    Word.

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  92. 92
    Markor says:

    RE: peckhammer @ 83

    Sounds like you’re doing a lot better than Buffett. One thing’s for sure, if I keep making house payments I will definitely own a house outright. Can’t say the same for all stock market investors.

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  93. 93
    Markor says:

    RE: peckhammer @ 87

    Comparing to a broad market index is customary because so few people can show that they are able to beat the market average due to skill rather than luck, and even those cases are debatable. The efficient market hypothesis, which implies that nobody can beat the market average due to skill, is still generally accepted.

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  94. 94
    Jeremy says:

    I guess I’m one of those crazy younger people who actually want to pay off their house rather than buy and sell them like baseball cards. I’d rather not pay any more rent (e.g., interest is the price to rent money) than absolutely necessary. We don’t carry balances on credit cards and took advantage of the artificially low rates to refinance into a 15-year loan rather and a 30-year. We were already prepaying a bit every month so the net change to use is ~$250/month. And we’ll save more than $7k in interest THIS YEAR alone.

    I see this as a hedge against inflation if nothing else once the printing catches up with us and the Fed waits too long to raise interest rates again. Inflation could easily top 4% in the long term, which is why I think it’s crazy that banks offered rates below 5% no matter how cheap overnight money is.

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  95. 95
    The Kid says:

    RE: Jonness @ 88
    Thank you.

    Pardon me, but I’m going to rant a little. Ignore it if you wish, it’s cathartic for me.

    So here I am, pushing 30, working at a good job, with pay slightly above the median income for a individual in this county (King). I save, as much as I can, and way more than most of my peers, but after doing the grim math of it all, I realized that even if I stopped eating, lived without a phone, sold my car and walked everywhere, I simply cannot save enough money for a %20 down payment on something I could afford. It would take DECADES.

    Sorry to sound whiny and childish here, but seriously, even rent on a one bedroom apartment is a stretch right now. The side of the housing bubble, and the rising cost of health care, that is missed frequently is this.:My generation has been given two options, do something totally insanely financially irresponsible, or have no home, and no family for the rest of your miserable lives.

    I was lucky enough that my chosen career required only a very reasonable cost of schooling, and limited time expendeture, my friends, however, are mostly sitting on $60k of school debt, $15k of auto debt, and significant medical debt because they were too busy putting themselves in debt for school to be able to obtain health insurance and something happened. Broken leg. Ear infection.

    We did as we were told by our parents.
    We worked hard.
    We did well in school.
    We went to college.
    We built our credit ratings.

    What did we get for it? a $35k a year “entry level position” that has stayed entry level for 8 years.
    A pile of debt that will haunt us for the next 20 years.
    Denied chances at responsibly owning a home.
    Denied a chance at responsibly having a family.

    Most of the people I know, college educated working adults, dual income, who have children are on food stamps and WIC checks.

    Buy within our means? Impossible, there is no longer any “within our means”. The only reason that my wife and I can afford an apartment of our own is because we have no debt. Even at that it takes half my take home pay just for rent. One bedroom. Most of my friends live in shared housing situations; three bedrooms, 4 roommates.

    You think I’m exaggerating?Think it’s not really that bad? Ask. Ask anyone under the age of 30. They will tell you the exact same thing.

    Bitter? You bet.
    Resentful? As hell.
    Angry? Nearly enough to start burning down McMansions.
    We were lied to. You can slice it any way you want, justify it any way you want, talk about how life isn’t fair, but it dosen’t change the one simple fact that WE. WERE. LIED. TO.

    So when I read, what frankly I already knew, that even if my income were tripled I would have a tough time affording the same basic status my parents had on the incomes of a preschool teacher and a truck driver, I get depressed enough to shoot myself.

    Why did people who made $40k a year buy $350k houses? I’ll tell you why. Because they were desperate, and someone has offered them a way out. This isn’t about stupid people, or irresponsible people, it’s about people who are desperate to seize some basic quality of life before that too is stolen from them.

    I have followed this blog for a year, daily, for one simple reason. I am looking for a particular piece of good news, and that good news will be here, one day, I pray. On that day, the headline will read “Whole Insane House Of Cards Real Estate Market Finally Utterly Collapses, Normal People Have a Shot Of Living Responsibly Again”

    The Kid

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  96. 96
    BillE says:

    By Kary L. Krismer @ 55:

    By BillE @ 36:
    They all keep focusing on the 8k tax credit without doing the math. On a 250k home, that 8k is only about 3%. 3% is nothing.

    According to some, that “nothing” is more than what you should pay to have someone experience guide you through the transaction and look out for your interests. ;-)

    In rough numbers, that 3% could be negotiated off the selling price, or off commissions, or made up with the seller paying closing costs. The idea of getting worked up over an $8,000 boost while spending hundreds of thousands is crazy. Some of the same people drooling over the 8k are also jumping so they don’t “miss the bottom.” As if housing prices are going to start shooting up again like it’s 2005.

    By ray pepper @ 75:

    Kary…20 year old truck? …………..come on….time for an upgrade…..loosen up the purse strings….I did recently. 1995 F 150 for 2k and it runs like a dream…2 gas tanks and a V6 with a stick…because I care …….no V8 here!…….

    Probably the 4.9 liter inline six, which is one of the best truck engines ever made. An industrial engine used in all sorts of equipment. It’s no hotrod, but it makes good torque and is about as reliable as a hammer.

    Oh, and the kid, I’m with you 100%.

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  97. 97
    Jonness says:

    RE: The Kid @ 95

    The Kid: That’s it in a nutshell, and something that the older generation absolutely cannot comprehend. And if you think you’re in a bind, try graduating from college right now with 50K of student debt and no jobs in sight. New grads are getting absolutely hosed by this mess. Meanwhile, the old guard sitting at the top of this gigantic government-led ponzi scheme is looking to get a half million dollars for a cardboard box so they can take a second vacation to Bermuda. On top of this, soon they will vote to raise your taxes in order to finance their social security and medicare benefits. They’ll have to do this because they robbed the coffers and spent all the money they were supposed to retire on. Now there is a $50+ trillion unfunded liability resting on your ability to work hard for your entire life in order to pay for it. Hey, forget about funding your own retirement, the baby boomers have already accounted for 100% of the tax dollars you will earn over the course of your life.

    V-shaped recovery here we come–not! IMO, October will represent a dismal month for the stock market and the aspirations of raging bulls. If the new guys coming up can’t buy into the game, the ponzi scheme eventually collapses. Translation, baby boomers will eventually pay for all the greed and excess after all. Unfortunately, the ones who end up paying the most will be those that stole the least.

    But God is a just god, and soon enough all the boomers will have bed sores and dirty diapers. And your generation will have the first shot at legitimate stem cell-engineering and other such technologies that will bring strength to the economy and promote a quality of health and life that the boomers can only dream about.

    Your time will come.

    (Sorry boomers. I mean no harm, but there is truth in what I say.)

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  98. 98
    shawn says:

    (found this on the web)
    5 Tips for Encouraging the Impulse Purchase

    1. Set Your Product Apart
    2. Make It Easy and Accessible
    3. Offer a Discount They Can’t Refuse
    4. Market Your Product at the Right Time and Place
    5. Everyone’s Doing It

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  99. 99
    shawn says:

    The cure is to take away the ability for the person to fulfill their impulse, and take back the thing the impulsive person already obtained.

    For impulsive home buyers, forclosure, and lack of loans.

    They may still have the impulse, but they have no way to fulfill it.

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  100. 100
    TJ_98370 says:

    .
    (Tim, the Reply and Quote feature isn’t working for me for some reason.)
    .
    Reply: The Kid @ 95 and Jonness @ 97:
    .

    Very eloquent. I should know better than to identify with boomers on blogs like this, but here goes anyway:
    .
    FWIW, it’s not only the under 30 crowd that’s having a hard time. I know of boomers, who are at retirement age, who cannot even consider that option. Some are way underwater on their homes and not because of lavish lifestyles or because of buying a McMansion at the height of the bubble. From what I can see, they made the mistake of providing for their families. The American dream gone awry.
    .
    When I graduated from college, I was so destitute that after I found an apartment near my first job, paid the deposit, first / last month’s rent, I had to borrow funds from the credit union to buy groceries. I could not get a credit card, because I had no credit history. Talk about irony. Apparently the credit card companies did not think I was responsible enough to have a credit card because I never before put myself into debt for anything.
    .
    The first few years working, I was only able to save $200 or less a month. I remember talking with relatives about how difficult it was going to be to buy a home, especially with the double digit interest rates. The response I got from older relatives and friends was that they did not understand the problem. After all, CD’s were paying double digit returns too. Well that is all fine and good if you had any money to buy CD’s. With inflation running rampant, the goal of ever owning a home seemed to keep retreating further and further away. I was majorly depressed about the situation.
    .
    Things got better. Interest rates dropped. I got promotions. My significant other found employment. After 6 years I had the 20% down payment saved.
    .
    It may or may not be more difficult starting out these days, but please don’t make it sound that it is / was all ice cream for all boomers. That just isn’t the case.
    .

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  101. 101
    ray pepper says:

    WOW..powerful and accurate quote!

    Anybody who thinks house prices are going up around here during a period of rising unemployment and foreclosures is dreaming. I’ll bide my time and continue to save. When the time is right, I’ll live comfortably in the same house that so many others will live in under extreme financial misery and duress. Living the good life starts with exercising a little bit of self-control.

    However, my friend Jonness these times are bringing some very interesting (and compelling) prices at local county auctions. I encourage you to go to the Friday foreclosure sales as a student. With time, education, and lots of leg work I believe you will find what you are looking for be it at the county level, http://www.auction.com, or in a short sale/foreclosed home. Just be patient and find your GEM! Maybe not this year or next but if you always look you will find. So many investors in the last 6 months have been buying and flipping at incredible profits. This may not be for you but finding a GEM is highly likely that you can live in for many years and withstand any further market declines!

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  102. 102
    Rack says:

    By Jeremy @ 94:

    I guess I’m one of those crazy younger people who actually want to pay off their house rather than buy and sell them like baseball cards. .

    It’s not crazy, but I bought my house when I was 21 and my needs, and income have changed since then (now 30).

    My wife wants bigger, I want better, I wish I didnt have to do it at such an uncertain time, but glad that I dodged the bullet that the last few years had brought us.

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  103. 103
    David Losh says:

    The difference between stocks and houses is that you can move money in a stock account which is exactly what the government wants. You pay taxes.

    The house, as a stable investment, works if you manage the property for return. I did a comparison with a stock manager and the difference was slight, but I had the potential of selling the property as a personal residence for a tax savings of 28%.

    That was in the past of course. Now there would be a constant stream of lost equity as the house value declines in the next three years.

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  104. 104
    Blurtman says:

    The message is that a nice, perhaps new, perhaps large, well appointed house containing all the modern gadgets and conveniences equals success and happiness. The same goes for being seen in a nice new expensive car.

    This message is constantly being beamed to consumers through every medium, constantly. Look at broadcast televsion, the internet, magazines, junk mail. Consuming more things and more expensive items equals success, prestige, admiration by your peers, happiness, achievement, violent love appeal, love for your children, etc.

    The homeless are losers – they have no possessions, no house! The winners are the investment bankers who have several mansions, private planes and expensive cars.

    So why wouldn’t someone try to gain the most possible prestige, the most admiration from peers, the most happiness, by buying the most expensive home possible? Don’t you deserve the most happiness, prestige, admiration possible?

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  105. 105
    softwarengineer says:

    RE: Nathan @ 3

    Don’t Make Generalizations Nathan

    My dad bought a home on one income for 15% of his net pay in the late 50s. $1500 today still isn’t cheap and can still be about 30% of a six figure income, after retirement, health, life, etc, etc….are taken out of the gross pay.

    If Americans all said Hades no to even 30% net pay mortgage payments, they’d have money for a life style too….like nice vacations, new cars, cash outside of retirement, etc, etc….and live debt free too. Home prices would all collapse and what’s wrong with that? I’m a home owner, but still like good sales prices on my rib eyes, electronics, etc, etc…..why are homes any different?

    All it takes is one stroke, one topple down the stairway, etc, etc….and even that $1500/mo will be like a hangman’s noose around your neck; especially in this current buyer’s market. Think about it.

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  106. 106
    The Tim says:

    RE: TJ_98370 @ 100 – The buttons are working for me in IE and Firefox. What browser are you using? Do you have javascript disabled?

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  107. 107
    Jonness says:

    By TJ_98370 @ 100:

    .
    It may or may not be more difficult starting out these days, but please don’t make it sound that it is / was all ice cream for all boomers. That just isn’t the case.
    .

    OK. Sorry for my accusational tone. The thing that burns me is the amount of money our government borrowed on the boomer’s watch. It’s difficult for anybody to take responsibility for that, but IMO, it has destroyed the strength and greatness of this country. I’m specifically targeting the $50+ trillion unfunded liability that the current generation is responsible for prior to even graduating from college.

    It’s easy to see how the younger generation might have a bit of bitterness toward the generation that took out massive loans in their names. But when you break it down, perhaps the boomers were just struggling along trying to survive. Suddenly Reagan decided to give the nation a tax break so that people could get a job and afford to buy a home during a very tough economic period. So he broke his campaign promise to reduce the debt and instead tripled it (wee, magical economic stimulation). It seemed to work, so the public voted in Bush Sr, who followed suit by borrowing a bunch more money. Clinton ended up with a surplus and decided to pay down some debt. But then Jr. got in and went berserk (thanks Bill, more for me). And now Obama is making Jr. look like the fiscal conservative Reagan claimed to be (you better spend your children’s money or else).

    We are a nation completely out of control, and the voting public must shoulder the blame for the part they have played. Otherwise, we are all doomed. Unfortunately, this requires the majority of people to admit the part they’ve played before significant changes are put into place. IMO, this won’t happen until it’s too late.

    A lot of people believe we can just inflate our way out of this mess. Unfortunately, this is not possible. The unfunded liabilities are for social security and medicare. Thus, the amount needed will rise in sync with inflation. Inflation cannot save the sinking ship. The only thing that can save it is to stop borrowing against the future and start living within our means. But we’ll never agree to do that as whole, because it will require enduring a significant amount of pain and going without many of the things we’d like to have. So we push it off on the next generation. The scary thing about this is the next generation awill make the decisions about our care when we are old, frail, and vulnerable.

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  108. 108
    Markor says:

    Reply: The Kid @ 95:

    Great post.

    What’s up with this 20% downpayment? I thought the good times were still rolling with 3.5% FHA downpayments. Did I miss something?

    It’s true that boomers have screwed future generations, including mine but not as badly as yours. The good news is that one day your group will be mostly calling the shots. I hope that you end all these crazy subsidies and giveaways that happen on the backs of others. Mostly I hope that you will make it a lot tougher for people to have more than 2 kids, since overpopulation is the root cause of most of the problems your generation faces. When I look around I see that less than half of people are working. A reporter did a survey, asking people lolling about on a weekday afternoon how they had the time off from work. Turned out that 10% of them were living on gov’t disability payments. These were people with no visible sign of being disabled.

    My first decade in Seattle I had no chance of owning a house here. I didn’t even consider it, unlike how it was recently common for early-20-somethings to buy. Then I got married and we both had graduated to good enough jobs, so it was doable. But it wasn’t doable on Queen Anne, and a lot of other nice areas that we were priced out of. A visit to San Francisco showed that that city was out of the question. Point is, as the human population grows some cities become more popular and are no longer reasonably available. Either you rent indefinitely in those cities, or you consider moving to another cheaper city and work with other folk there to make that city a great city. I have 20-something friends with average jobs who are well able to afford their house, in Syracuse NY. There are a lot of cheaper but still nice places to live in the US.

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  109. 109
    Markor says:

    RE: Jonness @ 107

    So [Reagan] broke his campaign promise to reduce the debt and instead tripled it (wee, magical economic stimulation).

    Yep. That things like airports are named after Reagan shows what a threat that party is to our futures. The people who were showered with that borrowed money love him.

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  110. 110
    Lilypad says:

    RE: The Kid @ 95 – There’s a great book on this topic by Nan Mooney called “(Not) Keeping Up with our Parents: The Decline of the Professional Middle Class” http://www.amazon.com/Not-Keeping-Our-Parents-Professional/dp/0807011398/ref=sr_1_1?ie=UTF8&s=books&qid=1251569879&sr=1-1
    which came out about a year ago in hardcover. (I read it from the library for free, of course, because I can’t afford to buy hardcovers.) She addresses many of the issues you brought up and how many Boomer parents have no idea how hard it is for their kids. I am older than you (42) and my parents are older than Boomers (74 and 72) but still clueless. I have struggled all my adult life to get by on a non-tech salary, non-tech, non-science college degree. (Heck, no salary for the past 6 or 7 years as a stay at home mom. And of course, some will say I could go out and get a job, but I’d earn less than I’d need to pay for the kid’s care and that’s just after school care, not full time.) Yes, Boomers have their own set of difficulties. But Mooney makes the case that Generation X and younger will never catch up to that level of affluence previously enjoyed (whether on credit or not) by the generation before us. That’s probably a good thing for the health of the dying planet, but hard to swallow for those of us caught in this trap.

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  111. 111
    BillE says:

    “Young? Can’t afford a house? You’re getting shafted by the government.”

    It’s from the UK, but some here might find some of the points appropriate.
    http://monevator.com/2008/12/10/young-cant-afford-a-house-youre-getting-shafted-by-the-government/?ref=patrick.net

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  112. 112
    Chris C. says:

    I think the only way out of this cycle is through debt-deflation and I don’t believe we will have much of an ability to control or manage it. There is obviously a point in time for both an individual and a society where simply servicing their debt becomes unmanageable. The levels of combined private and public debt are historically high and while this debt has fueled growth for the past 30 years it’s also put us in a very untenable situation. In short, our debt will be our downfall.

    I think we’re presently very close to a point of no return, a breaking point in the credit markets. If you include the unfunded liabilities that Jonness has been talking about then this scenario is unavoidable. We will be unable to afford our own personal debt, let alone any public entitlement programs.

    Here is a quote from Irving Fisher’s Debt-Deflation Theory which he wrote about 3 years into the Great Depression when it became clear to him that his earlier ideas could not fully explain the crisis-

    “Each dollar of debt still unpaid becomes a bigger dollar, and if the over-indebtedness with which we started was great enough, the liquidation of debts cannot keep up with the fall of prices which it causes. In that case, the liquidation defeats itself. While it diminishes the number of dollars owed, it may not do so as fast as it increases the value of each dollar owed. Then, the very effort of individuals to lessen their burden of debts increases it, because of the mass effect of the stampede to liquidate in swelling each dollar owed. Then we have the great paradox which, I submit, is the chief secret of most, if not all, great depressions: The more the debtors pay, the more they owe. “

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  113. 113
    softwarengineer says:

    RE: Jonness @ 107

    I agree with most of what you said, except the part about we voted for the overpopulation debt.

    We have a two party lobbyist controlled government, let’s face it. Do we really get to pick the presidential, senate, congressional candidates; or does the lobbyist corporate powers pick them for us?

    I know, we get all hot and bothered about my ugly sister candidate is prettier than your party’s ugly sister….but in the end, they’re both similar ugly sisters and both choices aren’t really looking after the environment, growth management, etc, etc….hence massive debt and degradation of America’s wages.

    And its all the Baby Boomers’ fault or the corporate lobbyists funding our only choices?

    If you don’t believe me, try running for US Senate on like $50K or even $500K; Hades, that won’t even pay for a couple weeks to set up a campaign office, let alone TV ads, posters, etc,etc….nope, you got to sign the pack with the corporate power cheap labor lobbyist devil to be a candidate and then tow to their line, once elected too.

    The real answer is $5 campaign limits from any source for all candidates…LOL

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  114. 114
    Markor says:

    RE: softwarengineer @ 111

    And its all the Baby Boomers’ fault or the corporate lobbyists funding our only choices?

    I believe about half the voters support anything that gives them something at the expense of someone else, fair or not. The corporate lobbyists just make things worse.

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  115. 115

    RE: Markor @ 112
    I think the corporate lobbyists have a way of making you think you’re getting something at the expense of others, when in fact it’s you who’s getting screwed.

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  116. 116
    The Kid says:

    The issue I’m running headlong into isn’t an issue of living within my means. It’s what living within your means actually gets you. I’m not talking about a smaller house, or no granite countertops, or an older car. What is “within the means” of the vast majority of the US population is shared housing and a car with a transmission that is about to fall out, if any car at all. As I said, my one bedroom apartment is 50% of my take home pay, and it’s no luxury apartment, of that I can assure you. That, I would consider, is living beyond my means but the alternative is moving into a shared living situation with two other people outside myself and my wife. Even then it’s still pushing it. We eat on ~$50 a week for the both of us, we eat out of bulk bins mostly. I don’t own a cell phone, and we have one vehicle between the two of us. I manage to save a few hundered dollars a month but that can get wiped out in a hearbeat. My wife has no insurance and she got a UTI that wouldn’t go away. To visit the doctor, get tested, and get a bottle of antibiotics it ran us $400 once all was said and done.

    What “within my means” options do I have left?

    I have one credit card. I do not carry it with me and it has no balance. Every month, at least once, I look at it and say to myself not “that’s a new stereo” or “that could be a vacation” but instead I say “I really need new socks” and “It would sure be nice to be able to take my wife out to dinner”

    We’re moving back into a roommate situation with a friend this spring, maybe find a rental house at around $1400 a month for the three of us. That should save us a couple hundred dollars a month. We hope.

    Regarding “did the boomers have it easier” the answer is “yes” not easy, but a hell of alot easier. I checked the census data, cross referenced average house cost with average income, and calculated the ratios (they are rough) in 1963 the average home is the US cost 2.2 times the median income. Now it costs 4.1. The housing was flat cheaper. Food was cheaper. Medical care was cheaper. Education was cheaper. Gas was cheaper. Cars were cheaper. All in realistic inflation adjusted terms. Does that mean everything went right for every boomer out there? No. But you did have it way WAY easier.Accept that. Please. Just do the math for yourself if you don’t believe me.

    Two years ago, we begged, BEGGED my wife’s parents to help pay for my wife’s last quarter of community college, so she could at least have her AA, for whatever that was worth. The gave us sad faces and told us how tight money was right now and they just couldn’t afford to help. Fair. Understood. You’re not obligated to help us.

    Then they went out and spent $2k on their DOG’S knee surgery. Oookay, well, the dog was suffering, I understand…..

    Then they bought a Mini Cooper.

    I wish I could say that my story was unique, but I hear similar stories every day. You want to talk about about impulsive behavior disorder, there it is.

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  117. 117
    The Kid says:

    On a side note, I just (like one minute ago) had a gentleman from Skyline Properties bang on my door, and ask if I wanted to buy a house.

    I had a hard time not laughing my head off.

    They’re going door to door now?

    What a recovery.

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  118. 118
    softwarengineer says:

    RE: The Kid @ 116

    You’re Right, and all People are all different on the fairness issue(s) though, irrespective of age, which is fine too

    I got help with my college, so I help my daughter [fair is fair] and keep her out of debt….but no dorm room and a free car, ya need two six figure incomes to give your college kid(s) that. I got her working FT since she was 18 and she’s saved a bundle for her age to date [she spends it too…LOL], plus when she gets college finished, she’ll also have work experience. My plan, get her with a good savings account and out on her own…debt free. Imagine 6 figure double income parents getting their kids through college, then junior can’t find work with no experience….don’t clean out their old bedroom too fast…LOL…

    Once you marry though, the cards change [so does the tax deductions on college tuition and exemptions for the parent(s)], so putting marriage off until you’re 30 isn’t a bad idea anyway, Hades, I didn’t know what I wanted in a mate until I was divorced and 40 anyway…LOL….once the little bambinos come, granny bar the door, so does the bills….ask the blogger dad that stays at home to save daycare costs [I think the kids get better quality care with a stay at home parent anyway].

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  119. 119
    ray pepper says:

    This may help some of you understand……………….Then again it may not…………. Obama Impulsive behavior?

    http://www.youtube.com/watch?v=P5yxFtTwDcc

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  120. 120
    Urban Artist says:

    Thank you “the KID” Finally someone that gets it. My husband and I are older than you but we also feel we were lied to. We went to college did what we were supposed to do, saved as much as we could stayed out of debt. Every time we start to get ahead some bubble bursts and we have to deal with a layoff. We waited to have kids until we thought finally we can afford it, then 2001 tech bubble burst , well there went my job. We still did okay but I had to settle for contract work and that’s how it’s been for me. My husband avoided the layoffs until this year now he is down to contract work and now we are faced with finding a new place to live. Despite all that we did put some aside for a house. But the rents are insane so I fear are savings will be eaten up by rents. I feel like we are being made to pay for other peoples mistakes. We don’t want to have to change our kids school but we may have to. And yes I’m so mad at the whole situation. I feel that we are being forced to leave Seattle because apparently you have to make at least 150K to live here. My parents didn’t really understand how hard it is. My father was a school teacher and my mother worked part time and they could buy a house. How did things get so messed up? The best I can come up with is Greed. Thank you again “KID” and “Lilypad”

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  121. 121

    RE: Urban Artist @ 120
    I completely agree with you, Urban Artist. Greed on steroids have hurt an awful of people.
    I clearly know that it’s harder for younger folks to buy a home and to save, and I feel lucky to have been able to buy homes when they were cheap.

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  122. 122
    peckhammer says:

    RE: The Kid @ 116
    “The issue I’m running headlong into isn’t an issue of living within my means. What is “within the means” of the vast majority of the US population is shared housing and a car with a transmission that is about to fall out, if any car at all..”

    Then you need a second or third job. There’s nothing in your story that is any different than mine at your age. When I was thirty, my net worth was about $2000. Seventeen years later things are different and I no longer work three jobs. But being a poor smuck taught me some things. We live in a 600 square foot place, despite being able to afford something on Mercer Island. We take the bus mostly, and drive a $14,000 car when we need to. No kids, no debt, and we save 50% of our gross income each year.

    You need to lower your expectations, because frankly, you should expect nothing, The world owes you squat. If you are not sleeping in Denny Park, you are already ahead of the game.

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  123. 123
    The Kid says:

    RE: peckhammer @ 122

    I WAS sleeping in Denny Park, once upon a time. I AM working full time, I used to work two, three jobs, I have worked those 90 hour weeks. I have scars from hot grease and molten metal. I did all that to CLAW MY WAY OUT of Denny park. I know golly well how bad it could get, I HAVE BEEN THERE. What, you thought I was some spoiled little rich kid who didn’t want to do any real work? Now I ask you, how does it feel to eat food out of a garbage can? Do you know?

    But get this, after years of working those jobs, you got what you wanted, and the capacity to have alot more. Me? I’m doing it not to get ahead, but just to get by.

    If you really think it is just fine, totally normal, no problems, expect nothing for people to work their fingers to the bone and starve anyway, then it’s gonna be real funny when all those whiny people who just don’t want to work hard break into your modest responsible home to take all your stuff because that is the only avenue they have left to get ahead. This is not a threat this is the weight of history speaking.

    It is way too easy to tell other people to lower their standards when you don’t have to.

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  124. 124
    peckhammer says:

    RE: The Kid @ 123
    “It is way too easy to tell other people to lower their standards when you don’t have to. “

    It is easier to suggest that other people raise their standards — obviously you missed something in the message here — when I’ve already walked a 1000 miles in your shoes. And I pity the poor soul that “breaks into my modest responsible home.” You need to redirect your anger towards more productive activities. I don’t buy your story; you need help, and you won’t find the type you need on this blog.

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  125. 125
    TJ_98370 says:

    .
    Reply: The Kid @ 123
    .
    No disrespect intended, but you are very articulate for a former street person. It is easy to do “pretend” characters on the internet. Your persona’s credibility is suspect. So what is your story, really?
    .

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  126. 126
    The Kid says:

    RE: TJ_98370 @ 125
    Sure, I would be happy to relate my story, though I’m not about to blast my life story out on a public forum. If either of you would like to hear it, either in person, on the phone, or related via e-mail I can do that. When and how would you like to hear it?

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  127. 127
    TJ_98370 says:

    The Kid @ 126

    Sure, I would be happy to relate my story, though I’m not about to blast my life story out on a public forum. If either of you would like to hear it, either in person, on the phone, or related via e-mail I can do that. When and how would you like to hear it?
    .
    I understand. I would like to hear from you. However, like you, I do not want to broadcast private info on a public forum. How do we get there from here? Excuse my ignorance.

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  128. 128
    The Kid says:

    Crud, excellent point. Well, I’ll just have to trust that the people on this forum won’t be d-bags about it. Here’s my e-mail address ktcrisalli[at]hotmail

    I’m on the eastside. I would be happy to meet for coffee somewhere. It’s a long story and it may take some time.

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  129. 129
    Kary L. Krismer says:

    By The Tim @ 86:

    RE: Kary L. Krismer @ 85 – Okay so my hypothetical situation of a potential July 2007 homebuyer who has $85k to use as either a down payment or a stock investment is admittedly unrealistic. But buying a $400k house with cash is even more ridiculous compared to what most people were really doing.

    If we want to look at something more like what people were really doing in 2007, a much more realistic scenario to run the numbers for would be buying maybe a $250,000 house with 3.5% down ($8,750) vs. putting that $8,750 into the stock market.

    No, it’s apples and oranges. You’re comparing a leveraged investment to a cash investment. The leveraged will do horribly when prices go down and fantastic when prices go up, and you know that prior to even running the numbers or making a graph. That’s what happens when you make a leveraged investment.

    If you want to make it apples to apples it has to be either cash to cash or leveraged to leveraged. But the thing is with stocks it would be virtually impossible to know the result because you wouldn’t be able to easily determine when the margin calls would come, and when any forced sales would occur. They could owe money conceivably.

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  130. 130
    Kary L. Krismer says:

    By peckhammer @ 87:

    RE: Kary L. Krismer @ 85
    If you made it apples and apples, with both cash, the homeowner would still be at $344,000 and the stock investor at one point would have been down 50%.

    This is a seroiusly flawed example, IMO. The stock investor can change thier allocation on a dime. The housing “investor” cannot.

    True, but that probably means they got out when they were 50% down. ;-)

    Seriously, you’re right that stocks are much more liquid. I was just trying to make the comparison a bit more fair. Comparing leveraged stock investing to cash stock investing during a declining market would show the leveraged investor doing worse, and doing better during a rising market.

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  131. 131
    The Kid says:

    RE: peckhammer @ 124
    “when I’ve already walked a 1000 miles in your shoes”

    No sir you have not sir. You were my age once, and had to work. That is where the similarities end.

    That’s the point I’m trying to get across, and the astounding arrogance you are displaying reflects poorly on you and is a syndrome of your entire generation. “Screw you Jack, I got mine” or even better “If you don’t have the things I have you obviously simply didn’t work as hard as I did”. You think you have been there when you were doing all of this at a time of amazing plenty in this country. That time is long past. Don’t buy my story? That dosen’t surprise me, and nothing, nothing I could do, no amount of research, no amount of credible sources could convince you of anything other than you already believe. Say something you don’t like and can’t refute? Guess I must be a liar or crazy.

    But we have long since drifted off topic. If you wish to continue this discussion, my e-mail address is posted a few posts up. E-mail me if you want.

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  132. 132
    jimmythev says:

    Hey Tim… not sure if you had seen this, it’s from last month, but I thought it was an interesting tidbit on how are friends at the Escala are doing…

    http://www.seattlewacondos.com/blog/2009/07/28/escala

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  133. 133
    truthtold says:

    peckhammer
    this is tiresome. Can’t imagine my or your bean counting lifestyle is impressive advice to the powerful perspectives voiced here.
    Deeply appreciate the candid posts – been waiting to hear these views and wondering. Began to wonder if this generation was groovy with debacle. Thanks for insight and perspectives.

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  134. 134
    TJ_98370 says:

    By The Tim @ 106:

    RE: TJ_98370 @ 100 – The buttons are working for me in IE and Firefox. What browser are you using? Do you have javascript disabled?

    Hi Tim,

    I found the problem. Apparently the Google Chrome browser is incompatible with your “Reply-Quote” soft keys. This is the second time I have had problems with Google Chrome and soft keys.

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  135. 135
    Urban Artist says:

    I wish to respect the “KID: for being so candid about his situation. I think many are missing the point he is trying to get across. I believe he is trying to point out that because of massive greed and nobody minding the ship for the past 8 plus years; people that work hard do not have an equal shot at making it as you did a generation or so ago. I’ve even noticed that my ability to save has shrunk and my spending habits have not really changed, and my husband and I are very frugal. I do wonder about why other posters are now questioning his truthfulness because he does not sound like a street person. That to me shows a very narrow minded take on the situation out there. There are many well educated people out there that are now living in tents. There are as many stories as there are people and yes I agree that many did not think things through and got in over their heads. I personally feel for my family we did not take part in the game but we are now paying the price. It makes me very mad. If one needs to blame others to feel better we should direct it further up the food chain and not at people trying to work hard to make it.

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  136. 136
    bob says:

    Aside question – there was apparently an auction for the remaining Gallery condo’s. Has anyone seen a report?

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  137. 137
    TJ_98370 says:

    By Urban Artist @ 135:

    ….. I do wonder about why other posters are now questioning his truthfulness because he does not sound like a street person. That to me shows a very narrow minded take on the situation out there. There are many well educated people out there that are now living in tents……..

    .
    I admit that I have very limited experience interacting with people who are “on the street”. I do not live in a large urban environment. If it is true that there are many well educated people living in tents right now, that is a disturbing trend. I’ve long held the opinion that other than physical / mental disability, most of those living on the street are there because of self-inflicted damage. Perhaps I need to rethink that position.
    .

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  138. 138
    The Tim says:

    By Kary L. Krismer @ 129:

    No, it’s apples and oranges. You’re comparing a leveraged investment to a cash investment. The leveraged will do horribly when prices go down and fantastic when prices go up, and you know that prior to even running the numbers or making a graph. That’s what happens when you make a leveraged investment.

    Kary, the point wasn’t to make an “apples to apples” comparison. The point was to prove the stupidity of the cliché that “buying a home is a forced savings account.” Go back to the comment by kfhoz @ 37 that got us off on this tangent:

    Many people have told me that their home is an enforced savings plan.

    People who believe that nonsense aren’t thinking about buying a home with all cash or putting that same cash into the stock market. They are considering what to do with a small down payment and their monthly housing outlay. That is why my comparison is valid, because it’s the comparison that real people are doing.

    The problem is that while it may be obvious to you and I without a graph, every day real people somehow manage to convince themselves of that tired nonsense cliché that buying a home is “a forced savings plan.” As I said in my 2007 post:

    Buying a home is not a savings plan. Actually saving money every month is a savings plan.

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  139. 139
    Dave0 says:

    RE: The Tim @ 45 – Tim, I’d be curious how your analysis would change if you changed the start date to Oct. 2007, when the S&P 500 peaked.

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  140. 140
    The Tim says:

    RE: Dave0 @ 139 – Good question. The result as of August 2009 is not considerably different. Home buyer has ~$8,400 in equity vs. the stock buyer with ~$75,650

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  141. 141
    Dave0 says:

    RE: The Kid @ 95 – Amen. I make a higher salary than a lot of my friends, put 40% – 50% of that after taxes into savings, and have been doing so for the past 4 years and I still don’t have enough of a down payment in my opinion. Every once in a while I get inquiries from baby boomers, who see how good I am with my finances, asking why I can’t afford a home. I then ask when they bought their first home how much they made, around $5/hour they say, and then I ask around how much their home cost, they say around $30,000. You have to point out to them that wages have increased around 4 times, while home prices have increased around 10 times. Only then do they realize why people my age can’t afford a home, when they could at our age.

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  142. 142
    Bubble Watcher says:

    RE: Dave0 @ 141 — Amen again. I could cut-and-paste your comment, and it would also reflect my situation and experience. Thanks also to The Kid for the detailed story and willingness to engage in the conversation.

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  143. 143
    softwarengineer says:

    RE: Dave0 @ 141

    Add to your logic the fact that safe 0.75% money markets make $70/mo after taxes on a $100K and its clear to me….the Baby Boomers aren’t going to be retiring soon, if ever, IMO. Is this recent 2009 spike in the stock market hope, or just another popped balloon by year’s end, just like the Great Depression’s phony stock market surge after the 1929 collapse? I just got back from Vegas, if you gamble there, IMO, your odds are better at winning there, than stock funds today.

    Hardly none of today’s Boomers can save $1-2M in an safe interest bearing account to assist the bankrupt social security cuts; thus allowing them enough for property tax, utilities, uninsured medical and food, etc, etc….

    They can retire by reverse mortgaging their wealth…LOL…would if they live too long? What wealth in their homes in the future?

    Nope, The Kid and my daughter’s generation are shafted…the jobs are scarce and the older ones can’t retire. One thing is for certain: “death and taxes”. Another certainty, without Seattle depopulation, wages will continue spiralling downward and so will RE prices….while unemployment/poverty will get worse and worse….but the rich elite corporations will have plenty of low wage employees to “pick and choose” from and they’re smiling.

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  144. 144

    “If one needs to blame others to feel better we should direct it further up the food chain and not at people trying to work hard to make it. ”

    …And the folks at the top of the food chain take great pains and pleasure in making sure that the rage is misdirected toward other poor suckers instead of at themselves.

    A couple of things that were posted recently are stilll lingering. One is the importance of taking personal responsibility, the other blaming everything on the baby boomers.
    Just as I’m not going to defend my fellow real estate agents, I’m not going to defend my fellow baby boomers. I don’t blame the baby boomers for all of our society’s faults, but I will acknowledge that many of my fellow baby boomers haven’t a clue about the economic difficulties facing younger generations.
    While salaries may be up, there’s a lot more contracting out there. It was promised as offering more flexibility and more freedom, but ultimately is offering more insecurity and poverty. And prices, especially housing costs, are way up.
    Well, I take it back. I’ll accept some blame, personally.
    In the fall of 2007, my son and his wife bought a house. I was their agent. I tried over and over to talk them out of it. I insisted that the housing market was due to see a significant fall, and soon, that their purchase was frought with risk, I tried to talk sense into them, but I failed. They thought I was being paranoid. Yes, I did the best I could, and they did buy a house that was a relative “deal” but now they’re down 75000 dollars in equity.They have steady jobs and are not planning on selling anytime soon, but I wish they’d have held off. I’m not sure I could have done anything differently. I suppose I could have left them to their own devices, and let them find their own agent, but then I’d feel really bad now, especially if they’d run into a less honest, hungrier agent.

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  145. 145
    The Kid says:

    The only real thing I have to add to this discussion is actually an exerpt from the wikipedia entry on the causes of the French Revolution. You know, the one where people dragged the wealthy, innocent and guilty alike, and murdered them in the streets? That one?

    “Another cause was the fact that Louis XV fought many wars, bringing France to the verge of bankruptcy, and Louis XVI supported the colonists during the American Revolution, exacerbating the precarious financial condition of the government. The national debt amounted to almost two billion livres. The social burdens caused by war included the huge war debt, made worse by the monarchy’s military failures and ineptitude, and the lack of social services for war veterans. The inefficient and antiquated financial system was unable to manage the national debt, something which was both caused and exacerbated by the burden of a grossly inequitable system of taxation. Another cause was the continued conspicuous consumption of the noble class, especially the court of Louis XVI and Marie-Antoinette at Versailles, despite the financial burden on the populace. High unemployment and high bread prices caused more money to be spent on food and less in other areas of the economy.”

    Sound familiar? That was the weight of history I was referring to. The French revolution was neither the first, nor will it be the last time that something like that has occured. I encourage everyone to read up on it in it’s entirety.

    What was that old saying “Those who fail to learn their history are doomed to repeat it.”?

    Just food for thought.

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  146. 146
    peckhammer says:

    RE: Dave0 @ 141

    ” I make a higher salary than a lot of my friends, put 40% – 50% of that after taxes into savings, and have been doing so for the past 4 years and I still don’t have enough of a down payment in my opinion”

    Then stay out of the market. First off, your retirement fund should be your priority, IMO, not owning a home.

    This whole pitiful “I am young, your generation screwed me” nonsense is tiring. If you’ve got a problem with prices in the consumer or real estate market, stay out of it. Houses aren’t oxygen; you don’t have to buy one.

    When people refuse to buy some crappy house in Ballard that in a lot of other cities would be considered a tear down, then prices will come down to some sane level and you can afford your piece of the American Illusion. But as far as I can tell — especially in the last five years — there were a whole lot of lemmings jumping off a cliff and into a real estate market that was completely diconnected from any sense of value.

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  147. 147
    peckhammer says:

    The only real thing I have to add to this discussion is actually an exerpt from the wikipedia entry on the causes of the French Revolution.

    The “me” generation doesn’t have the organizational skills, or the attention span that a revolution requires. And they’re too busy poking friends in Facebook.

    >–
    Peckhammer

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  148. 148
    Jonness says:

    By TJ_98370 @ 137:

    I’ve long held the opinion that other than physical / mental disability, most of those living on the street are there because of self-inflicted damage. Perhaps I need to rethink that position.
    .

    I’ve been homeless before. It was by choice and represents one of the most fulfilling periods in my life. I’m far from being the only one though.

    http://www.angelfire.com/stars4/lists/homeless.html

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  149. 149
    Markor says:

    RE: peckhammer @ 146

    You tell ‘em. Let them eat cake!

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  150. 150
    The Kid says:

    RE: Markor @ 149
    Hehe. Well, at least someone got it.

    Peckhammer, you DO realize that you’re a walking stereotype now, right?
    Out of touch, arrogant, dismissive, and clueless.
    That’s right, you have nothing to fear from a bunch of filthy peasants.
    Peckhammer failed to learn his history.

    Or maybe you’re just a troll. Please tell me you’re just a troll. Because if you’re not, I think “peckhammer” just became the boomer version of a golliwog. Votes?

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  151. 151
    Dave0 says:

    By peckhammer @ 146:

    RE: Dave0 @ 141

    Then stay out of the market. First off, your retirement fund should be your priority, IMO, not owning a home.

    This whole pitiful “I am young, your generation screwed me” nonsense is tiring. If you’ve got a problem with prices in the consumer or real estate market, stay out of it. Houses aren’t oxygen; you don’t have to buy one.

    BTW, funding my retirement was the first thing I did. My 401(k), pension and Roth IRA are to the point that I can pretty much let them grow for the next 34 years when I’m 60 and I’ll have enough without any more contributions. The only part of my retirement fund that I’m including as a possible down payment is my Roth IRA since I can take that out to buy my first house without any penalties.

    Also, yes there is a reason I haven’t bought a house yet, because after doing the math, I can get a nicer place by renting for the same price. When that changes, then I’ll buy.

    Finally, I wasn’t saying your generation screwed me, I was just agreeing that times are harder than they were in my parent’s generation. But, I do agree with all of the comments of those who have blamed the previous generations. That generation did screw us over, even if they did unknowingly. It wasn’t intentional, it was more related to using up all of the earth’s resources for short-term pleasure, namely oil, but that’s a whole other topic…

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  152. 152
    Dave0 says:

    By peckhammer @ 147:

    The only real thing I have to add to this discussion is actually an exerpt from the wikipedia entry on the causes of the French Revolution.

    The “me” generation doesn’t have the organizational skills, or the attention span that a revolution requires. And they’re too busy poking friends in Facebook.

    >–
    Peckhammer

    That “me” generation was able to elect Barak Obama, who without facebook would have never been able to connect with all of them. I wouldn’t count them out.

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  153. 153
    Kary L. Krismer says:

    By The Tim @ 138:

    The problem is that while it may be obvious to you and I without a graph, every day real people somehow manage to convince themselves of that tired nonsense cliché that buying a home is “a forced savings plan.”

    Buying a home might be a forced savings account if people forced themselves to pay extra every month on their mortgage. But I don’t know that they’re any more likely to do that than to put money in the stock market like in your hypothetical in the graph. If people need a forced savings account, what’s wrong with just having a savings account?

    The problem is when people get an extra $100 a month of income, many tend to spend an extra $75-150 a month. And the ratio is probably the same for many people who save $1,000 a month by renting rather than buying.

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  154. 154
    Markor says:

    RE: Dave0 @ 151

    It wasn’t intentional, it was more related to using up all of the earth’s resources for short-term pleasure, namely oil, but that’s a whole other topic…

    It was intentional. How many of that generation had lots of kids so they’d have lots of people to take care of them in their old age? Much of the excess is still happening today– e.g. see the natural gas fires used for decoration in restaurants.

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  155. 155
    cherilynn says:

    Thank you kid!
    I share a very similar story to yours and want to thank you for speaking up for our hardworking generation! I am 32 and have been reading this site for a year now. I now have 2 jobs. I walk to work (both of them) and am able to tuck some $$ away. But I share your frustrations! Until outrageous asking prices of $700,000 or higher homes (in central seattle) we are doomed to never have a chance to own our own homes! I can’t even afford the $400,000 that jonness was using for an example.

    I have also been comparing asking home prices to the king county assessor property report regarding what individual houses have been assessed at. I find it interesting that sellers are still asking for twice as much as the house is assessed at!!
    It seems sellers are still thinking that a 2 bedroom house with one bathroom on capitol hill is worth $800,000!

    Ridiculous!!

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  156. 156
    TJ_98370 says:

    RE: Jonness @ 148

    Interesting list, mostly artsy / entertainer / rebel right brain hemisphere dominant types. Great subject for a sociology major to investigate —— “What is the correlation between right brain dominance and homelessness” :-).

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  157. 157
    cherilynn says:

    dave0 151

    You hit the nail on the head!!

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  158. 158
    TJ_98370 says:

    .
    Serious question to cherilyn, Dave O, Markor, The Kid, Jonness, etc.
    .
    I’m not being sarcastic. I just want to know. If it is so difficult to make ends meet in the Seattle area, why do you stay there?
    .
    Last I checked, median home prices are around 35% less in Pierce and Kitsap than what is currently occurring in King and I’m sure rent differences are comparable. Is living in King that much more special?
    .

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  159. 159
    Peckhammer says:

    RE: TJ_98370 @ 158
    “If it is so difficult to make ends meet in the Seattle area, why do you stay there?”

    Newton’s 1st Law – an object at rest will stay at rest. If you can’t move it with your game thumb, then it’s staying put.

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  160. 160
    Dave0 says:

    By TJ_98370 @ 158:

    .
    Serious question to cherilyn, Dave O, Markor, The Kid, Jonness, etc.
    .
    I’m not being sarcastic. I just want to know. If it is so difficult to make ends meet in the Seattle area, why do you stay there?
    .
    Last I checked, median home prices are around 35% less in Pierce and Kitsap than what is currently occurring in King and I’m sure rent differences are comparable. Is living in King that much more special?
    .

    All of my family is in Seattle, so staying in the Seattle area means saving money on flight tickets. I also would like to avoid any place with hurricanes, tornadoes, extreme cold with ice and snow for months, or extreme heat during the summer, which pretty much only leaves the northwest.

    I live in Seattle because of my current comfortable desk job in Bellevue. If that jobs ends for whatever reason, I’d consider moving outside of King County, but I’d probably stay in Western Washington or the Portland area.

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  161. 161
    Peckhammer says:

    RE: Dave0 @ 160

    “I also would like to avoid any place with hurricanes, tornadoes, extreme cold with ice and snow for months, or extreme heat during the summer, which pretty much only leaves the northwest.”

    The Northwest, which is known for the largest earthquakes in the contiguous United States. Yeah, that risk assessment makes sense to me… ;)

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  162. 162
    Rack says:

    By Peckhammer @ 161:

    RE: Dave0 @ 160

    The Northwest, which is known for the largest earthquakes in the contiguous United States. Yeah, that risk assessment makes sense to me… ;)

    That would be the entire west coast, but how often have earthquakes done damage like Katrina did?

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  163. 163
    Peckhammer says:

    RE: Rack @ 162

    “how often have earthquakes done damage like Katrina did? “

    Every 300 years?

    Facts:

    Cascadia Subduction Zone, The Cascadia Subduction zone, which does not encompass the entire west coast.
    1700 01 26
    Magnitude ~9

    This earthquake, the largest known to have occurred in the “lower 48″ United States, rocked Cascadia, a region 600 miles long that includes northern California, Oregon, Washington, and southern British Columbia. The earthquake set off a tsunami that not only struck Cascadia’s Pacific coast, but also crossed the Pacific Ocean to Japan, where it damaged coastal villages.

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  164. 164
    Dave0 says:

    By Peckhammer @ 161:

    RE: Dave0 @ 160

    “I also would like to avoid any place with hurricanes, tornadoes, extreme cold with ice and snow for months, or extreme heat during the summer, which pretty much only leaves the northwest.”

    The Northwest, which is known for the largest earthquakes in the contiguous United States. Yeah, that risk assessment makes sense to me… ;)

    I’m fully aware of the earthquake threat in the northwest. In the 26 years that I’ve grown up here there was 1 earthquake that I felt (in 2001). The things I listed out occur usually on an annual basis. Significant earthquakes happen maybe once a decade, I can live with that threat. All of the building codes around here require buildings to be built to withstand one of those “once every 300 years” earthquakes. As long as your not on hwy 520 or the viaduct when it happens, you will probably survive.

    Regarding tsunamis, I don’t think they are much of a threat to Seattle considering 1) We are not on the open ocean, but instead the Puget Sound so large tsunamis are less likely to occur and 2) Seattle is hilly, if a tsunami is coming, it won’t be too hard to get to a high enough elevation to avoid it.

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  165. 165
    Peckhammer says:

    RE: Dave0 @ 164

    “All of the building codes around here require buildings to be built to withstand one of those “once every 300 years” earthquakes.”

    Which have never been tested by an actual magnitude 9, 3+ minute duration.

    The fequency of magnitude 9 earthquakes is about every 20 years in the world. The earthquake here in 2001 was like a kiddy ride compared to the Cascadia Subduction zone quakes that occur, on average, every 300 years. I doubt there would be anything left standing here in Seattle, since these quakes have a typical duration of 3 minutes or more.

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  166. 166
    Markor says:

    RE: TJ_98370 @ 158

    Serious question to cherilyn, Dave O, Markor, The Kid, Jonness, etc.
    .
    I’m not being sarcastic. I just want to know. If it is so difficult to make ends meet in the Seattle area, why do you stay there?

    Have I given the impression that I’m struggling? I’m not. As a liberal I support fairness (including to future generations) and sustainability. I do think King County is superior to surrounding counties.

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  167. 167
    Kary L. Krismer says:

    I like it here, but I’d prefer a natural disaster more in the form of a hurricane. One that gives you about 5 days notice that it might show up.

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  168. 168
    The Kid says:

    RE: TJ_98370 @ 158
    First off, Seattle is home. It’s full of memories, friends, and family.

    Second, regardless of the cost of living, this is where the jobs are. With the cost of transportation, commuting from, say, south Tacoma every day, or paying higher prices here is a null sum financial equation increase in tansportation expenditures cancels out any savings in cost of housing, combined with a tremendous waste of time in commute. You could ask yourself the same question about Manhttan. Why does ANYONE live there if it’s so expensive?

    Many of the people I know have packed up and moved back to where they came from, Oklahoma, Texas, Kansas, Nebraska. Now they’re living with their parents in some tiny town out in the middle of nowhere. Sure, the living is cheap, but only one of the four people I know who moved back out to the sticks has managed to find a job of any kind, and that one is working as a clerk at a convinience store part time. That’s why they left and came out here in the first place.

    Third, most places in the US are just as overpriced. Sure, if I moved out to, say, Yelm, or Prosser I could get a house, a big nice house on acreage for say, 200k. That still means that I find a job that makes me 50k a year to afford it, and that’s not going to happen out there.

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  169. 169
    Peckhammer says:

    RE: The Kid @ 168

    “Third, most places in the US are just as overpriced. Sure, if I moved out to, say, Yelm, or Prosser I could get a house, a big nice house on acreage for say, 200k. That still means that I find a job that makes me 50k a year to afford it, and that’s not going to happen out there. “

    Try Denver. Nice place, and it’s affordable. I am certain that there are $50K/year jobs there too.

    You’ve come into this discussion speaking on behalf of your generation, but really it’s all about you, your personal situation, and a dozen people you know who’ve crawled back to the dusty corners of their genesis.

    I happen to work around thousands of people that are thirty and younger, who seem to be making a decent living. Some of them have even purchased homes — achieving the impossible, apparently. So, I’d suggest broadening the scope of your sampling before thinking that your personal experience is the experience of everyone in their 30s — or that it differs from many peoples’ experiences in my generation.

    And as far as your French revolution BS is concerned, have you been there lately? With the exception of a better healthcare system, they live about the same way we do. So their revolution got them absolutely nothing in the long run. The current generation of French have no more stamina, no more experience, and no more stomach for a revolution than Americans do — because like us, they are preoccupied sending text messages and buying flat screen TVs while their deficit grows.

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  170. 170
    Costco Mike says:

    By Kary L. Krismer @ 4:

    I’ve said this before, but this is just a case of some of you not valuing houses as highly as others.

    Me I don’t value $40,000+ cars as highly as others, so I drive a 20 year old pickup truck, and when we do shop for new vehicles the price limit is around $20,000 (our other car is a 2005 Rav4 bought new). But do you see me going around the web complaining that the prices of cars are too high because I don’t value them as much as others? No. I accept that the market is what is is, and other people are what they are.

    And I’d add that historically car purchases have probably put far more people into bankruptcy than house purchases. Years ago one trustee I know mentioned that the average debtor has a car (or cars) that are less than two years old. After hearing him say that, I started noticing, and it was amazingly true. And also, for the most part, cars only depreciate.

    This got me thinking… What exactly is different about a house as compared to a car?

    Similarities
    – Regular maintenance
    – Options to modify or improve performance, comfort, luxury.
    – Both need repairs during their lifespan.
    – Both are used as a status symbol by society.
    – In high school you are a “loser” if you don’t have a car, in middle age you are a “loser” if you don’t own a home.
    – Both serve a purpose to the owner transport, shelter.
    – Both are ever changing with social wants/needs.
    – Both are items that society looks at as acceptable to be in debt to own one.
    – Both are susceptible to fads/fashion.

    I bought a 1960 Chevy pickup when I was 16 for $500. My dad and I have been working on restoring it since. It is worth a lot more than what I paid for and put into it. Kary would not be interested in it because it is above his interest level for market value. But I see it the same as houses I see extra value in a house that is historically significant to the area. But I see no value in a 1980’s rambler for 400k because a bunch of “sheeple” got in line because everyone was doing it and it turned out it was a line for the chopping block.

    So how does a car differ from a house in terms of value?

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  171. 171
    Kary L. Krismer says:

    RE: Costco Mike @ 170 – Well first, I wouldn’t have any interest in your truck because it’s a Chevy! ;-)

    Seriously, I’d put your pickup truck in a different category than a car in the way we’ve been discussing it, because it doesn’t sound like something you’d buy for a daily driver. Although I actually do know someone who bought an old classic pickup and did just that with it. I thought that was nuts, and I suspect whoever sold it to them would have said no if they’d known.

    But the other major difference is cars depreciate much faster, both in real and nominal terms. There was a time when German cars actually appreciated due to exchange rates, but other than that or the collector car, they will go down in value.

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  172. 172
    Markor says:

    RE: Peckhammer @ 169

    And as far as your French revolution BS is concerned, have you been there lately? With the exception of a better healthcare system, they live about the same way we do. So their revolution got them absolutely nothing in the long run.

    Have you been there lately? Can I drop some coins into a vending machine to get to Portland in an hour, with lots of leg room? And healthcare is huge; it can easily mean the difference between living in poverty or living middle class. Even house calls are free there. Most Americans have a significantly lower standard of living than most of the French do.

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  173. 173
    Lake Hills Renter says:

    Just wanted to post some words of support for The Kid. Thank you for sharing your story and problems. I am not in your situation or age group, but neither am I a Baby Boomer. I’m always interested in the experiences of people in situations different than my own so I can understand, not dismiss.

    Peckhammer — I love ya, but you’re sounding like a grumpy old man. I’m expecting you tell The Kid to get off your lawn next. =P

    Disclaimer: I’m 38 and have a good job with a good salary — I’ve been very lucky in my life this far. But because I’m on a single income, I haven’t been able to find a house I’m willing to pay for in the 3+ years I’ve been watching the market. So I rent, save, and fund my retirement.

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  174. 174
    Costco Mike says:

    RE: Kary L. Krismer @ 171

    I guess I was asking more for where and why society put appreciation on houses as they are a structure or entity with a lifespan, allbeit longer than a car, but still a product for consumers that will decay with out work and repairs at a cost.

    What would be the average term of ownership vs cost for a car compared to a house? Is it similar?

    Oh and I respect both Ford and Chevy in terms of historic automobiles. I just wouldn’t buy anything from them today. ;-)

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  175. 175
    Peckhammer says:

    RE: Markor @ 172

    Have you been there lately?

    Why yes I have, to visit family. And as some of you may know native French is spoken in my household. I have a pretty clear idea of what contemporary French society is like.

    RE: Lake Hills Renter @ 173

    I have no issue with The Kid’s individual story. I do take issue with trying to pass off that experience as the experience of a generation, and implying that the boomers were somehow consiring against them.

    Grumpy? You bet. “Stay out of those rose bushes! You won’t be laughing when I let this dog off this chain!”

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  176. 176
    explorer says:

    “So what’s the cure for impulsive behavior disorder?”

    It’s the “Amercian Dream” emotion saying to them: “I know it looks bad, but it will work out…” Famous last words. I still overhear people occassionally angsting over their upcoming purchases. They know they should not, but “it will work out somehow.” It’s pure wishful thinking. It’s also weak minded and improperly researched decision making based upon misplaced trust and marketing. Makes one wonder what they do to earn those 6 figures (those that do), and how they keep their jobs

    What sucks is that those who are more clear headed are taking it in the shorts too. I’m not about to toss in the towel of fiscal sanity, but I think the resentment is well earned. We have been well trained to live beyond our means as a society. Nothing short of disaster is going to reset that mindset.

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  177. 177
    explorer says:

    “That “me” generation was able to elect Barak Obama, who without facebook would have never been able to connect with all of them. I wouldn’t count them out. ”

    Trouble is, you can’t really count them “in” for the long haul either. As is proved with Health Care in particualr. With attention spans of gnats, they can be as weak minded as anyone else. Some of that is lack of expereince and wisdom, but some is also from a dumbed down educational system. That’s why there can still be support for old failed polices with new names and new targets.

    Everyone from every generation has a share of the “blame” for the malase.

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  178. 178
    explorer says:

    One of the things the under 40 set does not realize, is that the boomer generation is so large, they have had to cannaiblize themsleves when necessary. All this contrived blame is often due to too easy overgeneralizations to making up for a lack of context.

    Many Boomers are actually WORSE off now than the younger generations, and they don’t have the time to make it back up. Yes, Ira’s comment on gleeful misdirection is on the mark.

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  179. 179
    cherilynn says:

    TJ @ 158

    “I’m not being sarcastic. I just want to know. If it is so difficult to make ends meet in the Seattle area, why do you stay there?
    Last I checked, median home prices are around 35% less in Pierce and Kitsap than what is currently occurring in King and I’m sure rent differences are comparable. Is living in King that much more special?”

    to answer your question
    I am an artist directly in seattle… I have two good paying jobs. I can walk or bike to work! I love seattle. It’s where my friends, family, jobs, and artistic life, and social life is centered! I would rather be close to my jobs than buy a car and commute an hour or more a day in order to buy some cheap home in tacoma!

    The point is that houses in seattle are still OVERPRICED! Meaning people are asking TOO MUCH for their homes still! I make make more than my peers and put my leftover cash into my 401k and into a retirement fund! But i do not make a 6 figure salary… I don’t know anyone my age who does!!

    I personally do not blame any generation for anything. The point is that the flock of house flippers, a greedy market, fat cat bank CEO”S, and wall street have made housing prices unreachable for the average hardworking young american trying to build a life. Maybe prices are dropping in the other counties, but I’m not seeing in in seattle. Some houses on the market have the same asking price it did a year ago…

    And the frusterating thing is that I keep hearing from real estate agents and the market that “NOW IS THE TIME TO BUY” Just because those who make $$ off a bad sale say so… doesn’t make it so.

    I’m doing my research for my area… My conclusion… In Seattle it is still not the right time to buy!

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  180. 180
    The Kid says:

    RE: Peckhammer @ 169

    “And as far as your French revolution BS is concerned, have you been there lately? With the exception of a better healthcare system, they live about the same way we do. So their revolution got them absolutely nothing in the long run. The current generation of French have no more stamina, no more experience, and no more stomach for a revolution than Americans do — because like us, they are preoccupied sending text messages and buying flat screen TVs while their deficit grows.”

    Once again, you’ve missed the point. You seem to think I’m saying that there will be some glorious revolution and everything will become hunky-dory. I’m not. I’m saying that the environment that produced a popular revolt against an overprivileged class occured in an environement very similar to the one we are in right now. This resulted in alot of people dying, both those that deserved it and those who didn’t. Dismissing the entirety or even the majority of current society as hopelessly consumer driven and brain dead is short sighted and narrow minded.
    If you have been reading this thread carefully you will note that there has been a great deal of support for, and agreement with what I have said. This would indicate that I am not alone. People are angry and frustrated out there, and getting angrier by the day. No amount of dismissal, ignorance or excuses that you make will change that fact. Something has to give, and it will. I hope it happens peacefully and within the rules of our system of government, but it may happen violently. If it does happen violently, then god help us all.
    No, my experience is not representative of the entirety my generation, but it does seem to be an awfully large percentage of us. Yes, many people from your generation worked very hard to get what they have, I’m not saying they didn’t. But as a whole, you did have it whole lot easier. As a whole, we do have it a whole lot harder. However, if you admit this, you would be admitting that maybe, just maybe luck and privilege had as much to do with your success as hard work and perserverance. I don’t think you could emotionally handle that.

    We agree on one thing, the price of housing (not houses, housing, rent it outrageous too) is out of control, driven by a frenzy of easy money lending. Where we disagree is apparently you don’t think this is significant to people not looking for an investment, or a life of luxury, but just looking for a home, to sleep in, to keep their stuff in, and to raise a family in.

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  181. 181
    ananda says:

    The continued high cost of living in Seattle is due largely to the demand. The free money is now gone and you still have people willing to buy crappy houses built in 1916 for 400k. The demand to live in Seattle has been strong for a long time. I don’t think it’s some “impulsive disorder” to pay a lot to live in Seattle – it’s been happening for many years with many, many people buying in (demanding).

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  182. 182
    mukoh says:

    RE: The Kid @ 150 – The Kid, stop with the cry stories of generations that are lost because of these dumb, rich people that just plotted to keep the people down. Its a joke. I finished school in the lower income range of all my classmates, started business one week later, last time I went to the reunion I was top 10% and was the only one in that bracket, everyone was whiner with how little they accomplished, and how the man is keeping them down with these low paying jobs that are not enough, and how they have to work oh so much to stay ahead.

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  183. 183
    wreckingbull says:

    RE: mukoh @ 182 – Huh? How does this sort of reunion work? You submit the prior year 1040A along with your $50 reunion fee to cover the roast chicken dinner and two drink tickets?

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  184. 184
    The Kid says:

    RE: mukoh @ 182
    They didn’t plot to keep the people down. I don’t think that the cost of housing was inflated just to screw me over, that’s paranoid and delusional. It’s was a combination of cluelessness and disregard that brought us to the situation we are in now. I never said I have accomplished little, I’ve accomplished quite a bit actually. I’m not blaming the previous generation for the mess we are in, though I will say that there are some individuals who happen to be part of that generation that have alot to answer for. I am just asserting that they had it easier. That’s all.

    This is the last post I will be making on this subject, I’ve said my piece, but I want to leave with this one last statement.

    To all those out there of my parents generation. I have met many of you who understand the situation that I, and many like me are in. I know you worked hard for the things that you have, and I know you have accomplished a great deal in your lives. You raised us and fed us and took us to school, and I thank you for that. You fought through racism, sexism, and one of the most terrible “police actions” this country has ever participated in. You lived daily with the looming threat of nuclear war. I am not, and will never say that your contributions to this nation were not valuable. Those were your fights, and you came through them standing tall. You fought your fights, and you have your own problems now. I understand that.
    Now we have our own fights. We face a crumbling infrastructure, a monumental national debt and matching tax burden, a social security system that has dried up, and wages that have not even come close to pacing inflation. Our housing is priced beyond anything any reasonable person could be expected to afford, the health care sytem bankrupts as many people as it treats, fuel costs have risen to levels never before seen, fallen, and then have resumed their climb. An education is so expensive that most people end up spending a lifetime trying to pay it back. Our environment is badly damaged,and our fuel supplies are runing low. We have blood in our shoes and blisters on our hands. We are out there, every day, busting our asses just to get by. We are exausted, frustrated, and angry. These are real problems we face and I have no idea how we’re going to fix them. Please don’t forget us, and please don’t dismiss us, and if you can find it in your hearts, please have a little sympathy, I don’t think that’s too much to ask. Good luck everybody, we’re all in this together.

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  185. 185
    truthtold says:

    182. Sounds like a very dull party indeed for one so accomplished. I am tired.

    Thanks again Kid.

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  186. 186
    David Losh says:

    RE: The Kid @ 184

    You see kid, you don’t get it about how easy this is because you’re all caught up in the game.

    I know you all want to do the right thing. You want things to be better and maybe the easy way is harder than you think. You keep your head down, go to school, get a job, or career, save your money, buy a house, maybe get married, have kids, and start the cycle again. You go to the bank with your money, invest well, buy well, and some day you may be able to retire.

    Is that it? Maybe if you are really good, and special, you can go to your class reunion and be in the top 10%, because that’s what it’s all about.

    We fought. This is war. You are either with us or you are the enemy. There are millions, if not billions, of people in the world who are in the same war against oppression.

    There are no rules in war. There is win and lose, fight or die.

    You’re right it was easier to be on the winning side in the last generation. Everything was free after World War II. Jobs, houses, and education were in such huge supply any one could have anything. Now you have to take from some one else to have yours.

    The question is: is it right? That depends on you and your moral compass. Is it right to take from a thief if it benefits others? Is it right to get the best of some low life, like your land lord, or a bank? That depends on you and your moral compass.

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  187. 187
    Yilin Wu says:

    RE: The Kid @ 95

    Hey, I feel your pain. I’m slightly older than you and I’ve experienced the same obstacles in my quest for decent living. After over 30 years of renting (parents never owned a home) I broke down and decided that I had to get a house to fit the wife and two kids.

    Having never lived in a house before, I’d say it’s pretty nice. The lure to buy a home is so seductive.

    I hope things improve for all of us in the future.

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  188. 188
    Jonness says:

    By TJ_98370 @ 156:

    RE: Jonness @ 148

    Interesting list, mostly artsy / entertainer / rebel right brain hemisphere dominant types. Great subject for a sociology major to investigate —— “What is the correlation between right brain dominance and homelessness” :-).

    Apparently, I used to create and invent music at a high level. In those days, pretty much everything paled in comparison to the euphoria I felt when I discovered even a tiny new piece of the puzzle I was attempting to construct. Money cannot replace that feeling, so it was way down on my list of priorities. Also, every other field of endeavor I considered seemed as though it restricted my thoughts to only a small portion of my mind. Music was the only thing that allowed me to use my complete brain, and that was very freeing to me.

    I suspect a lot of artists are homeless because they believe art is the highest form of revelation. I know the passion for living I felt while exploring, creating, and inventing the future was beyond any other experience I ever had. Yes, many people believed I was the dreg of society, but that meant very little in the grand scope of things. For the most part, all I cared about was breaking new ground, and I went to great lengths in my attempts to do so.

    These days, I’m a mindless robot who solves logic problems and follows orders. It’s not very fulfilling, but the pay is OK. I like to think of it as having a day job. However, the nights seem awfully short, so I can’t guarantee you won’t see me out on the street again.

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  189. 189
    mikal says:

    RE: mukoh @ 182 – Yup…

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  190. 190
    mukoh says:

    RE: wreckingbull @ 183 – Well people started pulling professions and blah blah blah who was where doing what, geesus its like two guys ended up in IT and for 4 years moved all the way to a whopping $60k and were not happy and always complaining. One was complaining about taking only one two week vacation a year. I stayed quiet about 7 or 8 at least that I do a year.

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  191. 191
    mukoh says:

    RE: The Kid @ 184 – Kid its not just you but software engineer and scotsman always blanter about the same, how generations are wiped out since they will have to work for so little and not get enough money. And it all sounds more like washed up guys who never accomplished anything period…

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  192. 192
    truthtold says:

    mukoh – I marvel at the smallness.
    period.

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  193. 193
    TJ_98370 says:

    RE: Jonness @ 188

    Society needs it’s aritists. Life without art would be unbearably dull. I am truly envious of those that have the courage to follow their passion in the pursuit of perfecting their art. It seems that you have to be the best of the best to make a decent living in that world.

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  194. 194
    Jonness says:

    By TJ_98370 @ 193:

    It seems that you have to be the best of the best to make a decent living in that world.

    It can be worse than that, because there is an element of selling out that can happen when you make it. Have you ever listened to a record and at first not liked it, but after several listens became hooked on it? That happens because your brain has to form new neural connections to be able to hear the music in the way it was intended. Another example would be parents who hate the music their kids listen to because of a generational difference in the way their brains wired to hear music.

    Now imagine studying music for many thousands of hours in order to wire your brain up to hear music in a way that the mainstream population hasn’t been wired to be able to hear. At that point you have a choice between continuing to invent the music you love or backtracking in order to feed and clothe yourself. The purist among us will choose to stay hungry and remain unknown.

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  195. 195
    voight-kampff says:

    RE: Jonness @ 194
    Im way late to this party but,
    I too am a slightly-working-musician , Ive had to make the bulk of my money in other more mundane ways like running a business, but your post hit home with me ie: remaining hungry! Nothing fulfills me like writing music that I like ( avante-garde and virtually un-marketable), and never mind the bollocks.

    anyway cheers

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  196. 196
    voight-kampff says:

    respectfully, when someone posts about how very very successful they are, is it only me that finds it incredibly suspect? I know alot of successful people, but they dont ussualy post their salary or ytd earnings online.

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  197. 197
    Jonness says:

    By voight-kampff @ 195:

    I too am a slightly-working-musician , Ive had to make the bulk of my money in other more mundane ways like running a business, but your post hit home with me ie: remaining hungry! Nothing fulfills me like writing music that I like ( avante-garde and virtually un-marketable), and never mind the bollocks.

    anyway cheers

    Excellent!

    Best wishes :)

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  198. 198
    David Losh says:

    RE: Jonness @ 197

    Staying hungry pushes you to do more, in my opinion to take more chances. When you have nothing you have nothing to lose.

    Music, more than art, is a very selective field for what is popular, or profitable. Art can reach a small segment of the population much easier than music.

    There are many people who play music, compose, and collaborate that never make it out of a basement or garage. One of the things about Seattle is that it had a lively set of music venues.

    I’m thinking that one of the things that Seattle has lost is it’s ability to have diverse clubs, bars, and cocktail lounges. The other thing is the amount of basement sound studios that I see. It seems to me we have also lost the professional recording ability that we once enjoyed here.

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