The American Dream Is Now Officially Unaffordable

[z1ggy]

Well the good news is if I marry my current g/f we will start out making over $130k. Woohooo I can live the American dreeeeaaaammm!!

 

[IndyColtsFan]

As for Dave saying that I was born with a silver spoon...

Free advice: Ignore Dave -- he is the one everyone points and laughs at for his delusional posts. I'm also pretty sure that contrary to his blabbering, he also likely makes well above the median household income in the US and is just trolling.

 

[Mai72]

Well the good news is if I marry my current g/f we will start out making over $130k. Woohooo I can live the American dreeeeaaaammm!!

Where do u live? New Jersey, California or New York? $130k isn't much. If you're living in Idaho, West Virginia or North Dakota then yes! Its a lot of money.

 

[Naeeldar]

You need to take the interest rate into account. Housing prices were much lower because interest rates were much higher. At the end of the day, their monthly payments were just as high as today, relative to income. I can't remember the exact number, but my parents were paying something like 15% interest back in 1980, but their house was far less than 100k. You can go through the math and find that 15% interest on 60k or 70k is still expensive. Housing has never really been cheap in terms of monthly payments.
The higher interest rates are also the reason people would put down 20% instead of 5%. If your house is 70k, 20% down payment isn't really that much. Factor in the way you could easily get 10-15% yearly interest on a government bond, and that down payment seem to magically appear with minimal effort. Now that government bonds pay basically nothing, and low interest rates make houses cost 300k or more, putting down 20% is laughable. How many years do people plan on renting while they try to save that gigantic down payment? I always laugh at the people who insist on saving 20% down. How long will that take? 5 years? And how much money was lost to rent during that 5 year period? It's a hell of a lot more than what would be paid in interest if they chose to buy the house with only 5% down but do it several years sooner.

I'm well aware of the interest rate changes. I believe they had about 10%. However, guess which path I would prefer? Cheaper housing. I would have put 50% down and paid the house off in 4 years as an example.

That said it's far more than low interest. Housing prices as awhole have gone up dramatically for years. By 1995 my parents house was worth $225,000. That's insane appreciation.

Anyway at the end of the day I can't complain but I can very easily reconigze where I am now and where I would have been 20 years ago in my parents time. It's far harder to do just about anything these days.

 

[z1ggy]

Where do u live? New Jersey, California or New York? $130k isn't much. If you're living in Idaho, West Virginia or North Dakota then yes! Its a lot of money.

CT, just about the same.

And $130k isn't "a lot", but that is different to everybody. $130k a year gets you a decent little house, 2 decent, but not luxurious cars, nice furniture for the house and if you don't have student loans left over, a good chunk of extra savings.

If you live within your means, it's perfectly acceptable. Yeah you might not drive a BMW with a 5bedroom house, but those aren't items that are needed.

 

[Oldgamer]

Where I currently live the median household income is about 150k. But most of my friends and neighbors make about 250 roughly. I live in a pretty nice neighborhood honestly. We have some homes around us that are half million and above. The apartments around us are expensive. A one bedroom 700sq ft apartment runs 950.00 a month and a 1000sq ft is 1300.00 a month. If you want a renovated apartment then the prices are even higher than that. If you want a car port to go with that or an apartment garage tack on an extra 75.00 a month to your apartment cost. Gas prices are expensive out here to as compared to out of the city.

 

[halik]

$130K is damn near the top 5%. This article is way off base.

Oh wallstcheatsheet.com is not an unbiased journalistic institution?

 

[fskimospy]

$130K is around the 80% mark. Still pretty high. At least as of 2012 numbers.

$130K in California will get you a house in Sacramento or something. $130K though in Texas will get you a lot.

So it all depends on where you live.

Those making around the median which is around $60K per household are in for a world of hurt. Realistically speaking most people cannot afford a home anymore. I haven't followed the numbers very closely lately but I remember when I graduated from University they said that only 8% of Californians could afford a home. Now that we've had the bubble burst I believe that number is up to about 30%.

So yeah, if you want the American dream you better make some good money. As for the rest of the population? Well they're not destined for much.

There's no shame in renting except that rents around here at least are astronomically high.

You can buy a home in most of the country if you're making $60k. Go search around on trulia or zillow, you'd be surprised.

This article is way off base. You simply do not need to make $130k. Nyc is one of the most expensive cities in the country. I don't make $130k and I'm a homeowner.

 

[fskimospy]

In before eskimospy posts some government statistics showing Americans are 10x richer than they were in the 1950s.

Are you disputing the fact that the average American's income is much higher on an inflation adjusted basis than it was in 1950?

You definitely shouldn't be, as that's a pretty dumb argument.

 

[fskimospy]

Unless you can afford to buy a home outright then the monthly payment is what matters. At $60K your monthly payment would be half of what a $300,000 house is today. Have salaries doubled?

The big question is can Americans afford a mortgage payment and pay no more than 30% of their income on a respectable home? If you borrow $350K then your payment is around $1720 a month. Add in maintenance and taxes. Lets just call it $2000 a month to make this simple. How many households are pulling in $6666 after taxes? On the coasts it's much higher but even these numbers are interesting.

Total table napkin math not taking into account deductions and whatnot but $80K after taxes is a decent income. I imagine that's close enough to the $130K mark.

Instead what's happening is that people are paying way more than 30% of their income on housing and are sacrificing on other things like vacation. At least with my friends vacation is camping unless they are making more than say $150,000 a year as a household. Camping is about $75 a day for the whole family. Worse yet they're sacrificing on retirement. I shudder to think what this county will look like in 30 years when all these broke people are going to retire on social security.

The median home price in the US is about $188k, so making estimates on a $350k house seems pretty off base.

 

[dmcowen674]

Where I currently live the median household income is about 150k. But most of my friends and neighbors make about 250 roughly. I live in a pretty nice neighborhood honestly. We have some homes around us that are half million and above. The apartments around us are expensive. A one bedroom 700sq ft apartment runs 950.00 a month and a 1000sq ft is 1300.00 a month. If you want a renovated apartment then the prices are even higher than that. If you want a car port to go with that or an apartment garage tack on an extra 75.00 a month to your apartment cost. Gas prices are expensive out here to as compared to out of the city.

Where are you, Silicon valley?

 

[Oldgamer]

Where are you, Silicon valley?

Trust me pretty equivalent area...lol

 

[Naeeldar]

Where are you, Silicon valley?

Median home price in the suburbs of Philadelphia where I live is anywhere from 265-335,000 depending on the county/city. So CA is far from the only area of country that is expensive. Hell Silicon Valley median home price is $1,000,000 right now even San Jose is $669,000.

COL really plays a big role in this discussion. But the perfect example is how few people who live in NJ/PA for a lot of there lives actually retire here. Many go to Florida, Carolinas, Georgia etc... Taxes and housing prices are just plain insane in our part of the country.

 

[werepossum]

I saw Obama was cracking jokes at a barbecue joint in Texas.

We need jobs Mr. President! Not jokes.

Seriously?

The only way government can give someone a job is to take enough from others to fund that job plus the inefficiencies of government. That's a net negative for the economy. I really wish government would improve the underlying issues leading to job loss, but let's be very cautious about what we demand from government as the cost will virtually always exceed the benefit. If we as a nation adopt the idea that government should provide people jobs, we're screwed.

 

[Exophase]

COL really plays a big role in this discussion. But the perfect example is how few people who live in NJ/PA for a lot of there lives actually retire here. Many go to Florida, Carolinas, Georgia etc... Taxes and housing prices are just plain insane in our part of the country.

Maybe people chasing the American Dream who can't afford it with household incomes over $100k should think about moving somewhere else. Personally I find home ownership to be overrated anyway.

 

[fskimospy]

Seriously?

The only way government can give someone a job is to take enough from others to fund that job plus the inefficiencies of government. That's a net negative for the economy. I really wish government would improve the underlying issues leading to job loss, but let's be very cautious about what we demand from government as the cost will virtually always exceed the benefit. If we as a nation adopt the idea that government should provide people jobs, we're screwed.

Can you explain the economics theory behind your post here? I'm unaware of any theory that says all government jobs are net negatives for the economy. In fact, I'm unaware of any way a logical person who is not an anarchist could arrive at such a conclusion.

 

[realibrad]

Can you explain the economics theory behind your post here? I'm unaware of any theory that says all government jobs are net negatives for the economy. In fact, I'm unaware of any way a logical person who is not an anarchist could arrive at such a conclusion.

The government can only get revenue by taxation. So, the idea goes that you can't fill a bathtub with the water already in it. As we do not tax stagnant capital, it goes to reason that only active money/resources are being taxed. So, if you are taking away money that is active in the economy, you are shrinking the economy.

Now, the counter argument would then be that the government is taking resources and putting them to more efficient use and in that view, could create jobs through efficiency. I dont know of many who think that on net, this is what the government is doing though.

 

[fskimospy]

The government can only get revenue by taxation. So, the idea goes that you can't fill a bathtub with the water already in it. As we do not tax stagnant capital, it goes to reason that only active money/resources are being taxed. So, if you are taking away money that is active in the economy, you are shrinking the economy.

Now, the counter argument would then be that the government is taking resources and putting them to more efficient use and in that view, could create jobs through efficiency. I dont know of many who think that on net, this is what the government is doing though.

Saying on net, X is true is very different than saying that X is always true.

 

[dank69]

The government can only get revenue by taxation. So, the idea goes that you can't fill a bathtub with the water already in it. As we do not tax stagnant capital, it goes to reason that only active money/resources are being taxed. So, if you are taking away money that is active in the economy, you are shrinking the economy.

Now, the counter argument would then be that the government is taking resources and putting them to more efficient use and in that view, could create jobs through efficiency. I dont know of many who think that on net, this is what the government is doing though.

Who says that all the money they are taking is actually active in the economy?

 

[Naeeldar]

Maybe people chasing the American Dream who can't afford it with household incomes over $100k should think about moving somewhere else. Personally I find home ownership to be overrated anyway.

So housing bubble aside ( it happens and really it's still a good investment), purchasing home is still the best investment you can make in your lifetime.

I'll give you an example the condo I bought is 2 bed and 2 fully baths and costs me $1,085 a month with only 3% down ($160,000 home). A comparable rental in this area would cost about $1450-$1650 a month.

Lets say I never go for a larger home. When I retire the person on rent is likely paying $2,000 or so a month (possibly more) for rent. Meanwhile my condo is paid for and I'm only shelling out $275 a month for taxes and lets raise the condo fees dramatically and say $225 a month for them. My expensive in retirement for my roof is $500, yours is $2,000. But somehow it's overrated?

There's also the fact that I'll still be working for some years with that lower income as well. Or the fact that I will keep the house, pay it off in 3-5 years, and then earn $1,200 a month immediately on rent that will go towards my next property. You may not like homeownership - but it's far from overrated. ESPECIALLY when looking at retirement.

 

[realibrad]

Saying on net, X is true is very different than saying that X is always true.

Then on net, the government is a job destroyer. So, unless nobody has been paying attention to what has been working and failing, its better to not expect government to "create" jobs.

 

[werepossum]

Can you explain the economics theory behind your post here? I'm unaware of any theory that says all government jobs are net negatives for the economy. In fact, I'm unaware of any way a logical person who is not an anarchist could arrive at such a conclusion.

Realibrad said part of it. I wasn't really thinking so much of government jobs in toto as of jobs created by government, such as the FDR-era work programs. Government can only fund a job by borrowing or by taxing to get the money, and government bureaucrats must administer that process, other government bureaucrats must administer the job selection and recruitment, still other government bureaucrats must administer the job payment, etc. It should be axiomatic that none of these government bureaucrats work for free, nor provide their own work environment and tools, and that this cost is above what would be the private sector costs. All that costs money, either taken out of the current economy or taken out of the future economy.

I'd be hesitant to extend that to stating that all existing government jobs are a net negative for the economy simply because there are legitimate societal functions that the private sector is not suited to fill. But I seriously doubt many reasonable people would agree that government still has a lack of such jobs.

 

[realibrad]

Who says that all the money they are taking is actually active in the economy?

Do you have an example of when we do tax inactive money?

 

[fskimospy]

Then on net, the government is a job destroyer. So, unless nobody has been paying attention to what has been working and failing, its better to not expect government to "create" jobs.

Oh I sincerely doubt the government is a job destroyer, but that's a totally different argument.

I was simply pointing out that a statement that government jobs are inherently harmful to the economy isn't backed up by evidence.

 

[realibrad]

Oh I sincerely doubt the government is a job destroyer, but that's a totally different argument.

I was simply pointing out that a statement that government jobs are inherently harmful to the economy isn't backed up by evidence.

What I mean when I say net destroyer, is if you compared the total jobs pre tax, vs post, the economy would have more jobs.

The government currently is ineffective so even if it were possible for the government to in net create jobs, they can't for now.