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How Homeownership Became the Engine of American Inequality

nytimes.com

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Re: How Homeownership Became the Engine of American Inequality

#161

Post by mi100hael »

microdrum wrote: post #95
spaceflunky wrote: post #77

This article is incredibly misguided for several reasons... 1.) If you truly are "rich," then you pay for your home in cash. You do not take out a mortgage on your house. Look at a distribution of loan amounts, the vast majority are around $600k. Very few are are >$1M [0]. Home loans are a product for middle-class Americans. 2.) A lot of rich people don't really pay income taxes like middle class people do. This is s…

This, 1,000x. There are a lot of families making $1 million gross ($500K net) in income. They live in SF and NY. Both parents work 10 hour days. They live in an uncomfortably small house and have a $1 million mortgage. They can barely save for college after paying for childcare costs and the mortgage. But they're "rich." Yeah, right.

Is there really no cheaper housing options available to people like that? That sounds absurd.

Re: How Homeownership Became the Engine of American Inequality

#162

Post by graphitezepp »

ianai wrote: post #145
acchow wrote: post #142

Earlier quoted context omitted.

The Great Recession was right after the financial crisis triggered by subprime mortgages. You're probably thinking of the Great Depression.

I didn't think that term had to be defined. How can people forget so fast?

Not everyone seems to be aware calling the period The Great Recession is a thing yet.

Re: How Homeownership Became the Engine of American Inequality

#163

Post by succstressful »

pyoung wrote: post #79
komali2 wrote: post #62

Earlier quoted context omitted.

Regarding 2: I cannot wait to pay off my debts (scheduled in September!) and start putting money in IRA and 401(k) :) Every time someone asks me if I'm using the 401k I always feel sheepish answering "no... because I have debts with a higher interest rate than I'd get on the return..." Nobody seems to buy it but I've run the math again and again, it's just true.

Does your company offer a 401k matching program? If so, that is basically an instant 100% return. If they are not matching, then you might be right, but if their is a match on the table, it probably makes sense to max that out.

This advice is common. It should come with the caveat to investigate the vesting timeline for that 401k match. One of my former employers matched at a great rate, but that contribution did not vest until you had spent 4 years at the company. Given the rate of turnover at lower-seniority positions in the industry (PR agency), it was entirely unrealistic for more than half of the employees there to ever expect to see the benefit of that match.

Re: How Homeownership Became the Engine of American Inequality

#164

Post by Jtsummers »

strictnein wrote: post #150
njharman wrote: post #91

Earlier quoted context omitted.

Imagine other investments supplying roads, police, fire, parks, and education (or at least a place to store kids during work day) for 12 years.

Imagine the fact that property taxes pay for a lot of that. Now imagine house values plummeting because you removed the deduction and you've put the funding for all of that in peril.

That seems like the wrong way to think about things. That funding, then, is predicated on inflated, consequently inaccurate, housing/property values. When the bubble bursts for any reason the funding source will be reduced.

Critical services banking on a bubble to sustain themselves is just a terrible (though often done) idea. Eliminating the bubble earlier and getting accurate valuations before becoming dependent on the inflated amount (and suffering from austerity efforts later) would be a much better (and rarely done) plan.

Re: How Homeownership Became the Engine of American Inequality

#165

Post by astrodust »

tehlike wrote: post #103
mmagin wrote: post #90

Earlier quoted context omitted.

This is the wrong time in the cycle to buy a house in the Bay Area, unless you're filthy rich.

I think part of the game is to not think too much about that. Crisis happened in 2008, but it bounced back pretty fast. Check this: http://www.paragon-re.com/3_Recessions_2_Bubbles_and_a_Baby To me this long term trend is teling me that the drops are only temporary and contained for about 3-5 years. Sure if you buy at the peak, there is a chance that you might owe money to a bank for something you do not own (negativ…

Just because it bounced back doesn't mean it didn't just double down on the existing bubble.

If prices vastly outstrip the ability of ordinary people to afford it, you're detached from reality.

Re: How Homeownership Became the Engine of American Inequality

#166

Post by astrodust »

cbhl wrote: post #127
komali2 wrote: post #62

Earlier quoted context omitted.

Regarding 2: I cannot wait to pay off my debts (scheduled in September!) and start putting money in IRA and 401(k) :) Every time someone asks me if I'm using the 401k I always feel sheepish answering "no... because I have debts with a higher interest rate than I'd get on the return..." Nobody seems to buy it but I've run the math again and again, it's just true.

Yes, this is the right thing to do. From /r/personalfinance: https://i.imgur.com/fb7Dtmh.png

Where's the part where medical bills bankrupt you and you die in your 40s from what's an otherwise easily treatable disease?

Re: How Homeownership Became the Engine of American Inequality

#167

Post by uiri »

spaceflunky wrote: post #115
zardo wrote: post #104

Earlier quoted context omitted.

>1.) If you truly are "rich," then you pay for your home in cash. You do not take out a mortgage on your house. Look at a distribution of loan amounts, the vast majority are around $600k. Very few are are >$1M [0]. Home loans are a product for middle-class Americans. Looking at the distribution of loan amounts would only be meaningful in the context of the distribution of home sale prices. Obviously fewer loans are m…

Right, but who would take out a $750k loan on a $8.5M house? I concede I lack the data to prove my point, but common sense would tell you that these loans are almost all within the middle class home bracket.

Someone who has $8.5M of assets and wants $750k of liquidity. Interest rates are so low that it makes sense to take out a mortgage to invest the cash elsewhere.

Re: How Homeownership Became the Engine of American Inequality

#168

Post by southphillyman »

spaceflunky wrote: post #77

This article is incredibly misguided for several reasons... 1.) If you truly are "rich," then you pay for your home in cash. You do not take out a mortgage on your house. Look at a distribution of loan amounts, the vast majority are around $600k. Very few are are >$1M [0]. Home loans are a product for middle-class Americans. 2.) A lot of rich people don't really pay income taxes like middle class people do. This is s…

Your points ignore real estate developers..... Even the most successful ones that I know leverage debt in order to minimize risk. There is an entire strategy around this which developers use to scale quickly. It relies on them taking out loans and allows them to continue to use their capital on other things.

Re: How Homeownership Became the Engine of American Inequality

#170

Post by xherberta »

acconrad wrote: post #125

Can anyone speak to how taxes are appropriated? Because in all of this talk about MID and perhaps how eliminating it might level the playing field, that only seems to make sense if that money is then appropriated to lower income individuals. I mean the government could simply take that surplus of taxes and shove it into the military for all we know, which in the end doesn't help anyone given our already exorbitant mi…

>Even a minimum wage job should cover the cost of day care for their youngest child, who is too young for full-time schooling.

In many markets, no it won't, if you can even find a daycare with an opening.

Anyway, this plan sounds like a net negative for the family unless the job can cover daycare PLUS commuting costs, work wardrobe, increased food costs (less time to cook from scratch), and the hassle involved with finding alternate care when any of the four kids are sick.

Some people consider the "humanity value" of having a parent at home to care for children to be worth the financial downside. That's their choice. By the way, most developed nations agree...

From the New Republic: *Among developed nations, the U.S. is now the only one that doesn’t guarantee some kind of paid employee leave available for new parents." http://bit.ly/2pZ03Ay

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