U.S. incomes down

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NY Times--Americans earned a smaller average income in 2005 than in 2000, the fifth consecutive year that they had to make ends meet with less money than at the peak of the last economic expansion, new government data shows.

While incomes have been on the rise since 2002, the average income in 2005 was $55,238, still nearly 1 percent less than the $55,714 in 2000, after adjusting for inflation, analysis of new tax statistics show...[more]

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..."adjusting for inflation." Which means that we're actually earning more dollars, but those dollars are not keeping up with inflation.

Headlines like this are a pet peeve of mine. The headline could have easily been - inflation eats away at earnings...which is a more accurate depiction of what's really going on.

Further, the article says:

"The I.R.S. data showed that the number of Americans making less than $25,000 a year shrank, down by 3.2 million, or 5.5 percent."

So, the number of 'poor' decreased by 5.5% - this is good news.

"Nearly half of Americans reported incomes of less than $30,000, and two-thirds make less than $50,000."

But, you're in the top third of wage earners if you make more than $50,000 per year...does that make you 'rich'???

I find this very interesting when I compare it to my personal case.

My wife recently got a raise so our family income did get higher. I think we now do make collectively over 50K but I wouldn't describe us as rich. I'd say we do ok on a budget.

However before her raise we still were doing better than the year before. This is because we spent the last 12 months focusing on paying off our debt. Our two year plan was to spend two years focusing on our debt and spend the next two years buying a home and generating equity. Right now we're midway through the first two years and we are doing awesome.

We've paid off some of our old debt and in six months we'll be completely free of credit card debt.

This is not due to some magic wand. It was tough and we remained vigilant. We made a monthly budget, we planned to put our tax refund on our credit cards, and we put money into savings. While I don't have my 42 inch HDTV I will have no car payment and only one credit card bill come Christmas.

Also as compared to 2002 I have more disposable income as well.

MikeyA

MikeyA

...this article along the same lines - but a very different perspective:

http://biz.yahoo.com/ap/070828/poverty.html?.v=4

AP
US Poverty Rate Declines Significantly
Tuesday August 28, 5:54 pm ET
By Stephen Ohlemacher, Associated Press Writer
US Poverty Rate Registers First Significant Decline Since 2000

WASHINGTON (AP) -- Five years into a national economic recovery, the share of Americans living in poverty finally dropped.

The nation's poverty rate was 12.3 percent in 2006, down from 12.6 percent a year before, the Census Bureau reported Tuesday. Median household income increased slightly, to $48,200.

blogger, the original story referenced has been changed:

http://www.bizzyblog.com/2007/08/29/a-convenient-headline-and-first-para...

Unfortunately, the NYTimes link no longer goes directly to the story and now requires a registration to view.

About the housing industry and loan mess that there is now.

People made bad choices and now the piper wants to be paid.

http://toledoohioneighborhoodconcerns.com/blog

Yow!

I had a personal finance prof. in 1973 make some of the same points you just made about "buying" versus renting, GuestZero.

Housing market prices dipping for the first time since 1950...

I realize that this is a temporary situation, but so were the 1930's - I won't use the word.

The problem is people were overextending themselves even on ARM's.

If everyone paid $100 more on their mortgage a month they would gain equity at a substantial rate and would be better prepared to not lose the farm during a buyers market.

As any real estate agent will tell you ANY home can sell in ANY market if it's priced right. The problem is most people would have to take a loss in order to prevent foreclosure.

In today's market many homeowners would find if faced with default or foreclosure their mortgage company would be more apt to work with them rather than face the impending loss. However this requires the home owner to get off their ass and call them. Most of the people in the latest housing boom were buying houses because they thought they'd automatically get their money's worth out of them with little effort, this is false.

If many of these people who are more inclined to go into foreclosure would either work with the mortgage company or take a 20-30K loss on average they would avoid foreclosure, keep a decent credit rating, and be able to start over at home ownership a few years down the road.

Can the nation live with 20-30K of debt with little assets to show for it? Most Americans do with student loans already.

MikeyA

MikeyA

To most people above the family, the crash will NEVER affect the prime loans.

Sure, plenty of families with prime loans will lose their homes, no doubt about it. But also, many sub-prime borrowers will KEEP their homes.

This is complicated, but as most everyone surely knows by now, these loans (save for those bought by Freddie/Fannie), are purchased by wall street. This is done by sellers grouping tens, even hundreds of thousands of mortgages into a single security.

What's not common knowledge is how this actually works after the security is purchased by the investor.

These securities are rated just like any other bond, from AAA (which is absolutely no risk, equal to US Tresury bonds), down to junk status.

The securities with the highest portions of prime loans will have the higher ratings.

Well, these securities are short term, just a few months usually. (This is AKA "Commercial Paper"). When the term ends, the mortgage company pays back the investor the principle plus interest.

Here's the interesting part...

The securities are "bought back" from the investors based on credit worthiness from AAA on down. So the first ones that get bought-back are the AAA securities. If the mortgage company has money, they go on to AAB, etc, on down.

So, in theory, all the prime AAA borrowers could default, and if the subprime borrowers didn't, the prime loans would be paid for but not the subprime.

Seriously.

Of course, this means little to the family that had that prime mortgage.

But past that, and of course the mortgage companies, the effects are muted. It will just appear as if subprime (junk) bonds went...junk.

His brother bought a ranch in Wyoming with money from his farm he sold in Michigan. His brother (my renter) will live there on a house he has built himself. He slept in a second-hand trailer he bought while he is building his log cabin. They have taken hay they have grown in Wyoming, and sold in at a profit in Arizona (until the rise in gasoline and deisel made that unprofitable).

They have bought front-loaders and combines second-hand they use on their ranch. He has been offerred work with the county since many of the younger generation are leaving the ranches there. They built a boiler heated by wood which they cut from the national forest (with a permit), and use to heat water for radiant heating in the floors of their homes.

I guess what I'm getting at is that there are still ways out west to live cheap (and on your own terms). But you have to be willing to work, and take a chance. Unfortunately, its broken his marriage because his wife doesn't want to leave her job (and lose her pension) to live on his brother's land. He (on the other hand) has always said he would live out West where he could climb mountains, and fish in trout streams. So he's taking a minimal pension, and heading West. And he'll make part of his living pulling horses' teeth (which I understand can help get you by).

Old South End Broadway

Way to Go Mikey! Keep it up!

Getting ahead of the money game provides choices in life...freedom!

Some neat sites I found over time for investing and budgeting include:

www.money.com (personal finance tab and making of a millionaire);

www.vanguard.com (great money maker for index funds - college, roth, etc...awesome on global, small-cap, mid-cap, S-P 500, precious metals, energy, and bond index funds)

www.fool.com (made alot of money off the hidden gems newsletter)

www.etrade.com (great savings account at 5.05%, no fees. Nice checking account with universal no ATM fees. $9.99 trades on stocks. Added discount points off mortgages).

Neat book is "The millionaire next door" (in short, most millionaires don't drive fancy cars, wear nice watches, or live in crazy houses...they just live a simple, enjoyable debt free lifestyle).

was right on everything he predicted for the last 2 years-he's always preached fiscal responsibility, and said the housing /credit crash would eventually come. I won't blame it all on Bush though LOL

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BRING THE TROOPS HOME-NOW!

_________________
"They keep talking about drafting a constitution for Iraq.Why don't we give them ours? It was written by a lot of really smart guys, and we're not using it any more".

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'I used to have compassion, but they taxed it and legislated it out of existence.'

Spin and perspective aside, what most articles did not report is that the IRS data shows the average inflation adjusted income for those earning less than $100,000 (roughly the bottom 90%) in 2005 was $31,849, $2,914 lower than the $34,763 earned in 2000.

Just as many of us already sense, the rich get richer and the rest get left behind.

Here's the data for those inclined to spin it differently.

2005 data: http://www.irs.gov/pub/irs-soi/05in11si.xls

2000 data: http://www.irs.gov/pub/irs-soi/00in11si.xls

CPI data: http://research.stlouisfed.org/fred2/series/CPIAUCNS/downloaddata/CPIAUC...

Here's another NY Times article on the subject. Warning though, it's an editorial.

As a general rule, if you make 1 extra mortgage payment each year and have it applied to the principal of your loan, you can shave about 8 YEARS off your 30-yr mortgage. It's a no-brainer to make 22 extra payments in order to avoid 102 more. Of course, the extreme of that viewpoint is that you should make only 1 payment (the full price of the home) in order to avoid ALL the costs of credit. But, the user Handbanana's head would probably explode if he hears that one.

A mortgage can become a well-shaped piece of the average American's finances and lifestyle. But it has to be well considered, and all aspects have to be planned. If you're going to be stuck in a 30-yr payment plan due to various choices you made, it's still sensible to minimize the impact of that upon your life. As a first approximation, if you are in your late 20s and take a 30-yr mortgage, then the 1-extra-payment-per-year plan is an excellent choice since by the time your mortgage is paid off (about 8 years early), your employers will be looking to get rid of you due to your age (around 50). In such a state of income uncertainty, eliminating your mortgage payment entirely is a very good choice.

...I'm hoping you can answer this question. Since the IRS uses Adjusted Gross Income, do you know where someone can get information about how any new deductions or changes in the tax laws have impacted the adjusted gross?

I know that many people try to get to a lower adjusted gross because they then pay less...

Any ideas?

Also, instead of reported tax data on adjusted gross income, would earnings (pay scales) be a better judge?

Which hasn't happened and most likely won't with Ben "The Fed doesn't react to markets" Bernanke announcing rate cuts, albeit about six months late, and offering bailout loans to the lenders. Also he stated that all mortgages are bad and that everyone should be buying their houses with cash, which made absolutely no sense at all. Anyone who is fiscally responsible will tell you that paying rent while saving for the full price of a house is a waste of money. As long as the interest rate on your mortgage is less than the average S&P 500 return, you're better off with a mortgage. What is more fiscally responsible, paying a mortgage and saving for retirement or paying rent while saving $100k over decades for a house?

And everyone was predicting a housing crash, because the run up in housing prices could not be sustained. It's not like that was a mystery. If the value of your house is rising by 30% a year and average salaries are stagnant, there will be a crash. Here's a tip for everyone: if you hear the words "The old rules no longer apply," you're dealing with a bubble.

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"When I say your dumb name, please stand up briefly, but then quickly drop to your knees and forsake all others before me." -Ignignokt

There's a city full of walls you can post complaints at

Thanks for the links brassmonkey. But no need to congratulate me, that honor goes to my wife who is not only the banker but the bouncer who knocks heads together when the budget isn't followed.

What's funny is neither of us have gotten over how easy it was to pay off our debt when we had a jointly decided upon plan. We already know when, where, and how we want to retire and most of our decisions are based around that.

I would recommend to every newlywed couple to yearly have a "State of the Union" meeting like we have every January. It's where we discuss our goals, create a yearly plan to meet them, and reevaluate our monthly budget.

MikeyA

MikeyA

And please how would the average working person or couple do this, pay the whole mortgage up front.

It is an admirable goal but one that many simply cannot do.

I listened to a radio piece where it was discussed the ways that mortgage lenders have changed, for the worse, and the motivation for them is more profit and they could care little if the mortgage failed as they made the commissions and fees they wanted.

The lending system is broken and needs to be fixed, but how.

http://toledoohioneighborhoodconcerns.com/blog

AGI really doesn't seem like the best basis for these types of generalizations. I'm sure the IRS tracks relative changes in top line vs. bottom line income #s over time, but where?

all mortgages are bad and that everyone should be buying their houses with cash

The dude is the chairman of the fed? He should know how to transfer balances from one credit card to another! That's how you get the downpayment. No wonder we're in trouble!

What's in your wallet?

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I'm the Jack that your friends say you don't know.

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I'm the Jack that your friends say you don't know.

Hello again, Handbanana. You sure sound like you know what you're talking about. THEREFORE, you must know what the ARM reset schedule is for American mortgages. Please relate that schedule for us, hmm?

Those who know the ARM reset schedule know that I just slapped you around like a red-headed stepchild. If you'd bother to reach into your memory for a more precise accounting of what I said, I said paraphrasingly that subprime would crash first, then Alt-A, then prime. We're still in the beginning of the Alt-A crash. The fucking lendershits think that by halting the entire mortgaging process, they'll stop the crumbling of the Alt-As. That's the true American fashion for blotting out reality. It won't work.

The time of the true prime-mortgage accounting is not yet here. The crash will hit them too, since too many so-called prime loans were granted on the same flawed basis as the other, lower-caste ones were: credit rating. You cannot possibly survive as a creditor if you rely so heavily on the rating of the debtor.

By the time the 3rd wave of ARM resets happen in 2010-2011, the rout amongst the primes will be in FULL SWING. Prices will still continue to drop from there ... perhaps until 2014. Note that pricing adjustments across the nation will vary, since the Great American Housing Bubble also varied across the nation ... from late 2005 for CA, to late 2007 for NC/SC. The GAHB peaked in a 2-yr period, so prices will bottom out after 2011, in a similar 2-yr stretch. Barring other factors, CA may recover first, with a price bottom in 2012 or so. Maybe. If enough people and businesses flee CA due to the economic collapse, foreclosures, condo/HOA/Mello-Roos fees, and crime, then home prices will remain depressed there for a longer time.

As I suspected, the intervention of government is causing the crash to lengthen or deepen, depending upon which area and population it affects. Bailouts, waiving of internal lending rules, reliance on Fannie/Freddie, stealth rate drops, outright government short-term loans, foreclosure moratoriums ... all these and more have ALREADY been tried, and largely in just the last 6 months of activity. Just imagine what the dipshit government will try in the next 2 years as it tries to overcome the 2nd wave of ARM resets in 2008/9.

I'd love to continue debating you on the topic of the coming danger amongst the primes. I must warn you now that I'm in command of far more facts and figures than you probably ever imagined. You'd better get your will in order if you intend to continue crossing swords with me thusly. Unlike in the Shakespeare play, I'm going to win this melee. :^)

Now, onto the general mortgage issue. The 20th Century was a remarkable 100 years for America. One aspect of it involves a general debt slavery as Tho. Jefferson well warned us against. Throughout the century, the fraction of each average home purchase that was financed grew and grew. Hence, it is only rational to conclude that Americans USED TO buy homes for fat amounts of cash. Now, we're almost precisely inverted in that, in that using cash to buy a home is the rarity. Well, doesn't basic economics tell us two things about that? :

1. Credit Costs Money. Credit isn't free; you have to pay a bank for it. Although you bad-mouth renting, it remains a simple exercise to ask why RENTING MONEY FROM A BANK is a better option. The cost of credit and the decline of home value are significant factors. Those factors mathematically determine that at some times, and for some people, renting makes more sense.

2. Credit Triggers Speculation. The easier money is to get (loans, finding it, gifts, theft, etc.), the less the owner cares about spending it. This leads to overspending, for things like conspicuous consumption and asset speculation. In the latter case, the prices of homes rise ... which tends to crowd out the smart buyers who brought only cash (note: a fixed amount) to the table. The man with an approved mortgage app (note: a variable amount, usually exceeding that of the cash holder) tends to outbid the cash guy. Outbidding naturally raises prices. The more that happens, the less cash holders can successfully bid, which means that mortgages become more necessary in order to make a successful bid. The end product is what we have today, where in the bubbliest areas, median homes are completely beyond all cash buyers except the truly wealthy (about 10% of the population).

This a great problem and just because it's taking a good century to develop, doesn't mean that it's any LESS of a problem. We are indeed waking up slaves on the continent our fathers conquered, as Jefferson said in a warning to us, his successors. We've become wage and debt slaves, and liberty cannot survive in such an environment. We must drop home prices before real Fascism becomes the government standard in these United States. Please see this truth, before the real violence must erupt to resolve the social stress.

I probably should have been more specific. Sorry.

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"When I say your dumb name, please stand up briefly, but then quickly drop to your knees and forsake all others before me." -Ignignokt

There's a city full of walls you can post complaints at

You sure sound like you know what you're talking about. THEREFORE, you must know what the ARM reset schedule is for American mortgages. Please relate that schedule for us, hmm?

Sure.

The time of the true prime-mortgage accounting is not yet here. The crash will hit them too, since too many so-called prime loans were granted on the same flawed basis as the other, lower-caste ones were: credit rating. You cannot possibly survive as a creditor if you rely so heavily on the rating of the debtor.

How does the prime market crash? ARMs resetting screws over those who were ill prepared to pay the full payment every month, but prime borrowers have been paying the same monthly fee that will not change. Contagion has been avoided, primarily through the actions of the Fed and the ECB.

However, the people who recently bought a house with an ARM and were counting on their house value to rise dramatically are screwed. We don't blame eTrade when someone loses their money in the stock market, why should we blame banks when people buy houses with ARMs that they can barely afford the initial payments? They were counting on the real estate market to continue booming so they could refi at a low rate. They chose poorly and now they have to face the consequences.

I must warn you now that I'm in command of far more facts and figures than you probably ever imagined. You'd better get your will in order if you intend to continue crossing swords with me thusly. Unlike in the Shakespeare play, I'm going to win this melee. :^)

Save the internet tough guy routine for someone who doesn't subscribe to The Economist.

Although you bad-mouth renting, it remains a simple exercise to ask why RENTING MONEY FROM A BANK is a better option. The cost of credit and the decline of home value are significant factors. Those factors mathematically determine that at some times, and for some people, renting makes more sense.

Why is borrowing money for a mortgage a better option than saving the entire sum of a house's purchase price? You're kidding, right? In the first week of Economics 101 you learn about opportunity cost. Sure, you could rent while you save money to pay for a house in cash, but by doing so, you miss the chance to build your IRA with tax free earnings. In the next few years housing prices may slump, but after thirty years, it's going to appreciate in price unless you bought a house in Detroit. Let's run some numbers and see if it is actually a better idea to use cash to buy a house:

Mortgage Payments Over 30 Years (with 20% down payment)

$100,000 --- Price of house in 2007
7% --- Interest Rate
$532 --- Mortgage payment for $80k loan
$191,606 --- Total mortgage payments
10.31% --- Average historical annual S&P500 return
$333 --- Monthly IRA deposit
$812,101 --- Value of IRA in 2037
$1,155,801 --- Net worth in 2037

========

Saving to pay for a house in cash

$100,000 --- Price of house in 2007
343.7% --- Increase in CPI since 1977
$343,700 --- Price of house in 2037
$432 --- Average monthly savings needed to buy the house in 2037
$550 --- Rent per month in 2007
$352,634 --- Total rent paid from 2007 to 2037 adjusted for avg. CPI of 3.5%

==========

Bottom Line:
(Mortgage) Total net worth in 2037: $1,155,801
(Cash) Total net worth in 2037: $343,700
(Mortgage) Total housing payments over 30 years: $191,606
(Cash) Total housing payments over 30 years: $696,334

So in the thirty year span, paying for a house in cash will cost an extra $500,000, and by maxing out the contributions to an IRA account, an extra $800,000 is generated for retirement. Even if the savings intended for a house is invested in the same S&P fund, it would generate less money than an IRA account because of the tax deferment offered by IRAs. At most you should rent until you save for a down payment, otherwise you're probably wasting money. Given that Social Security will be a shell of its current self by the time my generation retires, we're going to need that money later on to use as a safety net.

We've become wage and debt slaves, and liberty cannot survive in such an environment.

We've always been wage slaves. Lower housing prices won't change this.

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"When I say your dumb name, please stand up briefly, but then quickly drop to your knees and forsake all others before me." -Ignignokt

There's a city full of walls you can post complaints at

GuestZero, Bernanke, whatever... u just transfer balances and switch the money around, and snap!

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I'm the Jack that your friends say you don't know.

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I'm the Jack that your friends say you don't know.

How does the prime market crash? ARMs resetting screws over those who were ill prepared to pay the full payment every month, but prime borrowers have been paying the same monthly fee that will not change. Contagion has been avoided, primarily through the actions of the Fed and the ECB.

Where does this notion of prime = fixed come from, certainly nothing I've read in the Economist. Many prime borrowers take out ARMs - per the MBA over 50% of loans in recent years (basically 2003 thru mid 2006) were ARMs and option ARMs, not just subprime but equally amongst Alt-A and prime too.

Just because someone has a solid FICO score doesn't mean they're only taking a fixed 15 or 30. Just like in subprime, many prime borrowers will likely be surprised at the heavy carrying cost after the adjustment, and some of these folks may even fall behind.

BOJ, Fed and ECB have added liquidity, but I suggest solvency might be a bigger issue to address. There's a lot of assets propping up the system that have yet to be marked-to-market. Only hindsight will tell us for sure if it becomes a crisis; but because it hasn't yet does nothing to suggest it won't or can't.

Nice save ... except for the bullshit part. You'd better go look at the reset schedule AGAIN, since you clearly aren't paying attention to it. How many more 100s of billions of dollars of resets have to happen before you finally admit there's a severe financial crisis going on?

HB said: "How does the prime market crash?"

I said "when the crash hits the prime market". You choose to interpret that to mean the prime market would crash. You're wrong. THE CRASH is the set of incapable borrowers who were only temporarily placed into overpriced homes. Credit ratings (being the primary enablers of borrowers) placed these incapable borrowers all over the mortgage markets. Their are a lot of them in the prime market, and "THE CRASH" of them will affect the prime market.

Furthermore, prime borrowers still overpaid for their homes in the varying period 2000-2007. Those home prices must also fall.

Furthermoreso, you haven't said a word about HELOCs. How many primes indulged in HELOCs? You already know that there's a shitload of trouble there.

HB said: "Contagion has been avoided, primarily through the actions of the Fed and the ECB."

Bernanke lied to us once about subprime being "contained". That you still parrot this falsehood in the huge asset-speculation and credit-granting bubble, then you must have the same brains of a parrot.

The mortgages will continue to adjust. Businesses will lay off en masse as such spending will be strongly diverted thereby. Please explain how this is not contagious.

HB said: "[W]hy should we blame banks when people buy houses with ARMs that they can barely afford the initial payments?"

Because banks made decades-long loans without concern for the fulfillment of the terms. Since those banks are almost always holding federal AND state charters, we have every right to regulate them. Part of the regulatory apparatus is to make sure the borrower qualifies. High LTVs, no verifications, teaser rates ... all those terrible policies where the decision and responsibility of the banks.

I blame them both, and more. The borrower will have to leave the home. The bank will have to take the loss. The holders of MBSes will also have to take the loss. Bailing out any of those will create a huge moral hazard that will continue to drive up prices and cause taxpayers to take the losses instead.

HB said: "Save the internet tough guy routine for someone who doesn't subscribe to The Economist."

Save yourself. You'd better get your subscription money back since you haven't learned a thing about asset speculation and the excessive granting of credit. We're heading for a Depression from all this financial chicanery and you don't have near enough copies of that magazine available to burn them for warmth.

HB said: "Why is borrowing money for a mortgage a better option than saving the entire sum of a house's purchase price? You're kidding, right?"

Do I sound like I'm joking? You only have to borrow since the fucking PRICE IS TOO HIGH. If you restrain yourself to the "no more than 2.5 times your income" rule for the purchase price of a house, and you save a good 30% of your income, then you can put down a huge (i.e. historically NORMAL) downpayment for the home. 30 years? Fuck, 40 YEAR mortgages are appearing! Generation by generation, the economic ability of the individual is decaying. It's neither natural nor normal. You may dismiss it as the usual wage/debt slavery, but SLAVERY is not the natural or normal state of the American, either.

You also failed (FAILED, I say!) to relate natural circumstances to this mythical 30-year span of time. Are you going to be employed enough over those 30 years? Banks don't say "well, you're on the 30-year plan, so we can defer your mortgage payment until you find work again". In your buying plan, you've made no provision for foreclosure.

On top of all that, your so-called numbers make no provision for people buying with exotic loans and/or at the peak of a bubble. You can refi all you want, but the purchase price of that home will never change. Overpaying is still overpaying.

Again, renting and buying go hand in hand. The individual should consider his options in BOTH, and avoid all that "always better to buy" propaganda. He has to understand his neighborhood, since if it's about to go to shit then buying is foolish; his work circumstances, since if he'll relocate soon then buying is foolish; his investment opportunities, since if he'll put money into a business then buying is foolish; etc.

HB said: "We've always been wage slaves. Lower housing prices won't change this."

Your acceptance of this crap is profoundly disturbing. A slave is a slave no matter if wages and/or debt are the actors of the slavery. The middle class was supposed to have the best of both worlds; they were supposed to SAVE MONEY AS MONEY in order to capitalize themselves (combined with a modest standard of living). Today's so-called middle class is shouldering so much debt that as a class it's a lot poorer than advertised. Downsizing needs and saving money from the margin created, was the ONLY economic strength of the middle class. They've given up on that and are foolishly signing any stupid contract you stick in front of them.

And it only stands to reason that lowering house prices makes them more affordable. Making up for it with exotic loan terms only delayed the foreclosures. Even your blessed Economist magazine should be telling you that by now. Don't you ever read it?

I said "when the crash hits the prime market". You choose to interpret that to mean the prime market would crash. You're wrong. THE CRASH is the set of incapable borrowers who were only temporarily placed into overpriced homes.

It's pretty clear from this statement that you have no idea what you're talking about. Shane did a much better job than I could of explaining how the mortgage markets work, so I'm not going to repeat what he said. Read it and you might understand the situation.

Do I sound like I'm joking? You only have to borrow since the fucking PRICE IS TOO HIGH. If you restrain yourself to the "no more than 2.5 times your income" rule for the purchase price of a house, and you save a good 30% of your income, then you can put down a huge (i.e. historically NORMAL) downpayment for the home.

Wait a minute... So now "renting money from the bank" makes sense? Because if you use someone with an income of about $40k, the examples I posted before fits your guidelines and it already assumes the person has 20% of the $100k saved. Sorry about not being clear about that, I figured that if you had access to stats and figures that I couldn't possibly comprehend, you'd know how to use them and you'd determine that a down payment was included.

You also failed (FAILED, I say!) to relate natural circumstances to this mythical 30-year span of time. Are you going to be employed enough over those 30 years? Banks don't say "well, you're on the 30-year plan, so we can defer your mortgage payment until you find work again". In your buying plan, you've made no provision for foreclosure.

As I noticed in our last financial debate, you don't understand personal finance very well. If you did, you'd know that the contributions made to a Roth IRA can be withdrawn at any time without penalty. In a pinch, the IRA can be used to stay afloat, just like the house savings in scenario 2. Except when you lose your job, you still have to pay rent in the second scenario. When using the savings for the house to cover rent, you're delaying the purchase of a house by at least twice the number of months you have no income. But you're wrong about the lack of a safety net either way.

On top of all that, your so-called numbers make no provision for people buying with exotic loans and/or at the peak of a bubble.

You're not reading what I've written, or you're forgetting it from post to post. Those people are screwed. They carelessly bought at the peak of a market cycle or they gambled on a continuing boom. Sorry, but they lose. There will always be a last man to die in a war.

Your acceptance of this crap is profoundly disturbing. A slave is a slave no matter if wages and/or debt are the actors of the slavery.

Please tell me that you really don't believe this. If a slave at a diamond mine in Sierra Leone doesn't meet his quota and has a hand chopped off, does the hand grow back after 10 years? Whereas if I get fired for poor performance and have to declare bankruptcy, it disappears from my past after a decade.

The middle class was supposed to have the best of both worlds; they were supposed to SAVE MONEY AS MONEY in order to capitalize themselves (combined with a modest standard of living).

Which page of the Middle Class Handbook are the supposed financial benefits and limitations of middle-classitude outlined?

The middle class is not "supposed" to do anything but pay taxes and die. Those are the only requirements. See, part of the liberty that you claim is eroding is the freedom to use your money however you see fit. But go ahead, park your savings in the bank. Enjoy that .05% interest rate they give you and watch that sum of money you save slowly lose value through inflation.

They've given up on that and are foolishly signing any stupid contract you stick in front of them.

So now it's not the "toxic loans" that are the problem, it's the idiot middle class?

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"When I say your dumb name, please stand up briefly, but then quickly drop to your knees and forsake all others before me." -Ignignokt

There's a city full of walls you can post complaints at

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