First-time homebuyers shut out in some cities
Falling prices had made homeownership more affordable, but only in some areas. In some major cities, working couples still can't afford to buy.
Teachers Steve and Logan Kinney, who lived in the New York City borough of Brooklyn, have excellent credit and would like to buy a house. But their budget of $250,000 puts most of the New York City area out of reach.
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"Unless you are a lawyer, owning a home is out of the question," Steve Kinney told The New York Times. He notes that the couple would have to save a full year's salary to come up with a 20% down payment. To help them save, they have moved to Rockaway Beach, meaning that Logan Kinney spends three hours a day commuting.
Citing statistics from Fiserv Case-Shiller, The Times notes that prices nationwide have fallen 32% from their peak. The national median home price is $166,000, a level not seen since the mid-1990s and down substantially since the peak, when the median price was $226,000.
But if you look at a number of larger cities, the median home price far exceeds the ability of a couple with the median household income to buy. The Times writes:
In fact, prices in several metropolitan areas — including New York, Los Angeles and Boston — will end up being higher than their pre-bubble levels, at least relative to local income, said David Stiff, an economist at Fiserv Case-Shiller, which tracks the real-estate market. There are a few reasons, but one of the main drivers is the work force: these areas develop pools of specialized, highly compensated employees.
In Washington, D.C., homes are relatively affordable in the outer suburbs in Maryland, but would-be homebuyers are having a hard time finding homes they can afford closer to central D.C.
"It’s very difficult to get a house in a desirable neighborhood for less than $400,000," Andrew Riguzzi, a managing partner at D.C. Real Estate, told The Washington Post. "If they’re out there, they probably haven’t been cared for and need several thousand to bring them up to conditions."
First-time homebuyers David Albersheim and Andrea Cohen have been looking for months for a home near a D.C. Metro station for less than $400,000.
"It’s frustrating because I feel like I’m wasting time looking for houses every Sunday," Cohen told The Post. "I do have faith that we’ll eventually find the right one, though. I’m trying to stay optimistic."
I am not glad we could only afford a dinosaur of an old uninsulated home with our affordable mortgage, which is what is breaking the bank and making it tough on us, now. In our case, the energy bills are the problem. We've reached the point where all the energy improvements we made, new doors and half new windows, have been perfectly offset by energy rate increases. Which turns out to be okay, because, we stalled out due to lack of spending money, and discovered, we will have to properly ventilate this dinosaur, too. And, because of this, we decided to seek a refinance to take advantage of interest, finally two points lower than ours. But, it may not come to pass, all because of a certain WI Governor deciding, with a wipe of a pen to end the WI VA Mortgage program and direct us all to the federal programs...but I digress.
Houses are expensive. In our case, the cost of owning a home is far greater, so far, than the cost of raising our single child. And, we drive old paid for cars, too, insured as little as possible and fixed by my mechanic spouse, so, it is the house that is draining us, not the kids.
If you really want to go cheap, there are plenty of nice houses in Canton or Youngstown, OH, and in lots of smaller cities in Kansas that can be had for under $50K too.
This is bad in itself but what about when this "working couple" wants to have kids? So they've already broken the bank with both of them working full time professional jobs just to get into a house. Now what? How can they possibly afford to have kids? Add the expenses of having a child but also the tough choice of paying for child care ($500 to $1000 a month if your lucky) or one parent staying home till the child or children start school.
So you say don't have kids unless you can afford it? Where is that getting us today? I'm in my 30's and out of most of my friends and colleagues I am in a very small minority because I have kids. And I'm poor now because of it. So are the other people my age with kids with very few exceptions. So what's happening is the people that should be having kids, (the intelligent, middle class, hardworking couples) are choosing not to because they can't afford it. So the next generation will be the very poor who don't care and have kids anyway and the very rich who will have a couple kids and make sure they go to top schools despite their behavior and intelligence and only based on connections. This does not make for a very good outlook for the future.
Housing prices need to become affordable again for working families. And dare I say they become affordable for a single income household like my parents? I'm all for women's rights but women entering the workforce as rule was not a good idea for the housing market. It drove up prices drastically and made it nearly impossible for one parent (father or mother) to stay home and raise their kids while the other supported the family with one income. Not only that, it took away the cushion that families had should one lose a job. My feeling is that this mortgage crisis we're currently in could have been averted if loans had been based on one earner per family instead of two.
With the concept of "working couples" if one loses a job they are screwed once their savings drys up. Many have no savings to begin with because they've overextended themselves just to get into a house. So within a couple of months they're in deep financial trouble. This was not so 30 years ago. At that time, like many households, my father earned the money, my mom stayed home with the kids. But during the mid eighties their was a recession as well. My father, who worked as a building contractor found himself without steady income. But the saving grace that kept our family afloat was that my mother had the option of going to work. She got a decent job that was enough to cover the loss of my father's income. So we kept our house, we kept our cars and we got by.
And even now, if you have a two income household but your mortgage is based on one income, think of the money people would have to spare. That way they could afford to save for the future and afford a lot of extras. Think how the economy would improve if almost every couple or family had and extra yearly income at their disposal instead of just getting by with it.
About Teresa Mears
Teresa Mears is a veteran journalist who has been interested in houses since her father took her to tax auctions to carry the cash at age 10. A former editor of The Miami Herald's Home & Design section, she lives in South Florida where, in addition to writing about real estate, she publishes Miami on the Cheap to help her neighbors adjust to the loss of 60% of their property value.