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Wednesday, October 6, 2010
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28 comments:
check out the "shower/tub" pic of this listing. on a trip to japan i saw something similar but made of stainless steel and smaller. you sit in there and fill up the tub to your chest/neck - sort of like what you do in a hot spring bath house.
There were comments yesterday about people not having a right to own a home.
The problem is the whole system is rigged to favor the rich, not the poor. The wealth gap has increased tremendously. In the previous 15 years, one percent of the wealthiest Americans earned 50 percent of the economic output, or so it says a Washington Post story this week.
So, the wealthier is getting wealthier, can afford more than one house and rent it to the poor. Can afford expensive education at Ivy league schools and other good colleges -- which is another guarantee (or great leg up) to earn a high income.
So, as long as we are educating, graduating from college less than one third of the population, the playing field is not levelled. Non-college educated people have a much harder chance to earn a living and one day own a home.
And owning a home is a key to retiremet. Unless you want to work until the day you drop dead, you need to own a home. Renting is not the key, because rents go up. So renting is not a "perfectly" reasonable solution as some said.
It is easy to say people have no right to own a home, when for some life was a lot easier, getting educated, gettign a good job as a result of that education, and having the ability to pay for that first home. Or do you really think that the wealthiest people in America are wealthy because they really work that much harder. How much of it do you think was luck, being in the right place, having a good education, smart parents instilling a good education, and yes a high IQ (genetics).
In summary wealthy people need to get off their high chair and recognize a lot of their luck and wealth was pure chance and not hard work.
dc2,
I'll get off my high (horse) long enough to say that people make their own luck. The rest, especially coming for this highly educated board, is whining.
I want people to own homes and acquire assets because I am one of the one's that will be paying the cost if they don't.
The entire mess can be tracked back to Frank and Dodd and forcing lenders to make risky loans to marginal borrowers.
Owning a home today is more affordable than it has been in almost 20yrs. Maybe not in N.Arlington...but don't get me started on the entitlement generation.
VA Investor,
What part of the wealth gap increasing monumentally did you miss?
dc2,
If someone is born both poor and dumb, then yeah they're pretty much screwed. However I definitely didn't grow up wealthy. We rented until I was 16 and then built a house on property my great-grandmother left to my mom. I would not have received any help with college tuition and was all set to go into the Naval Academy (no tuition, 6 year commitment after graduation) until I got my scholarships at UVA. I probably applied to 50 or so and managed to win enough of them to pay for everything. Some were only available to students with financial need, which we definitely qualified.
As for renting, yes it is a perfectly acceptable solution. Using the exact same amount of money a person pays for a home every month they can rent a cheaper place and save the difference, coming out ahead. It just takes discipline to force yourself to live below your means in a smaller place and save the difference. A mortgage as forced savings is less efficient since the bank takes such a large chunk in interest every month, not to mention the maintenance costs. I know renting to save money works because I've been doing it for the past 2.5 years since I got married. We've saved over 100k to put down in that time, and there is no way we'd have that much equity had we bought instead.
Jeremy,
The point of owning a home vs. renting as a way to secure retirement is the following.
Once you pay your mortgage all you need to continue paying is property taxes, insurance, and yes maintenance. This is a lot lower than continuing to pay rent for the same size of home.
So it is better to own a condominium or townhome, for the most part than to continue renting them into the golden years. Rents continue to increase and can be equivallent to three times or more expensive than the cost of property taxes, insurance and maintenance for the same type of home.
I am not against renting, while owning is more expensive (like it is now for some properties in some areas) or while one increases savings. But in the long run, owning is prefereble and more affordable than renting long term for equivalent homes.
I also do not believe in paying a home in 30 years. You should pay it as quickly as possible, otherwise you are just working for the bank.
VA investor,
Owning a home today is not more affordable than in 1996, 97, 98, and 99 in the Washington DC area. I know because I lived through it.
The reasons are multiple as these have been discussed in the blog. But certainly there is more people in the area, more competition for the same homes, which drive prices up also beyond what could have been the bubble price. So buying a home in this area is more expensive than in the late 90s.
I am not complaining about it. I am just stating a fact.
dc2,
What is your theory of the "wealth gap"?
I'm with Jeremy. No silver spoon here. No money given to us, no connections, worked full-time and went to LS at night. Don't make assumptions about people. And don't assume that hard work (and risk, etc.) is not entirely responsible.
What zip in particular dc2? Iwas here too and 97 and 98 were terrific, as were 93 and 94.
Affordability on the National level is the highest in 20yrs. We went thru this exercise a few weeks ago.
Va investor,
What particular zipcodes, 22312, 22180, 22182, 22181, 22207, to name just a few.
Va Investor, I do not think your are in the top 1 percent of the wealthiest people in the U.S. I am not assuming that you are. If you are good for you, but then again don't assume all those people made it there by working harder than most folks. Those are the wealthiest that I am talking about.
Although the top 10 percent makes more than $100,000 or so, and I am sure a lot of people in this blog fall into that category.
But what about the remaining 90 percent of the population? What about them and their desire to one day own a home too, and retire? Some may make it, but most will never will.
dc2 said...
I also do not believe in paying a home in 30 years. You should pay it as quickly as possible, otherwise you are just working for the bank.
My point was that the quickest way possible is to rent until you can pay in cash. Obviously most people aren't that patient, which is fine if you've got the financial means to buy sooner at the expense of all that interest. Since we are talking about people without those means, they should rent and save then buy something inexpensive to retire in.
Jeremy,
Except sometimes it is cheaper to own than to rent because of the mortgage deduction, for the same equivalent size of home. You need to consider those numbers. In that event, people are better served owning than renting.
Also, you may want to save to buy a house in cash, however housing appreciates at a rate above the cost of living on average. You would have to invest your savings to make up for that difference. And I would imagine if you are depending on that cash to buy your future retirment home (in 20 years?), you may be more conservative when investing those savings, at least I would. So it may take a lot more discipline to accomplish it this way, unless you have a high annual savings rate and can get to buy your home in cash let's say in 5 years.
dc2-
The mortgage deduction doesn't make a big difference for people without much money. Our income tax system, is set up so ~50% of people don't pay income tax. So even without a house if the person is truly poor they will pay little to no taxes anyways so the deduction is not that useful.
dc2, what does that have to do with the "right" to own a home? You want redistribution of people's money, then just say it. Don't conflate it into an argument that we should construct or encourage a system that helps people who are poor buy houses. There isn't an inch of daylight between that and people buying things they cannot afford which is EXACTLY why our economy is so f***ed up right now. You can talk pie in the sky altruistic intentions all you want, but the bubble collapse has absolutely decimated many people's life savings.
Nobody is entitled to buy a house and it is not a guaranteed path to a secure retirement. Prices only rise at the rate of inflation, the typical family moves every seven years (which is how long it now takes to pay down principal to cover the cost of selling), and it's a massive amount of debt slavery.
People should only buy IF they can afford it.
dc2 said: "In summary wealthy people need to get off their high chair and recognize a lot of their luck and wealth was pure chance and not hard work."
Do you really think all wealthy people have money because of luck and chance? There are plenty of wealthy people who busted their ass for many years to create a business or product that eventually made them wealthy. I hope to be one of those people some day. If/when that happens, i can assure you it won't be because of luck or pure chance.
I guess you think James Dyson was just lucky?
"...Over 15 years, he built 5126 prototypes before he found the one that worked. 15 years and 5126 failures..."
Sometimes people create their own wealth with hard work and creativity. Not every rich person is Paris Hilton.
novahog said...
Do you really think all wealthy people have money because of luck and chance?
I forget the exact number or the source, but something like 80% of millionaires are self-made. That is, they're not the kind of trust fund brats that dc2 hates and wants to project onto the wealthy class. It's easy to hate rich people if you have never known one or heard how they attained their success.
DC2 I agree with what Kevin says Part of the reason that our economy is in such a mess is the federal government policy to try to make homeowners out of people who were not financially able to buy a home. Many of the short sales and foreclosures were caused by people buying houses who either did not understand the cost to repay the mortgages, especially after initial teaser rates increased, or people who had shakey job histories but were allowed to obtain mortgages they could not repay when they lost jobs. While I would be happy to see everyone buy a home, I have seen the economic devastation it has caused for many people when they bought either without knowing or ignoring the financial considerations.
Kevin, i hear ya. I don't have the source either, but i believe the 80% number. As for the other 20%, they have every right to their money even if it was handed to them by rich parents/grandparents/etc. They're lucky, but so what? I guess if dc2 hits the lottery someday, he will give it all away.
dc2, there are endless stories of self-made millionaires/billionaires. Many of them help poor/unlucky people more than any misguided government programs. Ever heard of Bill Gates or Warren Buffett?
Also, unless you run your own business or work for the feds, some rich person is probably signing your paycheck every week.
"The entire mess can be tracked back to Frank and Dodd and forcing lenders to make risky loans to marginal borrowers.
As has been pointed out and documented many times by people such as Barry Ritholtz, this is complete and utter nonsense, totally unsupported by the data and pushed by people with an ideological agenda (not that everyone who believes it is ideologically motivated, but that those who started and continue to push this explanation are).
Private companies made bad loans based on the fact that, in the low-interest rate environment, they could resell them and make big profits. The biggest profits came from the worst loans and mortgage brokers were rewarded more for pushing borrowers into worse terms than those they qualified for. (A lot of sub-prime loans went to borrowers who could have qualified for normal loans - but the lenders would not have made as much). There was no government incentive for lenders to do this and none was needed. Pushing bad loans and multiple refinancings was extremely profitable to the people pushing them. Lenders made risky loans to marginal borrowers without any help from Frank or Dodd because it made them lots and lots of money (in the short run).
Most of the sub-prime and other bad loans were made by financial organizations not even subject to the CRA. They were not forced, or even encouraged, by the government to make these loans. Fannie and Freddie got involved in the process late in the game because they were losing business to those with lower standards. They were part of the stupidity, but they didn't cause it. (That doesn't excuse them from responsibility, and they should be held accountable for their actions, but the toxic mortgage activity was going strong before they got involved and would have continued to go on without them.)
The main role the Government had in causing this crisis was keeping interest rates artificially low, which resulted in private money mangers grasping for yield and ignoring the risks of mortgage backed securities, thus enabling lenders to continue to make bad loans. The support of keeping interest rates low was, and is, supported by most politicians of both parties - not just Dodd and Frank.
KeithK, excellent review of the facts over time. I would add that many finance experts believe that insufficient regulation of derivatives and other financial products and transactions, e.g., not investigating and charging people with fraud, was a contributing factor.
Further, the inability of institutional and other buyers to accurately assess the value of new packages of loans, etc., along with the sellers' pumping them without executive branch oversight (e.g., Goldman Sachs' shorting their own clients, whom they had encouraged to buy) was another contributing factor. In an international investing environment these problems became compounded. To the extent this is true, these experts argue that more, not less, regulation and enforcement is needed.
But now I'll get back to the micro: MM, I would like that shower/tub if it were raised above ground, as long as leak protection was very strong. Much easier on the knees!
dc2,
The IRS has recently released 2008 tax data. A good breakdown can be found at taxfoundation.org.
A mere AGI of 159,619 puts one in the top 5% of earners. The top 5% paid far more in taxes than the entirety of the remaining 95%.
btw, the top 1% only requires an AGI of about 380K.
What are the numbers that our President is discussing? People making less than 250K being unaffected? Or is it now 150K? I suggest he consults with the IRS and gets his facts straight.
I'll stick with my opinion of Barney Frank. His, supposed, oversight of Fannie was criminal.
DC2,
Wow, you got beat up today. I happen to agree with you though. I think there is a big disconnect in what people think they've earned/built/attained and how much of it was actually luck of the draw.
It's more about, what would would the average person given your exact initial conditions attain versus what someone actually has attained in that situation. But this is a subtle point that most don't take the time to understand.
My $0.02
mytwocents,
Good point. And, when we think about how different our lives would have been had we been born in most parts of the world (e.g., rural Asia, Africa), it's pretty striking.
VA_investor, your post refers only to income taxes. People in lower income classes pay lots of other taxes, e.g., SS, Medicare, sales, property, etc. Even renters indirectly pay property taxes.
Anyone looking at any interesting houses lately? I've been looking in parts of DC (like Pat) as there may be more contemporaries there than in Arl., and we don't need good schools. It looks to me that prices have been declining slightly. Hard to tell, though, because there haven't been that many sales in the relevant neighborhoods.
Ireland had incredibly reckless banks, coupled with weak regulators and a complicit political class," he said. "The result was a housing and credit bubble that dwarfs even what we've had here in the U.S., with a bailout tab that would make Tea Party advocates run for the hills.
The exact same mistakes. Of course, this played out to bigger or lesser degrees across the globe.
mytwocents said: "It's more about, what would would the average person given your exact initial conditions attain versus what someone actually has attained in that situation. But this is a subtle point that most don't take the time to understand."
If the average person had the same initial conditions as Guy Laliberte (Cirque du Soleil), Oprah, Steve Jobs, Obama, etc, would the outcome be the same? I doubt it.
Every success story is going to have some element of luck/timing, which is what i think you are saying. That's very different from "alot of their luck and wealth was pure chance AND NOT hard work". Which sounds a lot like, "Don't complain when the govt tries to take your money and give it to someone else, you didn't earn it anyway."
Novahog,
I'm not denying there will be outliers. But it's a gaussian distribution. Your examples are the rare several standard devs from the average. Take those people you mentioned, give them a single, drug addicted mother on public assitance and the same relative success story is an individual who managed to get a Phd.
I simply don't believe that people (read humans) are all so different from each other. Nor are our capabilities so incredibly different. Yes, it's a spectrum, but most people will fall into the middle.
My $0.02
Ace,
There are a ton of tax policies that we could discuss; stimulus checks, phaseouts of standard deductions, massive increases of medicare/caid due to removal of income caps, the stealth tax increase on SS income in the '90's, AMT not being indexed, etc.
Are some taxes regressive? Sure. Does the top 5% percent pay a hugely disproportionate share? Absolutely.
Renter's pay property taxes? Of course. It's a pass-thru. Should we eliminate landlords and let the gov't handle it?
Thanks, my two cents
You have it right. People are not thinking through what I wrote and immediatedly take it as a rich versus poor fight, when my comments are far from it.
Yes, very wealthy people got there with a lot of good luck on their side. They should feel blessed that they have been able to attain that wealth. And if fact, they can AFFORD to pay more taxes so others who were less blessed have a chance to attain an education, which is the key to earning a decent living.
It is funny, I read an article recently that banks were warning executives about wealthy people wanting all the services, but did not want to pay for these services. It appears the wealthy people get, the more they want to hold to everything they have and the more stingy they are to even pay for what they should.
Going back to my orignal post, without an education, if you read my post correctly, you will have a very hard time affording things such as a home in your lifetime.
No one should say people have no right to buy a house. Who are you to judge? Everyone has a right to fulfill their dreams, and if that is to buy a house so be it. I am not saying people should be given houses, but people should have a right to the right conditions so they can all have a shot at a college education, a decent salary, and yes eventually buy a home. Since buying a home is a key also to ensuring you do not have to work until you drop dead.
The problem with society is that people are extremely self-centric. They do not realize that whatever blesssings they have received, many have been just being in the right place at the right time. Not because someone made it and is wealthy means everyone will have the same opportunties, and above all good luck. (Statistics prove this point.)
I also mentioned IQ in my post. If you were born with an average IQ to no fault of your own, chances are you are not going to be very wealthy, particularly if you could not afford to go to college.
Perhaps by stating the opposite people will start getting it: There are a lot of people who work very hard all their lives but are not able to buy a home in their lifetime and die in abosulte poverty. Do you understand this now? Where is your moral compass?
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