Feb 21, 2009

The Housing Bailout: Responding to a Reader Comment

I always appreciate thoughtful reader feedback, and always enjoy reading what you guys think about what I have to say. Reader Rachel Elizabeth, who noted that she works in real estate, left a comment about my last post on the housing bailout.

She writes... "not all of the people that are being "bailed out" are people that bought houses that they couldn't afford."

Some of her friends, who are also realtors, were making good money back when the market was up, but with the housing market crash they just don't have enough money to pay their own mortgages. Also, she points out that there are a lot of people who were able to pay a 20% downpayment and then later got laid off or reduced hours and are in trouble and in need of bailout help. She also points out that the government is offering a $8000 tax credit for first-time home buyers.

I can't say those people don't deserve a bailout. To be 100% honest I'm bitter because in the Bay Area, $8000 is pocket change when it comes to affording a house. You're supposed to buy a house that's 3 times your yearly income. Granted, I'm 25, and my income hopefully will increase over the years. But I make pretty good money now (and I'm grateful for that) and even with the housing crash, there is no way I could afford a house here. The cheapest 2br condos in the area go for $600,000. Following the income rule, I'd need to be making $200k a year just to afford that. At my $60k salary, I really should only buy a condo/house worth $180k. You can't get anything for that around here, except maybe a closet.

My good friend in NJ recently bought a house with her fiance because she felt she needed to own a house right away to be all grown up and successful. Then, she got laid off, and even though her fiance has a good job they're struggling with payments. And their house is much less expensive (for its size) than a comparable purchase in the Bay Area. They paid $400k for something that would easily be $1.5M around here, give or take a few thousand.

I've kind of accepted that I will have to rent for the rest of my life. I just will never be able to afford to own. I grew up with the idea in my head that if I couldn't afford a house, I was a failure. These days, it's not just the American dream, it's the American necessity. But I'm trying to get over thinking that -- you can be a success and live the American dream and rent for the rest of your life. Can't you?



4 comments:

Fabulously Broke said...

Yes you can be a success and live the American dream if you rent for the rest of your life.

I don't know where I heard this from, but someone told me that the people who are truly rich, don't even bother buying properties because they just stay in expensive hotels and long-term stay areas and essentially, rent because they want the flexibility to be able to pack up and leave any time they want.

I am not sure how true that really is, but it's an interesting thought that because you rent, you are more flexible in terms of your options of being able to move and so on :)

rachel elizabeth said...

there's a guy i know who has more money than god... and he rents. :) so it's not a bad thing. i hope my comment didn't come off the wrong way, i just wanted to make you think. :)

Slinky said...

Did I miss something? When on earth did the American Dream become nothing more than owning a house?!?!!! The American Dream is "life, liberty, and the pursuit of happiness". It's the freedom to pursue the life you want. It making of yourself what you will. It's improving or lowering your standard of living over the generations through hard work or the lack thereof. Mostly, it's freedom, the freedom to make the dream whatever you want it to be. It sounds to me that for you, "living the dream" is living where you're at whether you get your house or not.

Now, success is very subjective. It depends on what matters to you. There's Mother Theresa success and Bill Gates success and everything in between and under. Personally, I measure success by whether or not you live the life you wanted to live and if you love the life you lived. If you hate your life, you've failed yourself. If you love your life in every way, does anything else really matter? It's not what you have, but how you live.

The Baglady said...

My old CEO had a networth of 300 million+ and had a different car for everyday of the week. He rents one of those luxury apartments in San Francisco with full maid service. So yes, renters can be very successful. There is no need to own real estate if renting is much cheaper and much more suitable for your lifestyle.

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