What Have You Done With My Country?
I remember being a child (1950) and my folks bought their first
house. It cost about $5,000.00. I didn't know it then but that was
about equal to one year's wages for my Dad.
Can you imagine buying a house for $1 down and only paying about
the same as you make in one year?
Well, for a long time following WWII that was the case. And as wages
slowly increased, so did home values.
When I bought my first home in 1968 I paid $19,000.00 for it. That
was just a little more than I made in one year, but when you included
my wife's income, it was much less than our total earnings.
Where have those days gone? Back then there was NO FICO SCORE.
Anybody with a job that wanted to own their own home, could. There
was no talk about who should and who shouldn't own a home.
The equation was very simple. If you paid rent, you could pay a
mortgage. PERIOD.
Don't misunderstand me, there was always foreclosures, but the
foreclosure rate back then was not high. It simply mirrored the
economy. When people lost their jobs, they probably lost their home
as well. Divorce and illness also contributed to the foreclosure rate.
But there was not any wholesale foreclosures just because they didn't
have to "qualify" in order to buy their home.
So what has happened since then? Well home prices now start at about
TWO TIMES the gross annual income of a two earner household, and a
nice house will cost over three times.
Forget about buying a house on one wage earner's salary. Those days
are gone, unless you are way out in the sticks and don't care about
indoor plumbing.
So why are houses so expensive? Well, there are a lot of reasons:
More two-earner households
Bigger Houses
More amenities
Higher costs to entitle a buildable lot
Low interest, which allows a borrower to qualify for more
Artificial scarcity
But is the current high cost of housing going to continue? Probably not.
There seems to be a trend toward one wage earner households.
There is also a push toward smaller houses and higher density.
We have surpassed our ability to absorb higher entitlement costs.
Governments are going to have to learn how to live on less. All the fees
that a developer has to pay to build a house are outrageous.
The idea of charging the developer for sewer connections seems
reasonable, but is it? A developer could build an alternative sewer
plant for less than the connection fees if he is putting up a tract of
houses. Same goes for Parks and Schools. He could build them for less
than the government wants in fees.
California came up with a plan to "BOND" the construction of curbs,
gutters, streets, and street lighting, etc. so that the developer didn't
have to pay for it and then include it in the cost of the house. This act
of the California legislature is called Mello-Roos. (What exactly is
Mello-Roos?). It worked for the developer, but not necessarily for the
homeowner who still had to pay for it in the form of additional taxes.
When my folks bought that first house, the developer had to put in
streets, but there wasn't any sewer and the cities hadn't figured out
YET that they could charge the developer for schools and parks.
It was a simpler time and more affordable. And everybody could own a
home.
So what have you done with my country? Do you call this progress?
Comments(108)