Monday, September 22, 2003
A Reality Check
I had a bummer of a weekend. Sure, it was sunny and beautiful. We visited Wave Hill gardens and went to the Medievel Festival at the Cloisters. But not even the bikers in tights and "ye olde meat on a stick" could shake my sour mood.
Earlier in the week, during a house hunting expedition in NJ, I stumbled upon one that wasn't too bad. I could imagine a place for the IKEA bookshelves and the new blue sofa. Sure, it was right next to a busy road with trucks whizzing by every minute. And it was an old house that needed lots of work. Still, it had good bones and a good school system. I could peel the mirrors off the dining room walls and paint the kitchen cabinets.
We hadn't decided anything for sure. Steve hadn't even had a chance to look at it. I hadn't crunched the numbers yet. But I had arranged the furniture in my head.
Then, on Saturday, on the way back from getting my eyes checked at Pearle Vision, I stopped into Barnes and Noble to browse. I picked up the
The Two-Income Trap. The authors describe how the middle class is becoming increasingly over commited. Their admirable intentions of providing a good education for their children have led them to buy houses that they can't afford.
It's like that commercial of the grinning man who brags,"I have a beautiful home. I belong to an expensive country club. I have a great lawn. How do I do it? I'm in debt up to my eyeballs. Somebody help me."
This situation has been brought about by the competition for homes in neighborhoods with good schools. Also, the inclusion of women into the work force has brought about higher combined salaries which has driven up all the prices of homes. If one person loses his/her job, then these families can't pay their bills.
I went home and examined our finances. I played around with mortgage calculators. I learned that we can't afford even this old home by the side of the road.
A really, really cheap house costs $350,000 in the NYC area. In order to afford a home, you must make $110,000 annually, have only $300 of loan payments (car or school loans), and have $80,000 for the down payment. Monthly mortgage and taxes would equal $2,500 a month. Then there are heating bills of $400 per month and additional transportation costs. How can a cop or college professor or a teacher buy a house these days?
Later that evening, I made the mistake of watching Suze Orman on MSNBC. As usual, she received calls from people in distress. "I owe $60,000 on my credit cards. What should I do?" "How do I file Chapter 11?" "I'm a single mother living with her mother and I can't pay the bills."
Being the first born, I'm really uptight about money. I pay my credit cards on time and have no balance. I don't buy the new cute pants at the Gap unless I have the money in the bank. If we bought a house, things would be really tight. If the boiler went or the car died, I could end up as a caller on Suze Orman. No thank you.
Today, I'm full of pessimism and despair. Even though my husband has a good job with the top secret Wall Street firm and we carefully save money, we can't buy a home. My kid won't start kindergarten next fall in a shiny classroom with a grassy playground. He won't grow up like I did. I have to get used to that idea.
UPDATE: Sometimes great minds don't think alike. Dan Drezner wrote a post today about how there is no income inequality and how great the middle class is doing. I disagree.
I had a bummer of a weekend. Sure, it was sunny and beautiful. We visited Wave Hill gardens and went to the Medievel Festival at the Cloisters. But not even the bikers in tights and "ye olde meat on a stick" could shake my sour mood.
Earlier in the week, during a house hunting expedition in NJ, I stumbled upon one that wasn't too bad. I could imagine a place for the IKEA bookshelves and the new blue sofa. Sure, it was right next to a busy road with trucks whizzing by every minute. And it was an old house that needed lots of work. Still, it had good bones and a good school system. I could peel the mirrors off the dining room walls and paint the kitchen cabinets.
We hadn't decided anything for sure. Steve hadn't even had a chance to look at it. I hadn't crunched the numbers yet. But I had arranged the furniture in my head.
Then, on Saturday, on the way back from getting my eyes checked at Pearle Vision, I stopped into Barnes and Noble to browse. I picked up the
The Two-Income Trap. The authors describe how the middle class is becoming increasingly over commited. Their admirable intentions of providing a good education for their children have led them to buy houses that they can't afford.
It's like that commercial of the grinning man who brags,"I have a beautiful home. I belong to an expensive country club. I have a great lawn. How do I do it? I'm in debt up to my eyeballs. Somebody help me."
This situation has been brought about by the competition for homes in neighborhoods with good schools. Also, the inclusion of women into the work force has brought about higher combined salaries which has driven up all the prices of homes. If one person loses his/her job, then these families can't pay their bills.
I went home and examined our finances. I played around with mortgage calculators. I learned that we can't afford even this old home by the side of the road.
A really, really cheap house costs $350,000 in the NYC area. In order to afford a home, you must make $110,000 annually, have only $300 of loan payments (car or school loans), and have $80,000 for the down payment. Monthly mortgage and taxes would equal $2,500 a month. Then there are heating bills of $400 per month and additional transportation costs. How can a cop or college professor or a teacher buy a house these days?
Later that evening, I made the mistake of watching Suze Orman on MSNBC. As usual, she received calls from people in distress. "I owe $60,000 on my credit cards. What should I do?" "How do I file Chapter 11?" "I'm a single mother living with her mother and I can't pay the bills."
Being the first born, I'm really uptight about money. I pay my credit cards on time and have no balance. I don't buy the new cute pants at the Gap unless I have the money in the bank. If we bought a house, things would be really tight. If the boiler went or the car died, I could end up as a caller on Suze Orman. No thank you.
Today, I'm full of pessimism and despair. Even though my husband has a good job with the top secret Wall Street firm and we carefully save money, we can't buy a home. My kid won't start kindergarten next fall in a shiny classroom with a grassy playground. He won't grow up like I did. I have to get used to that idea.
UPDATE: Sometimes great minds don't think alike. Dan Drezner wrote a post today about how there is no income inequality and how great the middle class is doing. I disagree.
