The Mind of Jack Spirko

For the last few months when it comes to housing and lending all it seems the media wants to talk about is "sub prime lending" and paint the picture that it is the reason there are so many foreclosures in America today and they correctly state there are more foreclosures today then any other time.  Yet what gets left out?  First that "A Paper" or conventional mortgages are also at an all time high for foreclosures just like Sub Prime loans are.  Second, that in 2002 we were also at an "all time high" just there was other news to talk about so no one bothered with it.

So what do I think the real problem is?  Well the title might lead you to believe I am blaming "House Hunters", yet more accurately I think that the T.V. show called House Hunters is not so much the problem as it is a looking glass directly into the problem. 

First let me say my wife and I truly enjoy watching this show together, it is a great way to understand property values across the country and what makes people buy and what turns them off.  We actually DVR episodes of the show we are going to miss and watch them later.  So don't see me as being negative toward the show.

To help you understand the problem I am about to point out let me first explain what this show is about in case you have not seen it.  Each episode highlights a couple or individual's search for a home.  You watch these folks tour three houses, see what they like and don't like about each one and then they pick one to make an offer on.  The finale is always what the house looks like a few months after move in and the couple has "made it their own".

Here is where the issue is and I believe it directly explains why our nation is watching people loose houses and have a hard time selling them as well.  I would say about 30% of the episodes are established professionals looking for bigger homes, these people are clearly highly paid and sitting on lots of equity.  They tend to buy something that they eye as a long term investment or "final dream home".  Most of them seem to be not getting over their heads.

Now let's talk about the other 70%, they are young first or second time buyers.  The show always tells you what they do for a living (such as Doug works for the phone company and Tammy is a pre school teacher).  You look at the way they carry themselves, the way they talk and how they dress and you quickly are able to realize the household income of these people is generally between 60-120K with most floating in the 80-90K region.  Hence they are not poor by any means yet they are also not rich, if you think a family of 4 making 100K is "rich" stop reading my blog now, never come back cause it is not for you, you will just never get it.

Let's look at it this way 100K household income is gross about 8300 a month.  That equates to about 5800 in total take home after the Government gets theirs in all fashions, State, Federal and the scam ponzi scheme that is social security.  Now hopefully money is going into a 401K, IRA or something like that which will further deplete it.  Yet lets be optimistic and say to pay all home expenses a couple making 100K between them is netting about 5500 a month for all living and pleasure expenses.  Now as I continue please understand I would place far more of these people in the 80K range then the 100K range I am being optimistic to prove a point.

During these shows I watch these young couples in their early to late 20's walk these huge homes and all I can accurately describe the majority of what they do is bitch.  Such as,

• "I don't know if this room is big enough for Kelsie"  [Kelsie is 4 and the room is 12×13]
• "I really don't like this carpet"  [The carpet is a neutral tone and brand new]
• "This closet is not big enough"  [That was a 6×8 master closet]

Oh and it goes on!  You really have to watch the show to get a feel for how much whiney complaints these young buyers are making and what is the price range they tend to be looking in?  Try 250-500K and many of them are well into the 400-500K range.  Now some shows are in high cost areas but many are in places like Nashville TN, Austin TX, or Atlanta GA which are hardly on par with San Fransisco or Boston Mass.  Let's really look at the money here, call the average purchase 350K [I am being conservative, on the show it is higher] and with taxes, insurance and mortgages a good rough estimate for a mortgage at 30 years is 1% of the cost of the home, with high taxes it is higher but again let's be conservative.  So average cost a month for a 350K house is 3500.00 a month.  Remember, Doug and Tammy make about 5500 take home so after just paying their mortgage they now are down to 2K a month!

This is happening all over the country and it is NOT because you have to pay that much.  It is because young singles and young couples are expecting to immediately have what their parents have.  Not that long ago a young couple would stay in a small apartment and save up, then buy a first starter home, improve it, acquire equity and then sell it off to buy something better for a long term family home.  Dad would build up the place over time, with small improvements and by the time the kids were in high school they had a pool, a picket fence and the American Dream.  At least for those that worked hard and were smart with money that is how it happened.

Now the kids of these very families are going out with the view that they are "entitled" to the type of home they grew up in.  Mom and Dad always paid the bills, so it stands to reason they can too.  So Tammies and Dougs all across our nations go and bitch about homes their parents never dreamed of owning at 25 and buy more then they can afford.

Here are some more examples right off the show

• Couple is going to get married and start a family soon, they are worried about buying in the "best school district".  These idiots also bought a huge SUV to "carry the kids around in".  Moron and Moronet seemed clueless that before the first kid was old enough to go to the first soccer game that SUV would have 150K miles on it and have been traded in long ago.  Likewise they could have bought smart and improved a home to sell for profit and move to the "best school district" [or perhaps JUST A REAL GOOD ONE] when the kids were actually old enough for it to matter.
• Another couple "needed" a basement.  Why, they had dogs who needed their own room!  Yep, dogs who needed their own room and for the dogs to have a room upstairs "didn't make sense".   What!
• Here is my favorite, a young mother was afraid her daughters toys would be "visible from down stairs, because the layout of the home let you see into the bonus room from downstairs".   Now the two kids were like 2 and 4 so I would have been more concerned with SEEING THE KIDS then hiding their toys from visitors.  This particular couple the guy was a blue collar worker, made I would guess 50K year and mom, "stayed at home with the girls".  They bought a 2700 SF home for 260K, nice place with four bedrooms and a finished basement.  Well worth the cost, yet run the guys income against it!  It should make you shiver to think about how close to bankruptcy this home puts them from day one. Yet the bimbo of a mom has a play room with a door to hide all those toys.

With all of this can you not see why so many families are loosing homes today?  I make a very good living, I have one kid not two and I have never spent over 200K on a home.  We live in a very nice home and I certainly could afford to purchase a 300-400K place by this point in my life.  I have chosen instead to be almost debt free, send my son to college with out a single student loan and take vacations with out using a credit card.

Now as a true Libertarian I am totally OK with you spending money that you don't have and suffering the consequences of doing so.  Just when the chickens come home to roost, don't cry to me and don't blame the mortgage companies.  The mortgage companies by the way that are REQUIRED BY LAW to give you any loan you qualify for and ask for.

~ Jack Spirko

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This entry was posted on Friday, July 6th, 2007 at 9:38 am and is filed under Politics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.