the housing crash

As I’m still under doctor’s orders not to blog, I’m just going to pass along this brief clip from our friend, the brilliant Jim “Fuck You” Kunstler’s most recent post on the collapse of the subprime mortgage market:

From the Florida Sun-Sentinel:

BOCA RATON — Retired Federal Reserve Chairman Alan Greenspan, speaking at a Futures Industry Association annual conference here on Thursday, said the problems of the subprime mortgage market had more to do with home prices than easy credit. “If we could wave a wand and housing prices go up 10 percent, the subprime mortgage problem would disappear,” he said.

What kind of a rock does this fucking idiot Alan Greenspan live under?

The median price for a house in my region of the US (northeast) was $380,000 in the third quarter of 2006. Median annual income, meanwhile, was about $46,000. If, by some miracle (in a land of negative savings) someone with an income of $46,000 had managed to save enough to make a 20 percent down payment ($76,000) on the aforesaid median-priced house and got a 30-year mortgage for the remainder ($314,000) at 7 percent interest, his monthly payment would be $2089. Add to that $250 a month in local property and school taxes and insurance and that brings it up to $2339. That adds up to $28,068 a year in house payments. Let’s say the poor bastard pays $8,000 a year in combined income tax and FICA witholding. That leaves him with a grand total of $9,932 for everything else. Then there’s the yearly cost of owning a car, including installment payments, insurance, gasoline, and maintenance: around $6,000 a year. Oh yeah, if he’s a prudent fellow, he’s got health insurance, let’s say a practically useless high-deductible policy costing $3,000 a year. That leaves approximately $57 a week for groceries, laundry, the collection plate at church, and everything else. (Too bad he can’t afford cable TV and the Internet)…

Yeah, Jim doesn’t take into account that most households have two incomes these days, but it’s still a damned fine point. Alan Greenspan and company are fucking idiots if they think people haven’t been borrowing way too much, for far too long, on homes they couldn’t ever hope to afford in saner times. And, it’s completely in-sane to suggest that the “real” problem is just that housing prices haven’t continued to jump 10% a year.

And, as long as we’re on the subject of the Michigan housing market, did you see that Detroit just got Metafiltered? Apparently people elsewhere in the country don’t think it’s so great that you can buy a house for less than a car here.

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  1. ol' e cross
    Posted March 26, 2007 at 9:51 pm | Permalink

    (In reference to the Detroit/Metafilter posts.)

    I maintain that Michigan’s deciling economy is good natural selection. We’ve all heard folks talk about how nice Michiganders are and we still produce kick-ass art/music/etc.

    My theory is all the assholes who are more interested in making a buck (aka, making a living) will continue to flee, and we who stay will be the most committed communal folks south of Alaska.

    Please continue to crash, housing values, so everyone who treated you like the buy-low, sell-high stock market runs scared to the dry hump love of the lone star state and those of us left turn out the lights and finally get a good night’s rest.

  2. mark
    Posted March 26, 2007 at 10:45 pm | Permalink

    The first time I saw the headline about being able to buy a house for less than a car in Detroit, I thought, “If this were about anywhere else, other than Detroit, it would be a positive story.” If there was a town in California where a young family could still buy a relatively nice house for less than $40k, it would be seen as a great thing. Here, because it’s Detroit, it’s a sign of how terrible things are.

  3. Hillary
    Posted March 26, 2007 at 11:23 pm | Permalink

    $28,000 houses in Detroit isn’t even news. The neighbors tell us that we missed the salad days of the early 1990s when everyone bought 3 houses at $10,000 each. I personally love the fact that immigrants from Bangladesh can buy houses here.

  4. mark
    Posted March 27, 2007 at 9:40 pm | Permalink

    I think I’ve said it before, but I think Hamtramck is one of the few places in the US that will make it through the turbulent times ahead in relatively good shape. I happened to be there a few years ago when the whole east coast lost power, and the people of Hamtramck didn’t miss a beat.

  5. Hillary
    Posted March 28, 2007 at 12:42 pm | Permalink

    Most probably didn’t notice. The people who last lived in our house didn’t own a TV or microwave and washed their clothes in the basement sink.

  6. steph
    Posted April 4, 2007 at 5:38 pm | Permalink

    It’s a similar situation here in Pittsburgh, though not with such a negative connotation, as far as I know. We just bought a house for $91k, and our friends just bought one for $52k. Before we came here we never even dreamed of being able to own a home for years and years, if ever. Luckily we were able to avoid subprime lenders…

  7. mark
    Posted April 4, 2007 at 10:06 pm | Permalink

    Congratulations on the house, Steph. That’s very cool.

    Can we come live with you when Ypsilanti implodes?

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