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March 01, 2005
A TALE OF TWO COUNTRIES
Every once in a while I see an article that just makes me shake my head in wonder. I've railed before about the difference between the haves and have-nots in the United States today... and tried to figure out just who the haves really are. Today I saw one such article.
According to a study released by the National Association of Realtors on Tuesday, second homes accounted for more than a third of residential real estate transactions in 2004. Second homes typically fall under the category of vacation home or rental property, though many owners of vacation homes also rent out their property.
Still, about 23 percent of houses bought last year fell into the category of investment property, meaning that owners use the house primarily as a rental property. The number of sales in this segment increased 14 percent last year. Vacation homes used primarily by the owners represented 13 percent of transactions last year, with the number of sales in this segment increasing nearly 20 percent.
In the meantime, the latest numbers that are available -- 2003 -- suggest that 12.5% of Americans, or one in eight, now live below the poverty line. One in eight live below the poverty line -- currently ridiculously defined as $18,810 for a family of four or $9,393 for an individual. But one in three new homes sold are to the rich.
Think I'm just railing about the poor? Nope. Who do you think is buying these second homes?
The typical person buying investment rental property is 47 years old and earned about $86,000 in 2003, according to the NAR, while the typical vacation-home buyer is 55 years old and earned $71,000.
Meanwhile, according to the US government's own statistics, the average income in the US in 2003 was $43,318. So what we're really seeing here is that one third of the houses sold in the country last year were sold to people making anywhere from 68% to 98% more than the average American.
I went to Realtor.com and did a little calculating... a person making that average income of $43,318 and having NO debt at all (highly unlikely, but for the sake of argument let's say so), getting a mortgage rate of 5.875% (just under the US average of 5.91%), and putting $20,000 down (would 1/2 of your income be doable? Again, let's assume so for the sake of argument) could afford a house that cost no more than $142,910. A person making the average US income could afford a house priced at $142,910.
The government reported in October that the average cost of a single-family home in the US is $264,000. The average house costs almost 85% more than what a person making the US average income can afford.
But meanwhile, more than one third of the houses sold in this country are sold to the rich. Some "recovery" in housing sales, huh? More than a third of the houses sold in the United States in 2004 were rich people buying second homes for their vacations or drive extra income for themselves. Let me say that again: more than one third of the houses sold last year were to people buying a second home and making anywhere between two-thirds to twice the average household income.
I'm lucky enough to be making a good living, well over the average -- but in Westchester County, NY, the average cost of a house in summer 2004 was $660,000... more than twice what I qualify to buy. I'm a professional white collar worker with a Masters' degree, and I'd have to double my income to ever buy a house here. And I'm admittedly doing well -- there are a lot of people not doing as well... what can they ever hope for?
20 years of policies (directed by both parties) designed to help those who already have get even more are having an impact on America. The average American -- not even just the poor, but the average American -- finds owning a home a dream that climbs further out of reach every year... while the rich get to buy beach houses and investment properties.
Something about that just doesn't seem right to me. What do we do about it? I don't know. I just know that the way things are just isn't right.
