<p>I do take your point. But it does seem to me that if the message is “You can,” then there’s a corollary that if you DIDN’T, then your situation is all your fault. Your fault that you can’t get a job, your fault that you got a crummy education at your ghetto/rural high school, your fault that you didn’t read the fine print. That lets all the nonpoor people who help keep people poor – from predatory lenders to employers who pay starvation wages to slum lords – off the hook. That’s what worries me about the idea of Congresspeople standing up and telling poor people, “The middle class is in your reach! It can be done!” If that’s true right now, then why do we need to change the system?</p>
<p>My other concern is the fact that Barney Frank’s life story isn’t anything like yours. IMHO, it would take a lot of gall for someone with my upbringing to tell poor people, “You too can have what I have!” Sure you can, if you work ten times harder than I did and avoid all the mistakes I made – mistakes that my parents’ wisdom or my financial cushion smoothed over. I don’t know that people who were born privileged can make that argument effectively.</p>
<p>I’m not sure how leaders can balance those messages. One message I’d like to see more of is parental responsibility (which Obama talked about in Selma this week). How much effort you put into parenting and your kids’ education is largely within people’s control, rich or poor, and has a huge effect on the next generation.</p>
<ol>
<li><p>You are completely off base regarding Barney Frank. The worst one could reasonably say about him is that he is trying hard not to freak out the banking industry any more than necessary, given that it was already having conniptions about his chairmanship of the House Banking Committee. Your characterization of him as disrespecting poor people is outrageous.</p></li>
<li><p>Everything you write has been premised on the notion that it costs at least the same, and probably more after tax, to rent vs. to own. That may be true in a few markets for a few years at a time, but as a general matter it’s dead wrong. And the tax system contributes to that: If you have a high-income owner, especially someone whose business is owning rental properties (i.e., a “slumlord”), he or she can make a current cash profit charging rents that are 70-75% of cash debt service costs (and that owner’s debt service costs are going to be lower than a poor person’s). We’re not talking about Manhattan or hot suburbs, here. We’re talking about challenged urban and rural areas.</p></li>
<li><p>I want to make clear that I am NOT opposed to home ownership for poor people. Home ownership has been a wonderful thing for lots of people. But it gets oversold a lot as the cure for all social ills.</p></li>
</ol>
<p>And can I just add that I totally resent what I feel like is a blatant misinterpretation of my posts as telling poor people they “can’t do” whatever? </p>
<p>I have worked very hard for years with underserved populations. What I resent is when their issues are discussed with through the eyes of people who know nothing about them, through the eyes of people for whom the “American dream” was straightforward - work hard, buy a house, get rich. Nothing is quite so simple for them. And that is my only point in “defending” Barney Frank’s theory. It is NOT about your personal story LTS.</p>
<p>Late, I have a real problem with this assertion. Look, I admire you. I’m very proud of you for what you did. It’s inspiring. But I DON’T think everyone could do it.</p>
<p>Look, whether we like it or not, there really is a curve on talent. I suspect you’re very talented. You certainly write well and you’ve certainly done well. Some people will never have enough talent to do much more than run a cash register. All the hard work in the world is not going to be enough to give them management skills.</p>
<p>There’s this myth in America that just anyone can do very well, financially, if they only try; that those in menial jobs are somehow too lazy to do any better.</p>
<p>It’s not true.</p>
<p>Oh, and I agree with JHS. The idea that owning a home is as inexpensive as renting may be true in the market in which you live. I don’t know. I don’t see how that could work, but I’ll take your word for it. But it certainly isn’t true where I live, and I don’t think it’s true in any place I’ve ever lived, but I can’t be sure about that.</p>
<p>My oldest son is 25. He purchased a home at 23 as he didn’t want to be throwing $800/mo away in rent. He purchased a nice small home adjacent to an upscale home area, 1600 sq ft. and pays $800/mo in mortgage–much better deal than renting. Most of his friends (single guys) have now purchased houses as owning is not much more than renting and one is building equity.</p>
<p>I suspect he moved to a lower-cost area? That’s fine. But the idea that owning is just as cheap as renting is simply not true. It COULDN’T be true. I know. I’m a landlord. If I charged as much for rent, for a comparable property in a comparable location, as it would cost to buy, I’d go out of business. No one would pay that.</p>
<p>There were times when renting was more expensive than owning. As recently as 5 years ago, it was cheaper to own than rent in many areas of the country (probably most). Of course, now we have had the housing boom and all the numbers have changed.</p>
<p>Which is my point. You can’t look at the past and say I did this and it worked; therefore, it will work in the future.</p>
<p>My folks bought a small apartment building in San Francisco with 10% down 40 years ago and they had positive cash flow. Try doing that now.
The numbers are different now and the investment returns going forward may be different now.</p>
<p>My friend worked at Safeway as a clerk and he bought a house, also in SF. This was 30 years ago.
Try doing that today.</p>
<p>There are areas in Massachusettes where condos go for more than $3,000 a foot? Didn’t know that.</p>
<p>I bought my first house 'lo nearly 20 years ago now. It certainly wasn’t cheaper than renting in terms of cash flow. I took a gamble on appreciation and won, but I could have lost.</p>
<p>Economically, how could what you said possibly be true? For instance, if buying a car cost less than leasing a car, who would lease? So, if buying a house costs less than renting a house, who would rent? I’m very aware of buying and renting costs in my area because I rent two houses out. When interest rates go down, it depresses what I can get for rent. When they go up, rental costs go up.</p>
<p>Given the most basic laws of economics, how can what you said possibly be true?</p>
Buying does cost less for those willing to drive a car for many years. After collision coverage is no longer required, and the car is paid off, the cost of owning drop substantially. So it depends. Much like the wisdom of homeownership. It depends. </p>
<p>I love your story , LTS. I agree wholeheartedly with you that Frank & his colleague’s favor the fostering of dependence & that is horrible. There are many ways to facilitate the migration of the poor into the middle class. We could all benefit from improving our financial literacy; this is especially crucial for the poor. How many of the people waiting on lines for MegaMillion lottery tickets last night could ill afford those tickets? I suspect that LTS never bought one. And the value of delayed gratification must be emphasized. Like LTS’s decision to do without furniture while capital improvements were made in her home & tuition bills were paid. </p>
<p>I recently saw a latenight commercial with an announcer bellowing, “If you’ve got $99 and a job, this car can be yours!” Many of the poor have never been taught that these easy credit scams will kill their financial future. </p>
<p>I lived through the loss of a job (my dad’s) and the loss of our house (to pay nursing home bills) as a kid. After his sudden death, we were certainly struggling. But because he & my mom had wisely saved up again to purchase a home, his family had a bit of stability. And equity. My parents, however, were educated. They knew not to buy a car because they couldn’t afford it. They knew not to use a credit card because the purchases would ultimately cost several times what they had originally paid if the balance wasn’t paid immediately. </p>
<p>I know it has a hair-trigger, but this kicked off my nonsense detector. A quick perusal of the real estate listings in the Boston metro area (acting on the comment that another poster made about Marite being in Mass.) revealed that there are a handful of condos on the market in Boston metro for more than $5 million. All are either giant penthouses or unusual “condos,” including one that looks exactly like a house to me. </p>
<p>On the other hand, there are more than 400 housing units for sale between $300k and $400k. I don’t know Boston neighborhoods, so I’m guessing that a lot of those are not penthouses overlooking the harbor. Many of them are, however, bigger than 1,600 sq ft. Not necessarily affordable for the average working person, but not $5 million either.</p>
<p>Tar, you need to shop better for your rentals. Two years ago we bought a nice 3br 2ba for $119,000 in the best area of Lynchburg. A week of TLC and $1000 in paint, etc had it looking sharp and we rented it the first day we had it in the paper for $895/mo. Do the math. The same tenants just signed a new 2 year lease that will bump rent to $950 and we kept the bump a little below mkt because they are good tenants. The value is also up to at least $150K in two years.</p>
<p>I suspect marite was using a little hyperbole (or using 2005 prices), even for Cambridge. On the other hand, a quick check indicates that there is at least one 2,000 sf condo near Harvard Square on the market for $2.5 million, and a 4,000 sf unit on the river in Cambridge for which $4 million is the asking price. </p>
<p>Based on my very minimal knowledge of the Boston housing market, the housing units for sale in the $350K range are quite likely to be in neighborhoods that are way less than desirable.</p>
<p>Tarhunt, if you live in areas where expectations of price increases are low, real estate will be cheaper. You used to be able to get a positive cash flow in many areas, but you did have to have a down payment. None of this no money down stuff.</p>
<p>Edit: I see Barrons example.</p>
<p>Prices in many areas have doubled and almost tripled in the last 6 to 7 years. Rents are up, how much, 25%.</p>
<p>I think Marite must live in Cambridge near Harvard? Remember her S took classes there while still in high school. One of my D’s high school classmates is a senior at Harvard, still living in the dorms b/c off-campus housing is far too expensive.</p>
<p>What does what you said about rentals have to do with the price of eggs in China? I bought both rentals for a bit over $100,000. They are now worth nearly half a million, each. I’m able to charge a lot more rent for them than what I’m paying on the mortgages. But that’s not what I said.</p>
<p>What I said was that I CANNOT charge more for rent than than what it would cost to BUY a comparable house. I could not find a tenant if I did that, other than the temporary ones that are passing through and don’t want to buy. The laws of economics don’t allow me to get and keep tenants if they can buy a comp for less money. How would that be possible?</p>
<p>bookiemom: I think you’ll find that all but a handful of Harvard seniors live in the “dorms”, not just because off-campus housing is astronomically expensive, but also because everyone else does, too, and the Harvard houses have pretty posh rooms for seniors.</p>