“My Two Cents” - Guest Commentary
6/24/2006
I am writing to this column in thought of a recent article I saw in one of the daily papers that engulf my area of the country. I have been tuned in to your online column from a friend of mine that knows you. This sort of tied directly to your recent newsletter “Sunset on the American Dream” dated 6/23/06. Its summer time and the schools are now on break, the traffic is less dense, unless you’re headed east to hit the beach. I was headed to work one day, comfortably settled in the seat of the train. Yes I am one of the many millions of commuters who on a daily basis have to leave their home city and travel to another for work since the job market is kind of slim in my area. Some of these commutes are well over an hour or two, as you can imagine. For me it’s a comfortable ride on the train from Baltimore to our nation’s capitol. The article was referencing the current housing trends of the market slowing in most regions, but not in the DC area. The article had mentioned a study by an office at Harvard University, which states the middle ground price of a house in the “District” is around $425,000. Now keep in mind this is most likely for a row home in a moderate neighborhood. It could possibly be for a small single family home that needs a little work. A larger home say a historic Victorian in Georgetown, could go for well over a $mil. Now to put this into perspective, the higher average 2 income families with or without children is in the neighborhood of $80,000 to $85,000. But for most it is usually $10 - $15K less than that. An executive from a leading national bank with a heavy presence in the area stated that in order for most people to even qualify for a loan, they need to make at least $50,000 a year, as a bare minimum. As I read that, I got a sick feeling, and could almost feel my skin turning green in disgust. I have resigned myself to the fact that there will be little likelihood of owning a home in the DC area. So I choose to stay where I am at, since the rental prices are well out of my range for a comfortable apartment as well. Thus I commute.
Now living in an apartment in the Baltimore area, which has been listed as a relatively affordable city to live in, there are economic pains as well. Since I've ruled out DC, could there be hope to buy a home in Baltimore? Not really! The reason will come to light in a bit. A few months ago, I was visiting some friends for the evening, while home in another state, to see family. We were just chatting and catching up on daily things and as our conversation progressed the topic of politics came up, and we debated back and forth. Not having the time or energy to delve into the vast arena of possible topics, our focus shifted to how they and their child were doing, and then came the topic of their house. I have been there many times for casual dinners and such. I remarked that they seemed to be doing well with it. They’ve done some things, and made it more comfortable for their family. I had just out of curiosity inquired how they were able to have a house like this. Now it isn’t a huge home, that some have nicknamed “McMansions” but it is still a nice home of I would guess about 2000 or so square feet, built in the early 1990’s. It’s nestled in a community suburb of a small city. (Only being able to guess at their combined income, I would say it’s in the solid middle income area, or possibly slightly higher, since the two of them are well educated.) They both had replied in a similar way saying that they lived in apartments and saved some money. When they got married, with combined assets they were able to afford the place they had only after looking for a good deal. If I remember correctly they bought just within months of the major housing increase. So we were contemplating what the house would be priced out at down where I live. They were both shocked that I said the cost of a home like they have would go for at least $500,000 to $600,000, in my region of the country. A few weeks later we were chatting by email, and I had sent them an article that was getting a lot of news coverage in Baltimore. It was in the news in early March. The content of the article was on the dream of owning a house, and incomes not allowing it, forcing perspective homebuyers with a moderate income to stay long term renters. The local big paper did a study of perspective buyers and found that most single homebuyers their first time would have to spend upwards of 70% of their income to get into the housing game. While 2 income families would still have to spend at least 35% of their income to get into homeownership.
While my income is just shy of the bare minimum figure needed to qualify for a bank to consider giving me a mortgage loan for a home in DC. So that places me right on the back cusp (or maybe right in the center) of that large gray expanse of the "middle, middle class". Where I am making enough to get by in moderately to higher priced area by my view, despite what the news experts tell me, but still can't seem to find the means to do more. So if I were a perspective single buyer, after that 70% vacuum on my wallet, the 30% left has to go for the other necessities in life. Such as the groceries, commuting costs, utilities (which is another hotly fueled topic in my area), insurances, vehicle payments, etc. there is not much left. In all likelihood if I mapped out this scenario with my finances, my checkbook would most likely be bleeding red ink.
Thank you for your time,
J., in Baltimore area, MD