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DynamicTrends.com
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The Middle Class, Wages and HomeownershipWhy the Middle Class Can't Afford to Buy a Home |
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The middle class cannot afford to buy homes because the median price is out of reach, when compared to wages. Real wages have not gone up in 6 years and as a matter of fact, real wages have actually declined. I’ll get into the reason for that later, because it’s tied into what I’m talking about. But for now, let’s get back to homeownership. With mortgage companies and banks in the trouble they’re in, they are getting back to the basics. On average, in order to qualify for a home loan, a buyer must earn 4 times the amount of the mortgage being applied for. Under certain circumstances a buyer may qualify at 3 times the mortgage. In other words, if you are trying to buy a home valued at $200,000 and you put 20% down, you will be financing $180,000. Payments would be approximately $1,050 plus taxes. That puts your monthly payment around $1,350 month. In order to qualify for the mortgage, you must have a job where you earn at least $5,400 per month. Now let’s lower our sites and look at less expensive housing. Let’s assume you can find a home in the area in which you choose to live, for $150,000. You put down 20% and finance $130,000. Monthly payments would be about $759 month plus taxes for about $959 month. You would need to earn $3,836 per month. Still too expensive? How about $120,000? 20% down leaves $96,000. Payments would be $560 month plus taxes, or about $726. Your earning need to be at least $2904 per month. And that’s at 30 years with an interest rate of 5.75%. Do you earn that much? Most middle class, oh I’m sorry, former middle class people, don’t! Well, don’t feel too bad, there’s always the GHETTO! NOW you see why the real estate market is in the shape it’s in. Why sales are plummeting and prices are beginning to come down. And as sales slow and prices come down, wealth will disappear, the economy will begin to slow, and the cycle will increase in intensity. No more borrowing against your home, no second mortgages or equity loans. That’s because equity is disappearing, equity that was falsely built in by speculators and greedy banks and mortgage companies. Not to let the real culprit off the hook, the Federal Reserve has been manipulating the money supply, interest rates and inflation figures, giving them complete control over the whole show. Now, here’s where real wages come into the picture. Real wages are wages compared to inflation. According to government figures, real wages are at negative .2%, since 2001. Do you believe it? You better because it’s a fact. I’ve talked about this before, but it needs to be brought home here. The CPI numbers that are published are an outright FRAUD. The formula used to arrive at the CPI is a FRAUD and is antiquated. Numbers have been quoted without including food and energy both of which have increased anywhere from100-200%. Had the formula contained such items as Food, Gasoline, Homes, Utilities, Taxes, Pharmaceutical and Healthcare costs, I’m sure the numbers would have been MUCH higher and in line with reality. Had they used these, the economy could have been kept in check and wages would have climbed along with REAL inflation. The solution to the problem is the FairTax. First of all because you get to keep all of your earnings. In addition, each individual would gain control of their own spending, but more importantly, they would gain control over government spending. The FairTax would also contribute to controlling inflation, but that is a subject for another day. By Michael Scoglietti
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