Interesting lecture about finances in the U.S. family

Tamiri

Sun, Sep 21 2008, 2:29 am

Ora, it is long but as I have wireless, I can keep it on while doing other things around the house and you don't have to look at the speaker. In case that's relevant.
The jist of it, was that although U.S. families now have 2 workers - they are basically so far behind their early 70s counterparts where there was generally just one spouse employed. Even though prices, adjusted for inflation, have gone down in many areas, families have negative savings (meaning: debt) as opposed to IIRC 11% saving per annum when just one spouse was working. Where the speaker, who wrote the book "the two income trap" or something like that, said she would have expected vast wealth once women entered the work force in "full force", the opposite is true.
It's really worth listening to - to see what we have gotten ourselves into. Well... not everyone.
And the tuition bills for U.S. Jewish families is just icing on the cake.

Tamiri

Sun, Sep 21 2008, 2:36 am

One interesting point of her regarding housing in the U.S. is something I have been musing about Israel: the price of owning your first home in the States is about equivalent to the price of owning a third or fourth "buying up" house in the previous generations. Meaning, people go for that 3rd or 4th bedroom right away, along with several bathrooms. Starter homes used to be 2-3 br with a bathroom and a half. Something like that.
How can housing be so expensive and sustainable here in Israel? By people killing themselves to attain what they think they "must" have. My contention is that if women (an men) rebelled, and refused to pay so much for housing, the prices would have to fall. Instead, workers here are willing to work more and more, neglect other aspects of their lives more and more, just to pay for a $250 or $300K place to live. So, there is no reason for prices to return to a normal level, is there?

alpidarkomama

Sun, Sep 21 2008, 3:08 am

We are getting ready to buy our next home (BE"H, pending a job change in the next year). We just won't spend more than 25% of our income on a mortgage and won't get more than a 10-year mortgage (our original limit was 15, but we're 5 years into paying for this house). Wherever we move, whatever we can afford based on that + what we have to re-invest into a house is what we will buy. We are hugely committed to having one parent working outside the home. Other people with a similar income live in much nicer houses, but I am very happy we're doing it this way. Sooner or later, the huge burden of increasing consumer debt is really going to cause a horrible crash. It's not sustainable.

catonmylap

Sun, Sep 21 2008, 3:35 am

Pickle Lady wrote:

Thanks I watched the entire thing. Its pretty sad. And this doesn't even include the frum families paying for tuition.

I'm not quite done yet. But in some areas frum parents can make up for it in cheaper housing since they are not buying in an area for public schools. Like in Baltimore, they can live in areas of Baltimore City where no one else who is upper middle class/middle class would want to live because the schools aren't good.
But we are after frum neighborhood which give us our own limitations.

Marion

Sun, Sep 21 2008, 4:27 am

When we bought, we intentionally slightly overextended ourselves. We did it because we knew we were looking at a very long term mortgage no matter what. We did it because we knew that in the then-current situation, if it stayed that way, we'd at least have the house as an asset if we had to sell it. (It has been a good investment so far, BTW!) And we did it because we knew that once we bought, we'd never be able to afford to upgrade to something bigger. And although I'm happy to have kids in a room, 4 kids, of possibly mixed genders, in a single room wasn't going to cut it for me. Maybe because I grew up spoiled or maybe because we like to host for Shabbat...but we needed the extra space.

catonmylap

Sun, Sep 21 2008, 4:35 am

We only bought a 2 bedroom, but we were going by the prices. If we had bought outside the city, we would have gotten a much larger place for the same amount of money. But we were thinking about the long term investment(and the rental value since were weren't expecting to move into right away). We can still move to a larger place outside the city when we decide we want to really live somewhere else. We are going to do the Israeli thing first and rent out our place and rent somewhere else first.

The other astounding thing in the lecture was the health care issues. We are so lucky to not have those same health care problems here.

ora_43

Sun, Sep 21 2008, 5:48 pm

Tamiri wrote:

How can housing be so expensive and sustainable here in Israel? By people killing themselves to attain what they think they "must" have. My contention is that if women (an men) rebelled, and refused to pay so much for housing, the prices would have to fall. Instead, workers here are willing to work more and more, neglect other aspects of their lives more and more, just to pay for a $250 or $300K place to live. So, there is no reason for prices to return to a normal level, is there?

I don't think that's true everywhere in Israel. Most people I know here who saw that apartments where they wanted to live cost $250 or $300K just said "forget this" and went somewhere else.

Also, dh and I are in our mid-20s and I can only think of one couple we're friends with who owns an apartment. Every single other person is still renting. (OK wait, I just thought of a second guy who owns, a 30-something single who saved for years). So I don't think buying big right away is standard either. Most couples I know are waiting until after university to see where they end up, then buying a smallish place (3 bed 2 bath is average, because most already have kids) and staying there until it gets too small (which, if you are dati leumi and in a three-bedroom apartment, is usually around the time your seventh kid gets too big for the bassinet).

I think the reason for high housing costs here is simple--lots of people all trying to live in the same space. When 80% of Israeli Jews live in the merkaz, housing there will be unreasonably expensive.

I don't like the high cost of housing, but OTOH it's a great way to ensure that the land gets settled--otherwise why would anyone want to live in the Negev (with all due respect to the Negev, which is a wonderful place for a desert).

BinahYeteirah

Sun, Sep 21 2008, 5:50 pm

Yes, I think she said that the median house size has only gone up from 5.8 rooms to 6.1 rooms, so not a big difference. She also said that even though we see lots of "McMansions", those homes are catering to the upper 20% of the market. She said that in the 70s new home construction was often geared to starter homes (home for 1st home buyers), whereas today it's for the top 20% of buyers, which means that the rest of us are buying older homes with additional maintenance costs.

It depends where you live, but in many popular frum communities, there simply isn't property available at a reasonable price level. Even if a young couple purchase a smaller home it's still hard to manage the payments.

ora_43

Sun, Sep 21 2008, 5:52 pm

ora_43 wrote:

I think the reason for high housing costs here is simple--lots of people all trying to live in the same space. When 80% of Israeli Jews live in the merkaz, housing there will be unreasonably expensive.

BTW, I realize this is basically what you were saying. I only differ in that I think people are rebelling--they're rebelling by moving further out and away from the merkaz, at least those who don't need to be there for professional reasons. Not everybody is rebelling, but not everyone is killing themselves for housing either.

Atali

Sun, Sep 21 2008, 6:58 pm

catonmylap wrote:

Pickle Lady wrote:

Thanks I watched the entire thing. Its pretty sad. And this doesn't even include the frum families paying for tuition.

I live in Baltimore City. A house of a similar size in the county (only about a mile or two away from me) would be almost double the price. I think that the difference is definitely primarily due to the difference in the school systems.

Happy Mom

Mon, Sep 22 2008, 1:07 am

>>Like in Baltimore, they can live in areas of Baltimore City where no one else who is upper middle class/middle class would want to live because the schools aren't good. <<

I'm not sure why you're choosing Baltimore as an example. This isn't exactly true - we may not care about the public schools, but wherever frum Jews live, the prices go up. The population of Baltimore city is almost entirely made up of Jews and blacks - and the city neighborhoods where the Jews are are much more expensive than those with no Jewish neighbors. I would think this would be a similar situation most urban Jewish communities find themselves in.

>>I live in Baltimore City. A house of a similar size in the county (only about a mile or two away from me) would be almost double the price. I think that the difference is definitely primarily due to the difference in the school systems.<<

I also live in Baltimore city, and there's are definite advatages to living in the county except for the public schools. The county has significantly lower taxes (almost 50% less), is safer, has better services from the county (eg, snow clearing in winter, special services if you have a child with special needs, etc). I don't think the price difference in the frum neighborhoods can be explained mostly by better public schools, since virtually everyone moving into those neighborhoods sends their kids to yeshiva and it makes no difference to them what the public schools are like.

Thanks for the link, op; Elizabeth Warren is excellent and knows her stuff. It's an important issue.

Tamiri

Mon, Sep 22 2008, 1:23 am

What I found most sad was what she had to say about the affect of 2 income families on the general finances: negative. I realize she's not referring to a 2-doctor household (although being a doctor these days isn't the $ame as 10 years ago) or a lawyer/hedge fund manager combo (oops, I guess the hedge fund manager isn't a great thing to be these days either). She was referring to 2 median earners living a median lifestyle, and found they were far behind their early-70s peers. Her data was astounding - how far behind people are even though they have much more income. Food for thought.