Deciding to buy while just getting by: Low-income families and the housing market

To buy or not to buy?

The leap into homeownership is always a big decision. But buying now, post-housing crisis, can be especially challenging — especially for lower-income buyers.

“Everyone’s looking to apply for a mortgage,” says Chris Gilliam, a counselor with Beyond Housing, a Saint Louis nonprofit, which does community development and runs home-buyer education classes.

Gilliam stands in front of roughly two-dozen potential homeowners on a recent Saturday morning.

“Credit will be evaluated,” he tells them. “They’re looking at more things than they used to. They’re going to look at your bank statements.”

Some workshop attendees know they’re going to buy and are here to qualify for down-payment assistance. Katherine Estrada, a vet technician, is not so sure.

“When I was younger, we had a great house,” she says. “But unfortunately, you know, things fell through. My father lost his job, he was injured.”

Her family was foreclosed on in 1998, and spent a long time bumping from family member to family member, rental to rental. Now, Estrada is 22 and out on her own. She’s looking for some stability — and a good investment.

“I’ve been thinking about it for a while, since everyone’s like, ‘Foreclosures! Property, this, property that,’” she says. “But it’s like if I get in a house and three years later, if I need a new roof, I’m not going to be a situation where I have to get another loan out to pay for something.”

It’s a position echoed by many here: on the one hand, there’s this fear of missing out on low interest rates and low housing prices. But on the other, there’s caution.

“Fear and trepidation about foreclosure is higher than it’s been in the past,” says Beyond Housing CEO Chris Krehmeyer, while driving through some affordable neighborhoods where the organization builds and rents homes. “We think that’s a good thing. We want people to go into this eyes wide open.”

He stops on short on a dead-end street, in front of a new brick home with beige siding that’s been on the market for over a year. “From a sheer what-you-can-buy-for-what-you-can-afford [perspective], the house itself is a great value,” he says. “However, when you think about the neighborhood and the community, is this the place that you think is the best investment possible for you?”  The house next to it is vacant, boarded up with rotting plywood. A few houses down, there’s what Krehmeyer figures is a fresh eviction; a former tenant’s belongings are piled on the front lawn.

Krehmeyer wants people to buy here, because homeowners who are literally invested in a neighborhood can help stabilize it. But he also knows that some of the best deals right now can be risky investments. It’s difficult for a potential homebuyer to know whether that nice brick home will retain its value. And will that value increase over time? It’s hard to predict what will happen to a neighborhood in five or ten years.

Plus, money that’s tied up in a house can’t be invested in other places.

“Historically, the stock market has outperformed the housing market in terms of an investment,” says Ray Boshara, a senior advisor with the Federal Reserve Bank of Saint Louis. “Many people even think it’s wrong to think of home-ownership as an investment given the risk.”

Boshara says low-income buyers need to build up savings and other investments; they shouldn’t let all their money get tied up in a house. But homeownership does have its advantages.

“There are tax subsidies to support homeownership for a big part of the population,” he says. “And there’s other evidence that when people own homes, there’s other outcomes associated with that, like saving and investing. Your kids are more likely to go to college.”

While homeowners with mortgages do pay interest, their monthly payments can become a form of automatic investing — they’re less likely to skip a mortgage payment than other kinds of saving during a tough month.

“It’s a forced savings plan,” explains Boshara. “It requires you, by making that mortgage payment, to put money into your house.”

Ultimately, the decision to buy is part economics, part emotion.

“I just want to leave my kids something,” says home health-aid Coretta Johnson. “I want to have something in my life that I can said I accomplished and I did. And so as of right now, I can’t say that. I can’t say that I can leave them anything.”

Johnson already works seven days a week, but she wants to pick up some night shifts to pay down a few thousand dollars in credit card debt. She hopes that will help her qualify for a loan under the new, tighter standards.

“I have to do this,” she says.

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Deciding to buy while just getting by: Low-income families and the housing market

Homeownership: The right choice for low-income families?

Breeann Mack looks skeptically at the kitchen ceiling of a foreclosed townhouse outside Saint Louis. Or perhaps more accurately, she looks at exposed plumbing and electrical wires where the ceiling is supposed to be. Without even checking the upstairs, Mac decides she’s seen enough. Even though the home is priced at only $ 45,000, she’s not interested in fixing up someone else’s mistake – not if it means overextending herself financially and potentially making a mistake of her own.

“I want to try to make sure that I’m OK-OK and that, financially, I can pay for the house, the down payment, furniture if I need it,” she says. “I have to be realistic in it.”

Mack, 32, lives with her mother. She spent four years paying off all her debt. Now, she’s thinking very carefully about what she can afford on her $ 33,000 dollar salary. She’s been pre-approved for a $ 90,000 dollar mortgage. If she goes with a loan backed by the Federal Housing Administration, her down-payment could be just over 3 percent of that. She wants to keep her payments around $ 500 a month.

People like Mack are the upside of the housing crisis, says Chris Krehmeyer, the president Beyond Housing, a local nonprofit where Mac’s received financial counseling.

People are much cautious now, he says; some are even scared of homeownership – and that’s a good thing, if it prevents people from taking on more home than they can afford.

But Krehmeyer still believes that most people – even the lowest income families – should be able to buy a home.

“Is there some number where you can’t? Sure,” he says. “What is that number, it depends upon the marketplace. But just to say arbitrarily if you make less than $ 26,000 that you can’t become a homeowner, that may not be true.”

Krehmeyer says homes are still the best way to help build wealth and pass that wealth on to future generations. It’s just that getting lower income homebuyers through the purchasing process is more complicated.

Beyond Housing runs classes to get people ready to purchase a home and their manage expectations.

Standing in front of roughly two dozen potential home-buyers on a Saturday morning, instructor Chris Gilliam explains that lending standards have tightened.

“Underwriters, that’s the gatekeeper, they’re looking at more things, more factors than they used to,” he says.

Attendee Coretta Johnson already knew she had to pay down her credit card debt. But she’s just learned that routinely overdrawing her bank account, which she does once or twice a month, could look bad on her loan application.

“That’s hurting me right now,” she says. “Because I know I’m a responsible individual and I just want to leave my kids something. I want to have something in my life that I can say I accomplished and I did.”

Homeownership has many benefits, says Ray BO-shara, senior advisor with the Federal Reserve Bank of Saint Louis. “Typically homeowners have about 35 times the wealth of renters.”

Many homeowners get tax subsidies; they tend to save more; Kids of homeowners are even more likely to go to college.

“The problem isn’t homeownership,” he says. “The problem is if you only pursue homeownership.”

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In 2007, the bottom 30 percent of homeowners had over half of their total assets in their homes, according to Boshara, who says a more appropriate number would be something around 20 percent.

So while he’s still pro-homeownership for low income households, Boshara also thinks people need to build more pain-old vanilla savings and look at other kinds of investments.

“Historically the stock market has outperformed the housing market in terms of an investment,” he says. “Many people even think it’s wrong to think of home-ownership as an investment given the risk.”

But stocks can be a tough sell.

“It’s kind of scary,” says Coretta Johnson, who has invested in a Roth IRA. “I mean I’d rather lock my money up in something that’s benefiting me.”

A house is an investment Johnson can live in. She wants a one-story home where she can grow old.

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Homeownership: The right choice for low-income families?

Families face tough choices in the shadow of the Great Recession

When you think about poverty you might think about hunger and homelessness, but you also should think about the tough financial decisions that families in need have to cope with. A new HBO documentary, “American Winter” takes a look at the tough choices Americans face. The documentary follows the stories of eight families struggling to survive in the aftermath of the Great Recession, and reveals the impact of cuts to social services, the decline of the middle class, and the fracturing of the American Dream. The makers of that documentary, Joe and Harry Gantz wanted to make the documentary to provide an intimate snapshot of the state of the nation’s economy as it is playing out in the lives of many American families.

 

“We saw that so many people were losing homes, losing jobs, working in jobs that didn’t support a family even if they were working overtime. Then we saw that that was followed by cuts to social services across this country. With more need than at any time over the last 80 years, with all these cuts going on, we decided that we would do documentary that kind of looked at the human side of the equation. There’s been films and books written about how Wall Street’s affected, how banks were affected, so we wanted to look at how ordinary American families were affected across the country,” says Joe.

How did the Gantz brothers find the families?

“We actually found all the families through monitoring calls at the 211 service in Portland, Ore. 211 is the number you call in most cities — some cities it’s 311 — if you need some type of social services. We listened to hundreds of calls a day and asked some of them if they’d be willing to allow us to come out and film their attempt to get social services and get back on their feet,” says Harry.

The families gave filmmakers intimate access into their lives.

“Once we worked with them, we worked by staying in the background. We don’t tell them anything about what we would like them to do or not do. We just stay completely in the background and film their lives over three, four, five, six months. We were let into every aspect of their lives. There were some very difficult times going on for these families. We had to watch them decide whether they were going to pay their electricity bill or rent, whether they were going to move out of their apartment, whether they were going to lose their home altogether and have to go into a shelter,” says Joe. “And then also families who didn’t have enough to eat, needing to go to food banks to keep their families fed. That’s difficult, very difficult, to be there so intimately in their life and watch this go on.”

Joe says the stress of these families having to face tough choices — like buying groceries or paying for rent — day in and day out really affected him. Harry says many families in the documentary struggle with having to ask for help from the government or their own family members.

“You’ll see many people discuss that in the film, where they felt they would never be in a position where they would ever ask the government for anything,” says Harry. “Another gentleman is talking about asking his father to help him pay an electric bill and how that just pains him so much.”

The documentary “American Winter” premieres on March 18, 2013 on HBO.

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Families face tough choices in the shadow of the Great Recession

Is It Fair For People On Food Stamps To Buy Prime Rib And Lobster While Working Families Barely Survive?

Should we all quit working and jump on board the Obama gravy train?  Of course I am being facetious, but when you are barely surviving does there come a point when it just becomes easier to give up and totally rely on the government?  Today, the federal government runs nearly 80 different means-tested welfare programs, and many state and local governments have their own welfare programs on top of that.  If you become an expert on those programs and you learn how to game the system, can you live more comfortably than someone that lives honestly and works as hard as they can and yet still makes less than 10 dollars an hour?  Now, right from the outset of this article, let me make it abundantly clear that I do not believe that most people are abusing the system.  As I have written about over and over, the number of Americans living in poverty is rapidly increasing because there are not enough jobs.  There are not enough jobs because we are shipping millions of them out of the country to the other side of the globe, and we are also losing millions of jobs to technology.  There have always been those that need our help, and because of the foolish decisions that we have made as a nation, the ranks of the poor will continue to expand.  But it is also true that there are some people out there that are very brazenly abusing the system.  For example, is it really fair for people on food stamps to buy prime rib and lobster while many working families barely survive?  People like that are taking advantage of their fellow Americans, and they are making it harder for the people that really need the help to be able to get it.

Unfortunately, we are rapidly becoming an “entitlement society”.  Close to half the country lives in a home that receives some sort of monetary benefits from the federal government each month at this point.

In particular, the food stamp program has experienced explosive growth in recent years.  Since Obama has been president, the number of Americans on food stamps has grown by more than 49 percent, and more than 11,000 people a day have enrolled in the food stamp program since Obama entered the White House.

And if you can believe it, the number of Americans on food stamps now exceeds the entire population of Spain.

Will we all eventually be on food stamps?

Actually, the truth is that there are millions upon millions of hard working American families that are desperately trying to make it on their own and that don’t want to become financial dependents of the federal government.  Unfortunately, it can be a little disheartening when you are barely making it from month to month and yet you see others using government benefit cards to buy luxury items.

The other day my wife came across a discussion on Facebook that really caught her attention.  I thought that I would share with you all the post that got that discussion going.  As far as I can determine, this woman shared what she believed she actually saw at her local grocery store, but I have no way of determining if this story is true or not.  But I have seen quite a few similar stories of food stamp abuse in the past.  Either way, I think the following story will be good to help spark a conversation about whether our current system is broken or not.  All of the names have been removed so as to protect the identity of the woman that originally posted this on Facebook…

Okay…so, I’m going to go on a rant for a minute…just to get it off my chest…

**** & I went to the grocery store to pick up a few things because we were getting low…sooo, we pick up our 40% off chicken and buy one get two free items and proceed to checkout.

There is a woman ahead of us with a child about 4 years old. The woman, I couldn’t help but notice….had beautiful fingernails, clearly professionally done…and I also noticed her brand new IPHONE…which she was talking on, and I think that is rude while you are being checked out. Her little girl was commenting on the TWO live lobsters in a bag on the checkout, asked if it was going to hurt when they get cooked, her mom brushed her off…at that time I took a look at what else she had on the counter…A HUGE roast, sirloin tips, shrimp, beef ribs and pork ribs…only the prime cuts… I thought to myself….mmmmmm someone is having a yummy dinner and must have a great job as I could not afford these things (not that I’d get my nails done anyway)….

So…the cashier gives her a total and what does she pull out of her wallet but a BENEFIT card!!!!!!! I had all I could do to contain myself…

Sometimes people need help, and I’m okay with that, and those who need it should get it….BUT…if you can afford the latest IPHONE and fancy nails then why in the world are the taxpayers paying for your LOBSTER?!!!! If she really needed help and food, she should have been buying the “sale” items…40% off chicken, buy one get one free cheese ravioli…you know, like the rest of us working class have to buy!

It especially makes me mad because there ARE PEOPLE WHO NEED HELP and can’t get it…My son and his girlfriend and brand new baby aren’t eligible for an ounce of help…they tried, she works days and he works nights so that they don’t have to pay for day-care, they use inexpensive diapers and try to save money anyway they can, they struggle to make ends meet and to pay for their straight talk phones and to boot are paying off college loans…but they supposedly make too much…c’mon, really, he works at McDonalds and she works in a nursing home…lets be real here…those are the type that SHOULD get help…UGHHHH Our system is broken and something needs to be done about it!!!

There, that’s my rant…kudo’s to you if you managed to read the whole thing as I know it was an awful long rant….Gotta go work now, Thanks for listening.

In response to her story, dozens of people posted comments.  Quite a few people said that they had seen similar things where they lived.

And the truth is that food stamps are accepted just about wherever you look these days.  Just check out this shocking article: “Obama’s food-stamp nation: ‘We accept EBT’ signs are everywhere“.

So is this kind of thing fair?

If not, what can be done about it?

What everybody can agree upon is that the number of food stamp recipients is absolutely exploding.  The following is from a recent CNS news article…

When Obama entered office in January 2009 there were 31,939,110 Americans receiving food stamps.  As of November 2012—the most recent data available—there were 47,692,896 Americans enrolled, an increase of 49.3 percent.

But this didn’t just start under Obama.  Back in the year 2000, there were just 17 million Americans on food stamps.

30 million more have been added to the program since then.

And of course food stamps is not the only federal welfare program that is being abused.

According to the Wall Street Journal, there has been a tremendous amount of abuse in the free cell phone program as well.

The U.S. government spent about $ 2.2 billion last year to provide phones to low-income Americans, but a Wall Street Journal review of the program shows that a large number of those who received the phones haven’t proved they are eligible to receive them.

The Lifeline program—begun in 1984 to ensure that poor people aren’t cut off from jobs, families and emergency services—is funded by charges that appear on the monthly bills of every landline and wireless-phone customer. Payouts under the program have shot up from $ 819 million in 2008, as more wireless carriers have persuaded regulators to let them offer the service.

A lot of people refer to those free cell phones as “Obamaphones”, but the truth is that the program has been going on for a long time.  It just has accelerated greatly under Obama.

So what is the solution to all of this?

Well, what we really need are a lot more jobs, but in the State of the Union address last night Obama simply rehashed a lot of the same tired proposals that he and our former presidents have been promoting for years.

If we continue to do the same things that we have been doing, we are going to continue to get the same results.

There is a reason why the percentage of the civilian labor force in the United States that is employed has been steadily declining every single year since 2006.  We keep pursuing foolish policies, and those policies are steadily destroying our economy.

Sadly, many of our politicians appear to be engaged in some form of “doublethink”.  The things that they tell us will solve our problems are actually the things that are making our problems even worse.

For example, Barack Obama says that we need even more “free trade agreements” and that we need to integrate our economy into the emerging one world economic system even more deeply.

But as I have shown in article after article, the “free trade” agenda of the global elite has resulted in the loss of tens of thousands of U.S. businesses and millions of good paying U.S. jobs.

For much more on this, please see the following article: “55 Reasons Why You Should Buy Products That Are Made In America“.

And of course Obama once promised that he would never “rest” until he had fixed our employment problems, but that hasn’t exactly been the truth either.  The following is from a recent article by Dan Gainor…

Back in 2009, the president promised never to “rest” until the job situation was fixed. Nearly four years later, he’s done a lot of resting.

According to The Weekly Standard, Pres. Obama has had 83 vacation days overall and Factcheck.org says he took 26 of those in 2009. That means the president has taken at least 57 vacation days since his vow not to “rest.”

But hey, he needs his rest.  Life is rough.  U.S. taxpayers only spend about a billion dollars a year on the Obamas.  How is he supposed to scrape by on such limited resources?

Meanwhile, Americans are still incredibly pessimistic about the economy.  The following is what one recent survey found…

• Eight in 10 Americans are skeptical that career and employment opportunities will be better for the next generation.
• More than half of Americans say the economy will not fully recover from the 2007-2009 recession for another six years; 29% believe the economy will never fully recover.
• 73% of Americans were directly impacted by the recession: individuals surveyed had either lost a job themselves or a family member/close relative had been out work because of the economic downturn.
• The majority of survey participants said college would become unaffordable for most young Americans.
• 56% reported having fewer savings than before the recession.
• More than half of those who were laid off or lost a job said they cut back on medical treatment or doctor visits.
• 40% of Americans have borrowed money from family or friends.
• Nearly 25% of participants said they have sought professional help for stress or depression.

And as you can see from the charts in this article, U.S. businesses remain very pessimistic about the future of the economy as well.

Unfortunately, those that are pessimistic about the economy have very good reasons to be so.

And as bad as things are right now, they are going to be getting much, much worse.

That means that millions more Americans are going to be wanting to sign up for food stamps and other welfare programs.

But what will happen someday when the safety net breaks and all of those welfare programs start getting cut back dramatically?

What kind of riots will we see in major U.S. cities when the international community insists that the U.S. implement its own version of “austerity” in response to a massive debt crisis?

Will we eventually end up just like Greece and Spain or even worse?

Please share this article with as many people as you can, and please feel free to leave your thoughts on this article above by posting a comment below…

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The Economic Collapse

Is It Fair For People On Food Stamps To Buy Prime Rib And Lobster While Working Families Barely Survive?