Wednesday, February 13, 2008

Well, which is it?

Today, I was checking out my homepage, which I have set to MSN, and noticed to headlines that really grabbed my attention. Both were under the "money" section. The first, "Why you'll never own a home" is kind of misleading. When you click on the link, the title of the article is actually "Why you MIGHT never own a home"...a bit different from never, but hey, they need a catchy headline, right? The second one,"Whats busting your budget?" focuses on "essential" indulgences. Funny how they don't see the solution to one problem in a published article is staring them right in the face in the next published article.

In a nutshell, the author of the first article claims you'll never own a home, because they are just priced out of reach for the average middle-class family. What the author fails to take into account is, that while prices are artificially high now, they will come back down to what people can afford. It is simple supply and demand...once you have enough homes that are not selling, the prices will keep dropping until they do sell...prices will come back into balance. My whole take on the article was all gloom and doom about how the current young generation will not be able to afford the "American Dream" if everyone will be living in apartments. And how it isn't the fault of people who can't afford the payments. One woman says she fears for her son (who is 29), that he won't be able to buy a home...but he has a nice car and an iPhone. Well, gee, get rid of the car payments and the iPhone, and you could save a nice down payment rather quickly. The article continues on, talking about how the mortgage industry helped push people into more home than they could afford, yet the author never really hits on the LIFESTYLE of the middle-class. The author seems to miss that little...well, actually, BIG...factor in why many people will not be able to buy a home.

But lo and behold, the same author, writes another piece on what is breaking the budgets of the middle class...the "essential" indulgences. These are items that are not necessities, like lattes, designer clothing, new cars, spa treatments, and such. While these things are nice to have, you don't need an iPhone, when the low end free phone you can get with your cell phone contract makes calls just as well. For that matter, you don't NEED a cell phone. Same with satellite and cable tv...they are nice to have, but you won't die without them...but go to a run down trailer park, and you'll be hard pressed to find one residence without a satellite dish. The author hits the nail on the head with this article...the modern standard of what we "need" has changed, and that is what is breaking our budgets. Getting a pedicure may feel great, but getting one every week is not a need. Buying "organic hand wipes" for $10, as the author admits to doing, is crazy, when you can buy a package for about a $1. If people would look at their lifestyle, and get rid of the indulgences they "need", then they would have no problem buying a house. Sure, a 5,000 square foot McMansion may not be what you can afford, but do you need a 5,000 square foot, 5 bedroom, 4 bath house? I didn't think so.

The reason the middle-class is having a hard time living like the middle-class, is because they are trying to live like the high upper-class. If the middle class would learn to stop being so self-indulgent, they would have more money to save and invest, which would allow them to start living like the upper-class, because they will BE the upper-class.

The author has the answer to her own concerns, between the two articles she wrote. So, which is it? Is the housing market outpacing the middle-class, or is the middle-class over-indulging itself? My vote is for the latter.

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