Quote:
Originally Posted by Stephen
Yes, I saw that too: so-called "McMansions" being among the most foreclosed properties
The problem is that being "a millionaire" may make you more vulnerable, due to the lifestyle and expense structure. Folks with more modest incomes may get by with the addition of a second job, but millionaires facing hard times may be truly screwed.
That includes a lot of porn folks that used to have money.
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The problem is that the McMansions are not being bought by millionaires, but instead people with slightly above average jobs. A friend of mine bought one these types of homes about 2 years ago. He paid 400K for it. It is a nice house with four big bedrooms, custom gourmet kitchen, hardwood, nice fireplace and a huge media room. The builders built an entire subdivision of them and almost all of them were purchased by people like my buddy who make between 80-100K per year.
My buddy pays 3K a month for that house when you include taxes. He makes about 85K per year. After taxes are taken out of his check he brings home about 5K per month. So he actually pays 60% of his income just to his house. He is lucky. He is single (got divorced a few years ago just after buying the house) and his truck is paid off. He doesn't have many other bills other than food, utilities and gas/insurance for his truck so he is getting by. The problem is the value of his house has plummeted. About 40% of the houses in that development are now either for sale or just empty from foreclosure. The value of his house is down to about 320K and falling. It could take years before the value of it ever rises back to where it was so even if he wanted to sell he can't without taking a risk of losing major money and having some serious credit problems because of that.
When I was a kid nobody I knew lived in a house like this. There were only a few houses like this in the town I grew up in and the families that owned them had a nice amount of money. Regular families, even those that had a nice income, lived in normal homes where the mortgage only took up about 30% or less of your income. But those days are gone.
I have said it before and I will say it again. Greed, and a desire for stupid material things has brought about the downfall of the middle class and they did it to themselves. When credit became easy to get people ran out and bought stuff they couldn't afford. They bought bigger homes than they could normally afford which left them with less money to spend on everything else. So they got credit lines for furniture, cars, TV's, vacations and just about anything else they bought. They couldn't afford 3K for a new bigscreen, but they wanted it for the new house and they could afford $100 a month for it and since it was all on credit they got the great surround sound and some nice media chairs to go with it. As more and more people bought these things they couldn't afford it drove the demand and price up for them so everything across the board started getting more expensive and more and more people turned to credit. Half the time you go into a store and the actual price tag of the item is tiny, but the monthly payment amount on the credit line for an item gets a huge, easy to see sign. Forget $1,200, it only cost $35 per month.
It seems like somewhere in the last 15-20 years people forgot how say no to themselves and refused to deny themselves anything. I don't know how many times I have heard people say, "I deserve this . . ." as they buy something nice and expensive that they can't afford. Entitlement, greed, credit and stupidity may well cause the downfall of an entire group of people in this country.
Sorry for the long post
