<p>I saw this excellent post on another blog from a young man in similar circumstances. He realized that there is no reason to give up hope once he understood what is going on.</p>
<p><em>I graduated from law school in spring of 2005, and got married that fall.
My wife and I got a lease on an apartment that was conveniently located for both of us to get to work. Like many young couples, we wished to buy our own home. However, we didn't want to buy in the area where we had to live (Prince Ghetto county) while she was on internship in Northern Virginia. Coupled with our student loans, and lack of a sufficient down-payment, we decided to put it off for a couple of years, so that we could get our careers, and our financial house in order.
But it is always good to plan ahead, so I started doing some research and talking to people. I had known before that home prices were high, but when I began to realize that I would need to accumulate about $80k in cash to put a traditional 20% downpayment on any home outside the ghetto, I became distraught. I talked to my dad about this, and he advised me about the first-time homebuyer programs available, and the possibility of putting 10% or less down on a house.
I then asked him about the first house that he and my mother had purchased. It was a modest split-level, in a decent neighborhood; a house that I would be more than happy with as a starter-home. It cost them just north of $60k in 1979, but it was very affordable for them on their income (my mom was working at the Naval Academy as a librarian, and my Dad had a job at a factory in Baltimore, and was working his way through college). They didn't have much money, but they were able to put 20% down, and by living frugally, they were able to begin a nice life together in this home, and give me and my younger brother everything we needed, paying the mortgage on time every month.
Now, in 2007, there is no way that my wife and I would be able to afford the same house, be able to start a family, and have one of us stay home with kids. How could a factory worker and a librarian in 1979 be better off than a lawyer and a psychologist in 2007? I felt bitter.
Several months later, I overheard one of the secretaries at work talking about how she and her husband worked hard and saved to buy their first home, and that she expected the same from her son. She would never give him any help toward his first home. I confronted her. I pointed out how much higher home prices are now than when she bought her first home, and asked how any young person could be expected to afford a house in the D.C. area. She responded by saying that she wanted her son to move to the midwest, where houses are more affordable.
This prompted me to go online, and see what other prople were saying about this. Were there any other young people who felt they'd been disinherited by ridiculous housing prices?
That is when I found the housing blogs. First, D.C. Housing Bubble Blues. Then iTulip. Then HP.
They tought me that instead of being resentful that I could not afford a home, that I should be patient and responsible, that I should work toward paying down my student loans, and that I should start saving up for a downpayment. I have learned the value of renting, and I have also learned (though I shougld have known this through common-sense) that I cannot be priced-out forever.
For people staring out in life, the value of this, and similar blogs is that they spread the word that the days of 20% down are not over, that it is foolish and dangerous to stretch your finances and take out exotic loans to get on the housing ladder, and that your money is better-off in places other than real estate.
As one poster put it here one time, "these days you have to think, people." It's not like it used to be, where you could purchase a home, and depend on this being a reasonably sound financial decision, or where you could dollar-cost-average into an IRA, and expect things to turn out OK.
We live in a bubble economy, and if young people stumble blindly through their financial lives like their parents did, depending for their fiancial well-being on steady and reasonable economic growth and asset appreciation, then they will be screwed.
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