Arizona Republic, The (Phoenix, AZ) - Saturday, November 17, 2007
Author: RICHARD KELLEHER , The Republic
One morning recently, I heard a television news announcer pontificating on home foreclosures and if the government should resolve this issue. The answer to that question is a simple "hell no!"
Since World War II and the advent of the G.I. Bill, homeownership in the United States has skyrocketed. Never in history have there been as many landowners as today.
For some reason, people today think it is a right, not a hard-worked-for privilege, to own a home. Not just a home, but a home they really can't afford. These same people feel when the economy gets tight, as it will when oil price doubles over the next several years, it is the government's job to come to their rescue.
You don't need an M.B.A. to know the economy goes in cycles. Home prices go up, home prices go down. In 1999, a client and I predicted home prices would fall in 2003, according to past cycles. We were four years too early. This current cycle (won't mention recession) has just begun.
A rule of economy for buying a home is that you take your annual income, multiply it times three, and that is the house you can afford. New townhomes just went up in my neighborhood, selling for $210,000 for 1,000 square feet. Let's not discuss the overpricing of the housing market in Phoenix. Market prices will always rise -- or fall -- to the level consumers are willing to pay.
It is the consumers who want the government to bail them out for their bad decisions that I'd like to discuss. So if you're buying a $210,000 home, your family income should be $70,000. Problem is these homes are selling to people with a $40,000 -- or less -- annual income.
These are the same people who keep those expensive restaurants afloat, paying $12 or more for a hamburger or sandwich that can be had down the street for $3. Whatever happened to eating at home?
These same consumers have a cellphone for each member of their home, Internet connection, premium cable television and more. What happened to rabbit ears for television? These consumers don't know how to cut their spending, and they want me to pay for it with a government handout!
These are the same consumers driving gas-guzzling SUVs, ruining the environment, and the ones really responsible for oil barrel prices doubling in the past several years. They're the ones who will pay $4 or $5 per gallon rather than taking the bus or staying home. After all, they have to get to those $12 hamburger joints some way. Their credit cards are probably maxed out, too.
I have a closet full of $80 pants, $240 sports jackets, leather coats and more. None of those pants cost over $20, none of the jackets over $50. You don't just pick up what's on the rack when shopping. I praise those 75-percent-off racks, and every now and then stores add 30 percent off on top of that. That's how you shop! Old economy books said you'd save if you bought a car that was a year old rather than a new one. Quite a savings.
Ben Franklin said it best, and I paraphrase: To become wealthy, you increase your income and decrease your spending. He never mentioned the government bailing out those who are fiscally irresponsible.
Since World War II and the advent of the G.I. Bill, homeownership in the United States has skyrocketed. Never in history have there been as many landowners as today.
For some reason, people today think it is a right, not a hard-worked-for privilege, to own a home. Not just a home, but a home they really can't afford. These same people feel when the economy gets tight, as it will when oil price doubles over the next several years, it is the government's job to come to their rescue.
You don't need an M.B.A. to know the economy goes in cycles. Home prices go up, home prices go down. In 1999, a client and I predicted home prices would fall in 2003, according to past cycles. We were four years too early. This current cycle (won't mention recession) has just begun.
A rule of economy for buying a home is that you take your annual income, multiply it times three, and that is the house you can afford. New townhomes just went up in my neighborhood, selling for $210,000 for 1,000 square feet. Let's not discuss the overpricing of the housing market in Phoenix. Market prices will always rise -- or fall -- to the level consumers are willing to pay.
It is the consumers who want the government to bail them out for their bad decisions that I'd like to discuss. So if you're buying a $210,000 home, your family income should be $70,000. Problem is these homes are selling to people with a $40,000 -- or less -- annual income.
These are the same people who keep those expensive restaurants afloat, paying $12 or more for a hamburger or sandwich that can be had down the street for $3. Whatever happened to eating at home?
These same consumers have a cellphone for each member of their home, Internet connection, premium cable television and more. What happened to rabbit ears for television? These consumers don't know how to cut their spending, and they want me to pay for it with a government handout!
These are the same consumers driving gas-guzzling SUVs, ruining the environment, and the ones really responsible for oil barrel prices doubling in the past several years. They're the ones who will pay $4 or $5 per gallon rather than taking the bus or staying home. After all, they have to get to those $12 hamburger joints some way. Their credit cards are probably maxed out, too.
I have a closet full of $80 pants, $240 sports jackets, leather coats and more. None of those pants cost over $20, none of the jackets over $50. You don't just pick up what's on the rack when shopping. I praise those 75-percent-off racks, and every now and then stores add 30 percent off on top of that. That's how you shop! Old economy books said you'd save if you bought a car that was a year old rather than a new one. Quite a savings.
Ben Franklin said it best, and I paraphrase: To become wealthy, you increase your income and decrease your spending. He never mentioned the government bailing out those who are fiscally irresponsible.
