Sunday, August 28, 2011
Their target audience doesn't shop at Target
Reading through The New York Times today I cam across this article, New Mortgage Limit May Set Buyers Back and my first thought was that, yet again, some change in American banking/foreclosure/credit ratings was going to disadvantage millions of Americans.
I was wrong.
This article, though published in the middle of times of severe economic constraint, is not about buyers it is about a very particular group of buyers who will be effected by the FHA (Federal Housing Administration) dropping the maximum amount they will insure from $729,650 to $625,500.
Yes, house prices are higher in Manhatten than in many other parts of the country -- but the (estimated 2009) median household income in New York City was just over $50,000. That means (given the advise from a variety of financial advisers) that half of all the households in New York City cannot afford to buy a home that costs more than $150,000. Even if we look only at Manhatten and consider the mean household income the average family cannot afford a mortgage much larger than $360,000.
It is mentioned one than once in the body of the article that this change in the FHA insurance ceiling will only affect those looking for homes costing between three-quarters of a million and a million dollars.
Three things stand out to this reader.
First, the tone of the article is that it would be a bad thing for sellers to have to lower the prices of their New York properties in order to find buyers. As a home owner (who saw hir own home lose value during an earlier economic recession) I understand what if feels like to see the value of an asset depreciate. But this is the nature of most investments--they can go down in value just as they can go up. "Banking" on one's house/apartment is a bad idea. It seems to me that the people who declaim loudly and often about the "wisdom" of the free market should be willing to accept the sad news that market is trying to give them--right now some of the housing units in New York City are overvalued.
Second, a someone whose first summer job as a teenager was with a mortgage company I find my shocked at the idea of someone in this economy even thinking of buying a house with a mere 3.5% downpayment. Do these potential homeowners have no savings? What will they do if one of them loses their job? What will happen if an unexpected pregnancy occurs? What will they do if their health insurance premiums go up? What happens if they run into unexpected maintenance costs? In other words, what happens when life happens? Many American families are only one or two paychecks away from losing their homes and being on the street and this holds true for families who are "income rich/capital poor" as well as for those who are struggling members of the working poor.
Third, articles like this are indications of why "conventional wisdom" and "the talking heads" never seem to know what the average American does and care about the things which worry the typical American. A substantial proportion of Americans today have no jobs. Not only do they have no jobs they have no realistic hope of ever having a reasonably paying job which allows them to use their skills fully. A substantial proportion of Americans who do have jobs are looking at pay freezes (at best) or pay cuts and the reduction of benefits. A sizable percentage of Americans who still have jobs are delaying their retirement.
Most of the householders in New York City are just worried about feeding their children and keeping a minimally acceptable roof over their heads. The "wise heads" at The New York Times should be writing articles about the problems of the ordinary New York City resident (the teacher, the nurse, the waitperson, the people who keep the city running) not about the challenges faced by those whom fortune has already favoured.
But the ordinary people are not the target audience of people who pay the bills at The New York Times and other major newspapers. In the democracy of the dollar zie who has the most dollars gets the most attention, the most respect, the most consideration and the most votes.