October 2, 2018
Subprime Crisis Lingers for Minorities
As Americans were riveted to the spectacle of teetering Wall Street behemoths in 2008, another ruinous tragedy was beginning to unfold: a national foreclosure crisis.
Black and Hispanic homebuyers were hit hardest by the foreclosures that resulted from unbridled sales of predatory subprime mortgages, which exceeded $500 billion annually at the market’s peak.
In the decade since the financial crisis, the stock market has rebounded smartly, but the damage to minority communities remains. At the height of the foreclosure crisis, entire neighborhoods were littered with bank foreclosure sales and realtors’ signs advertising sales of the properties.
About 30 percent of black and Hispanic borrowers’ homes in total have gone into foreclosure in the years since the housing market crash, compared with 11 percent of whites’ homes.
“For [minority] families, financially destructive foreclosure events delayed and potentially derailed the dream of homeownership,” the Federal Reserve Bank of St. Louis concluded in a report on the continuing impact of the financial crisis.
But the damage goes deeper than that. Because home equity is often the most valuable asset that people own, the foreclosure crisis “severely damaged the balance sheets of minority families,” the Fed said. …Learn More
September 4, 2018
Granny Pods: Financial and Care Solution
Kathy Barker already was having concerns that her elderly father’s dementia made it increasingly difficult for him to manage his life. When his doctor said he could no longer drive, Barker had to do something.
A contractor was hired to build a 448-square-foot cottage in the backyard of her Tampa home. Her father enjoyed it for just 10 days before going into the hospital, where he died. But the house was still a great solution – this time for her mother, JoAnn George. (Her parents divorced long ago.)
Last November, George was moved into the backyard “granny pod,” which has a front porch, living room, bedroom, bathroom, and small refrigerator – but no other appliances. Granny pods, which come in a variety of architectural styles, from Victorian to modern, aren’t cheap. George’s cottage cost $90,000 to build, putting it in the higher end of the price range for these dwellings, according to Home Care Suites, which built it. [Here’s the virtual tour of the house.]
The 88-year-old George had been living in nearby Plant City, Florida, close to another daughter. But as she slowly declined, Barker decided that moving her into the backyard made sense. A flood in her mother’s home, caused by a broken pipe, provided a convenient opportunity to take matters into her own hands.
Now Barker, who runs a web development business with her husband out of their home, can keep a close eye on her mother. Although George is developing cognitive issues, she still takes care of herself, is healthy, and takes no medications.
The beauty of separate living quarters, Barker said, is that her mother can “keep [her] own independence.” …
August 16, 2018
US Increasingly Polarized – by Geography
Rich or poor, old or young, white or black, red or blue – our differences cut many ways.
But a new divide has opened up, one based on geography. Stark new evidence shows that well-paid, highly educated people have moved to high-cost coastal cities over the past decade, while lower-income, less educated people have moved out.
American cities are “grow[ing] increasingly dissimilar along socioeconomic dimensions,” said Issi Romem, a fellow at the Terner Center for Housing Innovation at the University of California and economist for BuildZoom, a California website focused on development.
Gentrification is nothing new. But Romem’s analysis of U.S. intercity migration shows that gentrification occurs not just within city neighborhoods but also between cities. San Francisco is the most extreme example of what he calls “income sorting.” He estimates that the population moving into the Bay Area earns $13,000 more, on average, than the population that is moving out. People relocating to Seattle and Washington earn about $3,800 more than the people who leave.
A similar phenomenon is occurring in New York, Los Angeles, San Diego, and Boston, where restrictions on development, coupled with the strong demand for the limited housing stock, are pushing up house prices and driving people out, including renters who can no longer afford the steep increases in rents.
These movements exacerbate society’s already high level of inequality. As cities or regions of the country become less integrated in terms of their residents’ incomes, fewer low- and middle-income groups will enjoy the particular benefits to them of living in the midst of those who are better off.
Upward mobility is one such benefit. A famous study found that lower-income people are more likely to move up the income ladder, relative to their parents, if they live in coastal cities with higher education levels, better primary schools, and more family stability. Other research shows they will also live longer if they reside in cities with more socioeconomic diversity. …Learn More
August 9, 2018
Divorce Very Bad for Retirement Finances
When a marriage ends in divorce, there are no fewer than seven ways that it could damage a person’s finances.
Divorce can rack up costly legal fees; force a house or stock sale in a down market; increase living expenses; increase tax rates; hamper the ability of the primary caregiver – mothers – to earn money; require fathers to pay alimony; and reduce each partner’s access to credit.
A new study looking at their impact on workers’ future finances concludes that divorce – the fate of four in 10 marriages – “substantially increases the likelihood” that their standard of living will decline after they retire. …Learn More
July 26, 2018
Book Review: the Middle-class Squeeze
Marketplace recently estimated that a family’s common expenses have increased 30 percent since the 1990s. This was based on the inflation-adjusted prices for 11 necessities and small luxuries, from food, housing, college, and medical care to movie tickets and air fare.
On the income side of the household ledger, one well-known study estimates that the lifetime, inflation-adjusted income of a typical 60-year-old man today is substantially less than it was for a man who turned 60 back in 2002. Women, who have benefitted from getting more education, are earning more, but they started out at much lower pay levels and still trail men.
These trends – rising expenses and shrinking paychecks – get to the essence of the middle-class struggle described in Alissa Quart’s new book, “Squeezed: Why Our Families Can’t Afford America.”
Putting faces to the numbers, she had no trouble finding workers who feel they are losing their tentative grip on the middle class. Her focus is the 51 percent of U.S. households earning between $40,000 and $125,000.
That’s not to say that Americans’ quality of life hasn’t improved in some ways. Consider the dramatic increase in the square footage of U.S. houses over the past 30 years or the enormous strides in medical technology. In today’s strengthening economy, the Federal Reserve Board reports that a majority of adults say they are doing okay or even living comfortably, and they are feeling more optimistic. Yet this doesn’t entirely square with another of the Fed’s findings: a large majority of adults would not be able to cover an unexpected $400 expense without selling something or borrowing money. …Learn More
July 3, 2018
Readers Like a Travel Twist on Finances
Two of our readers’ favorite articles so far this year connected difficult bread and butter issues – personal finance and retirement – with a far more pleasant topic: travel.
The most popular blog profiled a Houston couple scouting locations for a dream retirement home in South America, which has a lower cost of living. Another well-read blog was about Liz Patterson, a young carpenter in Colorado who built a $7,000 tiny house on a flat-bed trailer to radically reduce her expenses – so she could travel more.
The downsizing efforts of 27-year-old Patterson inspired several older readers to post comments to the blog about their own downsizing. “From children’s cribs and toys in the attic, to collectible things from my parents’ 70-year marriage!” Elaine wrote. “Purging has been heart wrenching and frustrating and long overdue!”
The following articles attracted the most interest from our readers in the first six months of 2018. Topics ranged from 401(k)s, income taxes, and Americans’ uneven participation in the stock market to geriatric care managers. Each headline includes a link to the blog. …Learn More
May 10, 2018
Tiny House Fixes Millennial’s Money Woes
Sky-high city rent, college loan payments, and the low-paying days of an early career are a bad combination for today’s Millennial.
Liz Patterson has solved all that. The carpenter built herself a 96-square-foot house on top of a flatbed truck for less than $7,000 in Manitou Springs, Colorado, a hip neighborhood near Colorado Springs.
The house “represents my monetary freedom – it’s the whole reason I did it,” the 27-year-old said.
Tiny houses, which average 500 square feet, are only about 1 percent of U.S. home sales. But builders say that sales continue to grow as Generation-X buys them as Airbnb rental properties, and baby boomers park their “granny pods” in an adult child’s backyard.
Patterson’s house before
Tiny houses actually make the most sense for 20-somethings in rebellion, given their financial constraints and a distaste for all the junk their parents accumulated over a lifetime, said Shawna Lytle, a spokeswoman for Tumbleweed Tiny Homes Company in Colorado Springs, which built its first tiny house in 1999. The national tiny house price is $23,000.
Five years earlier, the tiny house movement had started in Tokyo. Recently, a handful of U.S. communities, including Spur, Texas, and Berkeley, California, have modified their zoning rules or building codes to accommodate them. The laws are a patchwork: houses on wheels must sometimes be classified as RVs, and some cities set size minimums for houses with foundations. …Learn More