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18 March 2007

Sooner or later under conditions of perpetually rising house prices, houses would have to be priced out of everybody's range

Jim Kunstler, with some cutting remarks in response to comments made by former Fed chairman Alan Greenspan earlier in the week.
What kind of a rock does this fucking idiot Alan Greenspan live under?

The median price for a house in my region of the US (northeast) was $380,000 in the third quarter of 2006. Median annual income, meanwhile, was about $46,000. If, by some miracle (in a land of negative savings) someone with an income of $46,000 had managed to save enough to make a 20 percent down payment ($76,000) on the aforesaid median-priced house and got a 30-year mortgage for the remainder ($314,000) at 7 percent interest, his monthly payment would be $2089. Add to that $250 a month in local property and school taxes and insurance and that brings it up to $2339. That adds up to $28,068 a year in house payments. Let's say the poor bastard pays $8,000 a year in combined income tax and FICA witholding. That leaves him with a grand total of $9,932 for everything else. Then there's the yearly cost of owning a car, including installment payments, insurance, gasoline, and maintenance: around $6,000 a year. Oh yeah, if he's a prudent fellow, he's got health insurance, let's say a practically useless high-deductible policy costing $3,000 a year. That leaves approximately $57 a week for groceries, laundry, the collection plate at church, and everything else. (Too bad he can't afford cable TV and the Internet.)

So, if housing prices went up 10 percent, how fucked would Mr. Median Income be?

An interesting question, that hints to harrowing times ahead.