Consider the plight of Stephanie and Bob Walker, who bought a $799,000, three-bedroom home in Los Angeles with a view of the Hollywood sign in 2006 but are losing it because last year Bob stopped getting computer consulting work that used to pull in about $240,000 a year. Bob eventually landed a job paying $60,000, and Stephanie found work as a $13-an-hour temp, but it wasn't enough to cover their mortgage and credit-card debt, which was swelled by about $130,000 worth of home renovations.
So I actually work in the "computer consulting" industry, and can assure you no one is pulling in $240,000 net a year on a consistent basis, especially not anyone with a $60K/year fundamental skill set. $20K gross in a month is definitely doable but that's rarely repeatable so I expect this was a stated income loan and doubt if the Walkers were regularly claiming $240K on their income tax returns. But the nonreality of the specifics aside BW makes a salient point:
Unemployment is exacerbating the problems at the top of the market. The jobless rate for adults with a bachelor's degree or more [is] more than double the rate of 2% a year earlier. And many families in that segment of the population built their finances on the assumption of continuous full employment, so they can't cover the mortgage when even one spouse is out of work.
Even couples that didn't use exotic financing regularly pushed their debt-to-income ratios to the absolute limit to be able to compete with people who did. And that leaves no slack, both people must stay fully employed or they can't afford the home. This source of foreclosure may currently be quite small relative to 0 down Alt-A/subprime nonsense or speculative investors, but in the end it will be the kind that hurts the most, and leaves the most lasting scars on our national psyche: families torn away from their dream homes after pouring everything they made into them for years.
No comments:
Post a Comment