Scene: a typical American coffee shop.  We see two casually-dressed friends sitting at a table, talking quietly and drinking a cup of joe.  We notice one has a “grande” while the other has a “tall.”

Suddenly we hear loud guffawing and rude comments, and we glance over to the other side of the shop to locate the source of the disturbance and see that it comes from another two friends, both in suits and ties.  They both have “trentas.”  Banksters–gotta be.

Get the picture?

Too much month at the end of the money

If not, let me spell it out for you.  Half of Americans cannot afford their houses.  They have to settle for a tall at the coffee shop while the other half who isn’t–yet–having a problem affording their house can indulge somewhat in a tall.  A MarketWatch article (h/t to Justice League Task Force) has the details on the small (er, “tall”) coffee folks:

Over half of Americans (52%) have had to make at least one major sacrifice in order to cover their rent or mortgage over the last three years, according to the “How Housing Matters Survey,” which was commissioned by the nonprofit John D. and Catherine T. MacArthur Foundation and carried out by Hart Research Associates. These sacrifices include getting a second job, deferring saving for retirement, cutting back on health care, running up credit card debt, or even moving to a less safe neighborhood or one with worse schools.

“Affordability issues are real and a major hurdle,” says Lawrence Yun, chief economist at the National Association of Realtors, an industry group. Home prices have increased 20% over the past two years while wages have barely gone up, he says. “Only by adding more new supply, via housing starts, can home prices be tamed,” Yun adds. In fact, construction of housing units has averaged around 1.5 million a year for the past five decades, he says, but it’s likely to be less than 1 million in 2014.

Make sure you get this nugget in particular, from above: “Home prices have increased 20% over the past two years while wages have barely gone up.”  So people are forced to do that “uniquely American” thing that George Bush found so heart-warming: get another job.  A second job.  A third job.  They line up outside grocery stores, as I saw this morning:

How about renting, then?

Okay, some will say, don’t buy a house.  Just rent, if that’s all you can afford.  Yeah, that’d be nice, except for this unfortunate fact–“More Americans fork half their salary over to landlords”:

Renting has become significantly less affordable in recent years, a report released Monday by the Harvard Joint Center for Housing Studies finds. In fact, 50% of U.S. renters spent more than 30% of their gross income on rent (the traditional measure of affordability) in 2010, up a record 12 percentage points from the 38% of households facing such a burden a decade prior. And many of those households, about 27% of renters, spent more than half of their salary on rent, up from just 19% of renters a decade ago.

This comes at a time when more Americans are renting: 35% in 2012 versus 31% in 2004. The consequences for those who can’t find affordable housing can be dire, the report noted, leading families on already tight budgets to spend significantly less on health care and retirement savings.

So renting instead of buying isn’t really the greatest solution (beats homelessness, of course), but thanks for suggesting it, Mr. and Mrs. “I’ve Got Mine and Don’t Think Anything’s Wrong and Why Don’t You Just Get a Job and Stop Whining.”

OK, why not just borrow against the “equity” in your house?

Oh yeah, that’s always a swell idea–always works out great.  But here’s the thing: people are taking out HELOCs again.  Why?  Maybe they already have three jobs and have already spent all their savings and have already borrowed from family and friends.  Or maybe they just want to be able to afford to send their kids to college, even if they’re “medical-device scientists”:

Ian Feldberg planned to open a $200,000 Heloc this week with Belmont Savings Bank to help pay his son’s college tuition. The medical-device scientist purchased his home in Sudbury, Mass. for a little over $1 million in 2004, and estimates that its value dipped as low as $800,000 during the financial crisis. However, after applying for the line of credit, he found that its value had completely recovered.

“I’m very pleased about that. My options for tuition fees were either that or to cash in on my pension prematurely,” he said.

 

Indeed, these loans are really starting to take off again:

“The Wall Street Journal reported yesterday that home-equity lines of credit (Helocs) had increased at a 8% rate year-over-year in 1Q14. Some banks are more aggressive than others, and perhaps we shouldn’t be surprised to see TBTF government welfare baby Bank of America leading the charge, with $1.98 billion in Helocs in the first quarter, up 77% versus 1Q13.“

Always remember and never forget…

All this money that the banks supposedly have to “lend” and that we don’t have and supposedly “borrow” from them is created out of thin air.  The banks don’t risk a dime in these transactions.  It’s a complete scam.  That is the proper place any discussion on these issues should start, yet it never starts there.  Trying to change that…