Re: A strategy for affordability
From: Joanie Connors (jvcphdgmail.com)
Date: Mon, 17 May 2010 12:52:17 -0700 (PDT)
You can't buy a travel trailer, or any kind of trailer for $3,000,
unless it is over 20 years old, more like 40.

On Mon, May 17, 2010 at 1:40 PM, Brian Bartholomew <bb [at] stat.ufl.edu> wrote:
>
>> In our economic system their house is perhaps the only potentially
>> productive asset available to many if not most people of modest means.
>
> Productive?  Let's do some figuring.  $150,000 mortgaged at 6.5% for
> 30 years is a monthly payment of $948.  The total mortgage payment is
> $341,280.  Here are some maintenance costs: painting exterior $2,000
> times 3; replumbing $4,000; new roof $6,000; new appliances $10,000;
> real estate taxes $1,500/year; miscellaneous $50/month; total
> maintenance payment is $89,000.  The total payments are now up to
> $430,280.  You bought a new house worth $150,000.  Now it is 30 years
> older, and you would have to sell it for $430,280 just to break even;
> but perhaps you can sell it for half of the original price, $75,000.
>
> Suppose instead they paid $3,000 up front to buy a travel trailer to
> live in, and replaced the trailer every ten years.  Then they paid
> $948 each month for 30 years to buy more of an investment, like a
> bond, that earns 6.5% each year.  After 30 years their investment
> would be worth about 1 million dollars.
>
> This calculation was quick and dirty.  I used financial calculators on
> the web, I'm ignoring details such as the down payment, currency
> inflation, taxes, and that the repairs do not have to be financed for
> the whole 30 years.  You'll also note the complete lack of predatory
> lending practices in this example; a house you live in is not an
> investment or savings vehicle even if the bank is reasonable.
>
> -----
>
>> With regard to Brian's thoughts, when I last looked, the costs of
>> construction in many parts of the country were beyond the means of
>> low income families--particularly if the cost of land and utilities
>> are included.
>
> Not true.  The costs of building construction are small; it is the
> costs of permitting an inexpensive structure which are prohibitive.
>
>                                                        Brian
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