Personally, I suspect that the main reason that poor people are less likely to pay back their mortgages than rich people is because poor people tend to have less money than rich people, but, then, I'm not the Dean of Social Sciences at NYU like Dalton Conley, so what do I know?
Wednesday, August 05, 2009
QOTD
Steve Sailer, responding to a tortured academic argument that explains why 1960's beliefs about the poor should be revisited, so that we might help them buy houses now.
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3 comments:
Well, it depends more on the ratio of earnings to monthly payments...and job stability, long-term cash flow, ability to absorb unexpected financial needs, etc.
But all that is a more finely-tuned way of saying have less money.
So I agree.
But in this calculation, isn't it better to leave each individual to measure the risk and rewards themselves? Why mess it up with pressure on the banks, complex calculations of tax rebates on home interest, and laws which delay foreclosures on properties for which the current owner cannot make the payments?
Brings us back to the "Dignity of Risk" quote, but with the added caveat that some people are't good at measuring long-term risk.
But such people are easier to find among the poor than the wealthy, and if banks are given the dignity of risk, then they can use it to decide who is a valid lending risk and who is not.
Earnings to monthly payment... what seems to have happened is that this equation was ignored.
As a "poor" person paying $500 monthly rent, why should that person not qualify to buy a house with a monthly payment of $450? (The difference being insurance and taxes, etc.)
What happened, (IMHO) was that people paying $500/mo rent were approved for houses with $600/mo mortgage payments with the assumption that $100/month wasn't that much to overcome. Well, it was.
I have a child who (with her husband) decided to buy a house with a mortgage payment $100 less than their rent payment for a much inferior house. Their decision seems sound to me.
They have, however, incurred expenses they would never have incurred in a rental. They've decided to do landscaping. They've decided to upgrade appliances. Of course, these things add to their costs, but they are not expenses they would have incurred with a rental property because it would not have benefited them directly.
So are they stupid? ... um, NO. not at all.
Welcome back.
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