Here we go again! The Arizona Republic, admittedly a joke of a paper that often gets the facts wrong, reports that young parents are snapping up “bargain” houses in the bedroom communities on the east side of hard-hit Phoenix. These smokin’ real estate deals cost upwards of two hundred grand and are at least a half-hour’s drive away from the center of employment in this area…to the extent that any employment is left.
We have here the young couple who bought a $270,000 Meritage home, thrilled at the give-away price. In passing, I would note that I know a painter who used to work for a company that went around to developments and repaired and rebuilt the flimsy construction, which often left details like keeping out the rain for someone else to fix. He said Meritage was one of their richest sources of business.
So let’s think about this bargain.
At 4 percent with a 20 percent down payment, the happy young buyers will pay about $1,350 a month—that’s with a very conservative estimate of the cost of homeowner’s insurance. Their down payment will be $54,000. Every young couple has that laying around the apartment, right?
Then, incredibly enough, we have the tale of the freshly divorced mother of two, unemployed and a brand-new import from California, who picks up another bargain at $200,000. No job—she thinks she’s going to find work at a shopping center about ten miles from her new home.
Maybe she doesn’t realize that in a right-to-work-for-nothing state, any job she may find as a shop girl won’t net enough to cover the $1,250 PITI payments. Assuming a 25% tax rate—oh, let’s give her the benefit of the mortgage deduction and make it, say, about 15%—she would have to gross $34,500, just to pay the mortgage. That’s before she eats and before she feeds and clothes the kiddies. Sales clerks earn about minimum wage, $7.25 an hour. Assuming she works 52 weeks a year or she lucks into a job where she’s given a few paid days off now and again, that comes to $15,080 a year. If she lands a job as a waitress, in Arizona employers are allowed to pay her as little as $3.00 an hour; the feds assume she earns enough on tips to make up the difference between that and minimum wage and so tax her on $7.25 an hour, whether she really collects that much or not.
Has no one told this lady that there are no jobs in Arizona? Let’s hope ex-hubby is cheerfully sending her a hefty alimony check each month. Doesn’t seem likely, IMHO; if the court allowed her to bring her kids to Arizona, it means she got sole custody, which doesn’t sound like Dad is going to be in the mood to pay through the schnozzola to support her and the expensive offspring.
Maybe it’s not that Arizona’s school system is so bad it can’t teach the most basic common sense; maybe the issue is that we have a population of lunkheads. Six thousand buyers, some of them unemployed, grabbing $270,000 bargains? These folks—and their lenders—don’t learn even after they’ve been hit upside the head with a two-by-four!
Yeah, I’m not thinking that houses in the $200K+ range are bargains, but someone from California very likely might think they are — like you said, without realizing how little pay is here.
I htink what is scary are these people are STILL getting mortgages!
@ Evan: Incredibly, I just read an article saying some economists believe the economy here — and its long-term prospects for recovery — are significantly worse than California’s. Is there a question why?