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house poor “房奴”
Describes a person who directs a large portion of his or her income to home ownership.
Someone who is house poor usually has very little discretionary income.
house-poor=A description of the state of having very little disposable income after paying the financing and carrying costs of one's home.
House Poor': The Pitfalls of Home Ownership
The condition of having very little cash because nearly all of one's net worth is tied up in one's house.
William Baldwin, 03.28.05
Did you hear about the proposed plan to deal with the shortage of retirement savings in this country? The plan is to penalize workers and reward spendthrifts. Do you think it will work?
The new part of the plan, espoused by Senator Lindsey Graham (R-S.C.) and not very fervently opposed by the fellow in the White House, is to jack up Social Security taxes, currently capped at $11,160 on the first $90,000 of your salary. By raising the earnings ceiling to $200,000, the federal government could haul in more cash.
The second part of what I am talking about, a federal policy to reward big spenders, is of long standing. It consists of the home mortgage deduction. Supposedly you can't deduct interest on debt incurred to engage in nonresidential spending, but it's easy to get around this rule. When you move, just take out a bigger mortgage than you need. The result is known to economists as "home equity extraction," and it is made wonderfully easy by the house price bubble we have all enjoyed over the past decade.
Equity extraction, which runs to half a trillion dollars or so a year, explains where people are getting the money to buy BMWs. It also explains the trade deficit. The deficit represents not just goods floating across the ocean but capital we must import from Asia and Europe because we are tapped out. As Robert Lenzner explains on page 56, the phenomenon has not escaped the attention of Alan Greenspan.
You thought the mortgage deduction was an incentive for home ownership. It isn't really. Remember, you get a huge tax benefit from owning a home even if you don't have a mortgage. Its rental value to you--its dividend, so to speak--is tax free. So are the capital gains (up to $500,000 every two years). Note that the interest deduction is keyed not to how big your living room is but to how much money you borrow and how slowly you pay it back. In the old days people saved by paying off the mortgage and having a lot of equity at retirement. The mortgage deduction is an incentive not to do that. It's a reward not for home ownership but for indebtedness. This spendthrift incentive is running $73 billion a year.
Senator Graham says he wants to raise taxes only so that he can finance your personal retirement account. An unlikely outcome. The government is the biggest spendthrift of all, and it is going to spend your cash.
If too much of your income goes to paying for and maintaining your house so that you do not have money left over for other expenses, we call that "house poor". Therefore, most people buy a monthly payment. Which means you take the amount you feel comfortable spending per month on housing (such as what you spend on rent) and convert that number into a mortgage amount. Then add that to your down payment and this is the amount you are willing to pay for a house. Below is a worksheet that you can print out and use to help you figure out how much of a monthly payment you can afford.
The House Poor
by Bill Bonner
by Bill Bonner
Oscar Wilde once commented on a man who knew "the price of everything and the value of nothing."
Most Americans would be surprised to realize that there is a difference. And yet, with the advance