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My Dad worked with the same company for sixty years. His first days were spent making coffee, learning English, and finding any opportunities for him and the company. It wasn’t easy. Back then America was in a recession with unfathomable debt and a dollar that could seemingly buy all the remnants of a battle scarred Europe. Today we have all the elements of the past. Except America is still fighting the wars, the dollar is weak, and the only thing that our country can seemingly buy is more debt… and time. With such lighthearted thoughts in my head this afternoon, I decided to go for a long walk.
And I found hope… really. The first thing I saw were a bunch of old gas guzzlers that were still in great shape. An early 90’s Crown Vic and a late 70’s Malibu. They were neatly kept and in the shade. How long could they last? Well, as long as the owner wants them. The house for them was a beautiful four sided brick that can likely outlast all of us. That too was kept up and had been bought for a song as a recent foreclosure. As I sauntered down the hill I saw so much more of the same. Late 80’s BMW’s. A couple of Accords. A 1st gen Taurus, and a smattering of older SUV’s that were looking like ‘third cars’ due to all the Georgia pollen built up on them. Then it hit me.
Americans are in a great position. A frugal Yank can spend the next 20 years buying virtually no expensive big ticket items and still be perfectly fine. Used car prices are becoming cheaper quicker… because a lot of folks simply can’t economize to save their asses from first base. I would estimate that our country has more consummate spenders than any other country on the planet. But then there are tens of millions of people that save, invest and plan. For us it’s a wonderland of high quality cheapness.
Buying a house in most of the United States is less than 100k. With 20% down and a 5% interest rate that’s about $550 a month. A car? If you’re willing to learn the absolute basics you can more than likely make a $3000 car last at least 5 years and sell it for $1500. I will admit that there are plenty of other areas where inflation is going to start opening people’s eyes. The list as long as the government is involved. But if you’re smart enough to maximize the investments and minimize the divestments (a.k.a. being a tightwad) a recessionary economy can be quite a boon.
50 Comments on “Hammer Time: Wealth Construction...”
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Amen brother. I had to dump a “consummate spender” first wife. She was pushing me into the poor house. Now if I can get rid of this house she had to have with it’s $1200 a month mortgage that I couldn’t get her to take in the divorce. Life is gonna be a lot better.
Smart girl. Wanted all the toys as long as someone else was paying! She’ll be leaching off some other sucker in no time.
” . . . I decided to go for a long walk.” This was a random walk, right?
“Buying a house in most of the United States is less than 100k.” Uh, possibly if “most” means geographic area. I doubt this works for “most” houses. I’m pretty sure it doesn’t work for houses within 20 miles of a coast.
“Americans are in a great position.” True. Until I got to this line, I was expecting a segue into some sort of Howard Kunstler riff about the end of the era of happy motoring.
Walk took place near my wife’s church. She teaches Sunday school and I had been given a pedometer by the Girl Scouts of America as a gift.
Thought I would try it out. Ended up writing a ditty.
I can’t remember the last time I saw a house for $100k (not a condo, not a townhouse — a house). Where do I find these? Or are you just talking about foreclosures that need multiple 10k’s of money put into them?
– Btw, I live 35 miles outside of Chicago and houses are $150’ish to $350’ish — nowhere near $100k.
My $100k 3/2 HOUSE in DFW area was purchased as a foreclosure and needed absolutely nothing.
You can find $100k options in the south suburbs or just across the line in Indiana.
In Greater Toronto Area you won’t find even a condo for $100K, they go for close to double of that. And our multicolored dollar is at par with your greenback.
A guy at work lives in the south/west suburbs. To go 60% farther than me to work his computer is typically 2.5-3x mine.
No thanks!
“Buying a house in most of the United States is less than 100k…”
Cite please. I live in Mass. You can’t buy a doghouse for under 100K. A parking space in downtown Boston recently sold for $300K.
The median home price in my state, Massachusetts, is $300k, and I live in one of the more expensive towns in the state, and I could buy a Civic every two years with money left over for the sheckles I spend on property taxes. But the quality of life here is vastly superior, IMO, to all those places where you can get a house for less than $100k, and my friends are mostly here. But in the 20 years I’ve owned cars, my capital costs have been an estimated $21k. I don’t think either of my siblings has spent less than that on any single car they’ve bought in the last 10, maybe 15 years.
I’m with you, Steven. I have spent the last 20 years driving cars bought for $3k or less. The last year was particularly cheap. Last March, I bought a 96 Honda Odyssey (or Oddity). 207K and paid $2200. It was a really nice car, as I insist on the top 5% on the quality bell curve. In 12 mo, I had a total of $3600 in the car (timing belt/water pump/etc) and a couple of other odds and ends. This past February, a nice elderly lady made a left turn in front of me and my Honda was no more. It lived to see 218K. After some wrangling with the insurance company, it cost me about $200 to own my car and drive last year (not including insurance and gas, which we have to buy no matter what).
I tried to find another Gen1 Oddity, but they are getting scarce and I couldn’t find one that met my standards. Then I stumbled upon a 99 Chrysler Town & Country. Super clean from a private owner. I saw how the car lived and how the man took care of everything he owned. 187K on the original 3.3 engine and tranny. The car drove absolutely right and I bought it for $1800. I had my mechanic fix some things, and bit the bullet on 4 wheels of brakes and new Michelin tires, and I have a nice, nice van that is virtually perfect for about $4500. And no car payment. I could have saved more by putting off some maintenance, or by doing some of the work myself, but I am short on spare time right now and insist on a car good enought to drive 300 miles tomorrow if I need to.
I will admit that I am a bit over budget on this one, but I don’t think I will have trouble staying within my historic range of maybe $1500-2000/yr cost range. If my new 16 yr old driver polishes off the 93 Crown Vic, (about $5K in it over 4.5 years), they they will get a minivan. This alone may be a good safe-driving incentive.
So thanks Steven for periodically reminding me that there is someone else out there who appreciates a frugal drive.
Houses are under $100k for one simple reason – nobody wants to live there. Be it no employment in the area or what have you. A nice 2000 sf suburban Atlanta house sure as hell ain’t going for $100k. Was just working with a client last night who was amazed that his simple house addition came in with quotes of $135k. Materials and labor are not cheap. While housing got carried away in places like CA, NV, AZ and FL, most of the country I’d argue had prices that were in-line with reality. Median wages is what hasn’t kept up.
Welcome to Detroit, where average house prices are a lot less than $100,000.And I mean average, not rare exceptions. For $150,000, you can have a beautiful mansion from the teens or 20s, although with high upkeep costs.
Just don’t expect any city services. And, if you want to sleep soundly at night, you’ll chip in for the private police force that most neighborhoods hire.
Ann Arbor, however, is another story. So little crime that it has become embarrasing for the cops, but houses start at $500,000.
Bob
“Just don’t expect any city services. And, if you want to sleep soundly at night, you’ll chip in for the private police force that most neighborhoods hire.”
This sounds just like part of the plot to Robocop.
Sounds to me like the dream of the Libertarian party.
If you take a 2nd world approach to life, you can live on very little.
Cut your own hair, wear nearly indestructible nylon clothing, make your own music with a ukulele and dine on beans, rice and tap water for dinner.
St. Louis is a nice place to live and you can get in a not so bad neighborhood for 100 grand.
Granted, the big job creators are leaving (AB, Chrysler, GM), but it’s cool if you have a job.
I think Stephen is talking about overall geography. Strip out the coasts and greater Chicago area and you can find LOTS of housing for that amount.
Case in point – there are many suburban neighborhoods around Cleveland that are very nice areas where you can find brick bungalows in the $65 – $100 range, and a 2000 sq. foot colonial will start at around $95k.
Go a bit further out into areas like Medina, Wooster, Geauga county area where there is a lot of farmland (and still about 45 – 60 minutes from the ‘big city’) and you can pick up dirt cheap homes ($45k bungalows) or dirt cheap large colonials and victorians (2500 sq. ft. for $130k).
Those out of the way places are an ideal option for someone who can telecommute like a writer, tech support, etc.
Yep, FleetofWheel, and that’s actually what I think the demographics are showing. I know lots of people in those areas who have retired there because the taxes are lower, there’s lots of land, it’s generally safe and clean.
One of the nice things about these outerlying areas in Ohio is that there are lots of private colleges around and these smallish towns tend to crop up around them helping to keep the area stimulated
Undergrad years, Defiance College, Defiance, OH, on the Defiance River, in Defiance County. City of 20,000 with a private college and GM foundry as the primary employment.
Shoot, you’d be hardpressed to find a house in Idaho for under $100k, a house with a foundation and not bank owned for years.
I’ll admit I’m a consumer (but never spend more than I can afford) but I try to find second hand on most things first, if it’s cared for then it’ll continue to last. And usually, you can get something higher quality for the same price as a new item from Walmart or the like.
Interesting article Steve, and I agree with you. However as a late twenty-something who is about to graduate to my thirties in a couple of years, my later teenage years and early twenties were a time when I was indoctrinated into the ‘spend now, pay later’ crowd. I’m finally getting back onto an even keel financially, but I’m very sure that there are millions of people my age who aren’t in that position, and many will end up spending large chunks of their future income on paying back debt, whilst others will continue to dig themselves deeper into the debt hole.
The house 3 doors down from me sold in March for $100K exactly. Yes, it was a foreclosure. The new owner had to put $20K into it: about $10K for a new roof which is pretty standard for a 20 year old house in Florida, and the rest for hardwood floors, paint, and replace some old appliances. He pretty much was just making up for several years of ignored maintenance. 3 bedrooms, 2 baths, and a screened pool. In a golf course community, 15 minutes to a large city. Some very nice folks are renting it now.
I’ll bet with a little clicking, one could find similar situations in just about every suburb in the US.
Great article.
I live 25 minutes outside of NY city in Rockland county and you can’t get a dog house for $100,000. My 850 sq. foot condo was $ 285. However, when listening to the Dave Ramsey show many of his callers from the middle of the country live in houses less than $100,000, so it is possible.
Anyway, I was in credit card debt for 3 years. I worked 3 jobs for a while and now work 2, but I’ve paid off the cards, live on a budget, and put $700 into savings every month (even with that leased Miata, and I’m not doing that again). It’s not easy, it’s not fun, but I’m also not deprived. When I want something I save up for it and that feels some much better than the old put it on the CC card and pay for it eventually. I even had my last credit card statement laminated!
Lot’s of people my age, 28, want everything now, everything new, and everything designer. I’m through with that. I want my house paid off by 40, and I have a no compromise rule on debts.
I watch Dave Ramsey on FoxBusiness all the time. I am out of CC debt, and am pre-paying my mortgage. I can’t get onboard with the drive a beater / no lease idea. Leased a 2011 Sonata for cheap. Hyundai pegs the residual at 60% for the 36 month lease even though the Automotive Lease Guide pegs it at 54%. Better to let Hyundai absorb the 6%++ loss.
The way I see it is this, you’ve got to consider a lot of different advice and work with what feels right to you. As long as you get to your destination does it matter how you got there?
Good luck with paying your house down. That’s awesome.
If you are good with money, the world is your oyster right now. Even if you don’t make a lot, you can pay your bills and put money in the bank. I can’t quite bring myself to go the beater route. I know new cars are a huge waste of money, but I economize in other ways to make up for it.
I bought a 3 bedroom 1.5 bath two story with garage on a 8000 foot corner lot in the best area of town for $91k. Yes, a forclosure, and needed about $5 in immediate work. The catch, 100 miles east of Los Angeles at 6000ft elevation. As far as cars, its been hit or miss for me buying used ones. Even though I do 90% of my own work, and always have, certain types of failues will kill the economy of buying cheap used vehicles. The $4000 F-150 was a disaster, since electronic automatic transmissions are not a typical backyard mechanic item. I went back to paying cash for new and intend keeping it for just under 100,000 miles and still getting roughly 33% back.
Regarding the prices of houses, personally I’ve never lived in a house that cost anywhere near $100k, the most expensive one was in the neighborhood of $68k.
We’re looking at moving right now with the upper end of our budget at right around $100k; as they say the world is our burrito. There is no shortage of nice houses in our price range within a good commuting distance.
Of course we don’t need a new house, don’t want to live in a “subdivision” and intend to purchase a reasonable sized home instead of the bloated castle-like structures that have become so fashionable.
The homes are out there, just because they’re not somewhere you would choose to live does not mean that the options aren’t available.
Homes… if you get out of the ‘popular’ high density areas of the country, most of the houses are available for around $100k or less. My neck of the woods happens to be a half hour away from Atlanta and it has low taxes (about $100 a month) and an extremely low crime rate. It’s one of tens of thousands in the U.S.
Cars… as much as I am an enthusiast, I see commuting as the domain of a comfortable appliance. Your interior is nice… radio clear… seat comfortable… MPG reasonable… DONE! Only the fooled buy into the whole mystique of a high cost car while wading through stop and go traffic. The same is true for a house. Mine happens to be the Toyota Corolla of houses. Don’t need any more than what I have… and don’t really want it.
Frugality… a lot can be learned from books such as ‘How To Survive Without A Salary’ and ‘The Tightwad Gazette’. Even more can be learned by simply living your life without having money as a central concern.
But if you want money to be a central part of your life… then at least have fun with it. Figure out the systems in play and learn how to beat them.
Steven,
I understand what you are saying and applaud not only your willingness to “walk the talk,” but also to share your experiences with us.
Having said that, I don’t believe that for many of us spending less than $100,000 on a single-family house is realistic.
I’ve noticed that housing prices in the South and Midwest tend to be much less than in the Northeast, California or coastal Northwest. That’s great for people who live in those low-cost areas, but many of us cannot move. I like the South and California, but the bottom line is that we are not moving that far away from our families, especially since we just had our first child, and that support network is turning out to be critical.
Here in Pennsylvania, there are nice single-faimly homes available for reasonable prices (usually about $120,000) in many parts of the state. Only problem is that these areas tend to be either depressed, or very rural, or both.
You aren’t going to move to those areas, search the want ads in the paper, and easily land a good-paying job with benefits. Jobs with decent pay tend to be with state and local governments, or nearby medical facilities. The first two usually require an “inside” contact who will vouch for you, while the third one wants people with very specialized skills and degrees. The few private employers left tend to be small, family-owned businesses, and the only people making decent money in those places are the owners.
In the more prosperous areas of the state, expect to spend a minimum of $175,000 for a decent house (by decent, I mean three bedrooms, a living room, kitchen, one full bathroom, a half bathroom and a small lot). You also have to consider the school district and proximity to work. Some houses in the cities are very cheap because the local school district is so awful that most families with children will not even consider living there. Unless one plans to home school the children, or paying private school tuition (which isn’t cheap), living in those areas simply isn’t an option.
Proxomity to work is also important. I love to drive, but not one hour each way to work. For many of us, telecommuting is simply not an option (even though we wish that it were).
As for buying cars – I, too, wince when I hear of people buying brand-new cars every 2-3 years (and then listen to them wail about car payments).
But, some of us like buying and driving brand-new cars, and I don’t see any problem as long as it’s done in moderation. My 2003 Accord EX was bought seven years ago brand new, and now has 130,000 miles on it. It is still going strong, and looks like new. In another 2-3 years years, I’ll probably buy another brand-new car. But I figure that one new car every 8-9 years is hardly extravagant. At some point, you work to enjoy life a little, and a new car is one of those things that I enjoy.
Coming from the suburbs of NYC I wouldn’t have imagined that 100,000 could get you anything but a shack. However after moving to rural NY and finally rural PA, $100,000 can buy you a very nice house. I would say that a $100,000 home in rural PA is about equal to a $350,000 house in the suburbs of a major city… and you get a lot more land to go along with it.
Even better than home sales though were the price of stocks if you were lucky to have a couple thousand dollars of disposable income right after the down turn.
According to Texas A&M, the median home price in Texas was $146,900 in 2008 with higher prices in urban areas and lower prices in rural areas.
http://recenter.tamu.edu/mreports/
It would be fairly easy to find distressed property or homes in less desirable neighborhoods in Texas priced below $100,000, but one would have to shop around to get a good deal. In most of Texas a $200,000 budget would buy a nice house in a good neighborhood with good schools and employment nearby.
As gasoline becomes more expensive, the economics of driving some of those guzzlers is going to change considerably. Older cars that can still manage 30 MPG will do fine, but SUVs, pickups, land yachts and other low-MPG vehicles are going to face a market with few buyers.
As for $100k houses, that really depends on where you live. Around here, $100k is a down payment. I suppose I could live 40 miles to the east in the central valley, but that’s an extra 10 hours of commute time per week.
High crime rate. Lousy schools. Unpleasant climate. Poor job economy. Looooong commute. Severe maintenance issues. Show me a single family home for less than $100,000 and it likely comes with at least one of these features.
Some inlaws live in a small town in a bankrupt state. Pleasant enough town, near a university, so there are .edu and .gov jobs. For the time being. There are SFH around $100K, but they are marginal. A decent home for a family starts closer to $200K.
On the other hand, the good news is the purchase price of cars is pretty much the same everywhere in the US. The A5, Land Cruiser, X6, GTR, etc. cost the same in coastal regions as they would in other parts of the country. And, in general incomes are higher on the coasts, so if you can get a handle on housing costs (and time has a way of fixing that problem if you have a 30 year fixed rate mortgage) you can more easily be in a position to afford a much nicer ride.
SD, the same is also true for million dollar homes.
In fact, in most of the South you can have million dollar homes right next to 100k and under homes. There are several $1 million+ mansions right down the street from me. The houses in my neighborhood sell for $80k to $120k.
You go to Tennessee, Oklahoma, Kentucky, Texas, Nebraska, Utah, and all states in between… and you’ll pretty much find the same thing.
As for incomes being the same… I remember listening to Clark Howard one day and hearing that the average salary in Austin was virtually the same as San Diego. I’ve spent a lot of time in both places… and always thought that Austin was more affluent.
Now I know why! ;)
Sorry, but any area where $100K houses are the norm are places where there is little job opportunity, high crime and nonexistent municipal services. In other words, places full of meth labs, indoor grow ops, and organized pitbull/cock fighting. The link below is a list of real estate sales in Bergen County, NJ last week — a suburb of New York City. The only sub $300K houses on the list are in the shitty part of the county (Garfield) or are otherwise “tear downs” — houses sold for the lot only. http://buyinginbergen.com/sales.php
I grew up in Bergen County, NJ. If you transported my house to where I used to live, it would be worth at least six times as much.
Cold weather, sky high taxes, gridlock traffic… I would rather live in Brooklyn.
@ Steve Lang. Let me guess? Ridgewood? I’ve got relatives in Ridgewood, they live on California St. Their property taxes are $28K per year. BTW, I live in Paramus, the crappy part, over by the Garden State Plaza Mall.
Even worse… Englewood Cliffs…
In Hillsborough county Fl (Tampa) the median home is around 120,000 and still going down, according to our hometown paper. Smartest thing I ever did was buy a house for 42,000 in 1996. Dumbest thing I ever did was turn down an offer for 300,000 in 2005. Its now worth around 120,000 and still going down.
In Greater Toronto Area you won’t find even a condo for $100K, they go for close to double of that. And our multicolored dollar is at par with your greenback.
Define “Greater Toronto”.
You won’t see houses under $100K until you get outside of reasonable commuting distances, which means well north of Barrie, west of Guelph, east of Peterborough. That’s a huge area.
Where I live (hint, there’s a song whose title is the town I live in) it’s a nearly-three-hour one-way commute to Toronto and I know three people who do it daily. Houses here, save for some really wretched affairs, are north of $100K. I’d probably have to drive well into North Ontario before I found a decent place for $100K (where “decent” means “has insulation in the walls”, which is kind of critical up there) and by that point I’d have to live off the grid as there’s hardly any employment.
In Toronto, the only way you’ll find under $100K is a rotten hippie tear-down on the Islands (and even then…), or a boat moored in-harbour. Trust me, I tried.
I don’t think you get get sub-$100K in Newfoundland or the Yukon these days.
Too true. One of the places you cited, Barrie, is approximately one hour from Toronto (or, if you will, an hour and a half from doorstep to downtown), and isn’t exactly the toniest of suburbs. The demographic make-up (based on my twenty-two years of experience living there) consists of a roughly equal mixture of commuter families with varying degrees of affluence, old biffers in well-kept homes, drunken college kids and assorted other noisy punks, and racist Joe-Bobs who haven’t yet been pushed to the outskirts of neighbouring hick towns like Angus, though not for lack of trying. In short, then, it seems pleasant enough on the surface (being on a large and quite pretty body of water will do that), but it’s not exactly what I would term the most desirable option available. Caledon, it isn’t.
The average price of a home sold in this area through the MLS website in recent months was $274,000. Number of detached homes currently available for less than $200,000? Seven. Number available in a non-industrial area that you might actually want to live in? Zero. Number available that are not sub-1200 square foot bungalows in various states of disrepair? Zero. And, as noted, this is an hour’s drive each way from Toronto, in a city of 150,000 whose manufacturing base has been vanishing steadily since the mid 1990s. Sub $100,000 homes? Christ, Americans don’t know how good they have it, in some respects. I recently saw a lovely old Century farmhouse for sale in Vermont, on 100 acres of rolling meadow with two ponds, for about $375,000. A similar property sold east of the Barrie area last year at a listed price of $1.4 Million. And trust me, the surrounding area really wasn’t *that* nice…
Oh yeah, one more thing: number of sub $100,000 homes in Barrie area? Four. They’re all mobile homes in trailer parks. And if you think that’s sobering, try halving the distance to Toronto. Get within a half hour’s drive, then see if you can find a four bedroom house for less than $500,000. Shameful stuff, right there.
Skor, you need to get out more. Here in flyover country one can choose from lots of comfortable $100K houses in peaceful communities. Just don’t demand a mini-mansion. Yes, we’re hicks compared to our betters on the coasts. But it’s not all “meth labs, indoor grow ops, and organized pitbull/cock fighting” between New Jersey and Beverly Hills.
$100K will buy you nothing in Bergen County, not even a garage. $350K will get you a crappy, old, little house — just like the one I live in. A “mini-mansion” will set you back at least a million — depending on the town. I’d consider moving to somewhere in Flyover-ville, if I was old enough to retire, which I’m not, and won’t be for a long time. What kind of work would I be able to find? Meth cooker? Hydroponics specialist? I know, I could start the museum of barnyard oddities.
We just closed on a house two days ago in the MD suburbs of DC. The certified check we handed over was for just over 100k– this 100k covered the 20% down payment and all of the associated closing costs, title insurance, lenders fees etc. The home is pretty close to everything we wanted in a house including the neighborhood and scools for our two kids. Yes we just spent a crapload of money and will be continuing to spend a lot of money every month “owning” this house — but then again I drive a 2003 saturn Ion 3 with almost 100k miles on it and it is paid for. Our 2007 Odyssey will be paid off in two years. I don’t mind paying the huge amounts in interest to live in the house we wanted. But I will drive my little Ion as long as she runs to avoid having a car payment, and after that, I’ll probably go the Steven Lang route and buy used cash for a similar mediocre ride( all the while watching my collegues drive around in a 3 series or RX or whatever money pit)
We just closed on a short sale 1300sf 3/2 condo in Takoma Park, MD for under $200K. We own 2 other apartments (3/1 and 2/1) in DC proper that are paid for. Also, both our cars are paid for. We’ll be using the rent from the DC apts. to help pay off our new place in 10 – 15 years, depending on how much fun we decide to have in the process. Then it’s on to a SFH with ample passive income to mitigate the financial worries that come with owning your dream-house. Is that smart/wise enough for you, Mr. Lang? ;)
No, sorry. Your plan is truly pathetic. Please turn in your Yuppie Union Card immediately.