Defining "House Poor"

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RRAAYY3
Posts: 926
Joined: Thu Jan 17, 2013 12:32 pm

Re: Defining "House Poor"

Post by RRAAYY3 » Wed Feb 28, 2018 3:39 pm

Cliff notes :

Ridiculous home pricing growing drastically out of proportion with wages has rendered buying a home a stupid financial decision unless one is wealthy

samta09
Posts: 73
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Re: Defining "House Poor"

Post by samta09 » Wed Feb 28, 2018 4:05 pm

thangngo wrote:
Sun Feb 25, 2018 2:27 pm
Simple Simon wrote:
Sun Feb 25, 2018 2:43 am
Can a renter be house poor?
If you rent more than you need, yeah for sure.

It's just a very simple principle: do not buy/rent more house than you need. With this principle, you can run the numbers and assess your personal situation so that buying/renting too much house will not have a detrimental effect on your wealth accumulation.

Why do we tend to forget the golden rule: live below your means, do not buy things you don't need.
Life is more than just needs. It’s more about moderation, no?

Simple Simon
Posts: 92
Joined: Sat Apr 26, 2014 4:37 am

Re: Defining "House Poor"

Post by Simple Simon » Wed Feb 28, 2018 4:19 pm

KlangFool wrote:
Wed Feb 28, 2018 3:33 pm
1) So, you are agreeing with my formula? Aka, whether a person is "House Poor" is dependent on both their income and their net worth excluding the house?
Pretty sure he is not agreeing with your formula!

From my own perspective, it hinges on net worth and availability of cash. It does not depend on income. Income is just what someone brought home last year, it tells them nothing concrete about the future.

I guess it's subjective and personal. You might feel poor in a $250K house while sitting on $500k of cash, stocks and bonds. Someone else might feel wealthy in the same house, with a fraction of those financials.

KlangFool
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Re: Defining "House Poor"

Post by KlangFool » Wed Feb 28, 2018 4:28 pm

Simple Simon wrote:
Wed Feb 28, 2018 4:19 pm
KlangFool wrote:
Wed Feb 28, 2018 3:33 pm
1) So, you are agreeing with my formula? Aka, whether a person is "House Poor" is dependent on both their income and their net worth excluding the house?
Pretty sure he is not agreeing with your formula!

From my own perspective, it hinges on net worth and availability of cash. It does not depend on income. Income is just what someone brought home last year, it tells them nothing concrete about the future.

I guess it's subjective and personal. You might feel poor in a $250K house while sitting on $500k of cash, stocks and bonds. Someone else might feel wealthy in the same house, with a fraction of those financials.
Simple Simon,

<<From my own perspective, it hinges on net worth and availability of cash.>>

So, what is the ratio that you goes by?

1) House price versus the net worth excluding the house

2) Cash versus the remaining mortgage or years of annual expense

KlangFool

Simple Simon
Posts: 92
Joined: Sat Apr 26, 2014 4:37 am

Re: Defining "House Poor"

Post by Simple Simon » Wed Feb 28, 2018 5:08 pm

KlangFool wrote:
Wed Feb 28, 2018 4:28 pm

<<From my own perspective, it hinges on net worth and availability of cash.>>

So, what is the ratio that you goes by?

1) House price versus the net worth excluding the house

2) Cash versus the remaining mortgage or years of annual expense

KlangFool
1) Including the current value of house in net worth. My figures for (value of house: net worth) could be up to 500% at start of career, up to 50% mid career, up to 30% at retirement or financial independence.
2) Cash > $50K at all times.

These are not "rules" or anything like that. But since you have asked directly, it is my best guess that if either one of these conditions was not met, I think I'd probably feel house-poor again.

thangngo
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Re: Defining "House Poor"

Post by thangngo » Wed Feb 28, 2018 6:39 pm

samta09 wrote:
Wed Feb 28, 2018 4:05 pm
thangngo wrote:
Sun Feb 25, 2018 2:27 pm
Simple Simon wrote:
Sun Feb 25, 2018 2:43 am
Can a renter be house poor?
If you rent more than you need, yeah for sure.

It's just a very simple principle: do not buy/rent more house than you need. With this principle, you can run the numbers and assess your personal situation so that buying/renting too much house will not have a detrimental effect on your wealth accumulation.

Why do we tend to forget the golden rule: live below your means, do not buy things you don't need.
Life is more than just needs. It’s more about moderation, no?
YMMV.

Life is not about material things. Life is built around the 3 pillars: Health, Happiness, and Knowledge. None of those are tangible. But without money and means, you'll find yourself struggle to survive.

Big house don't bring me happiness. Having knowledge and ability to understand housing needs for my family and make a sound financial decision is priceless.

EddyB
Posts: 440
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Re: Defining "House Poor"

Post by EddyB » Wed Feb 28, 2018 7:23 pm

KlangFool wrote:
Tue Feb 27, 2018 4:00 pm
SilverDollars wrote:
Tue Feb 27, 2018 11:24 am
Ive always used the term house poor to be that you get into a home, and dont have enough savings to maintain it as desired (replacing worn out furniture, peeling paint, rotting deck). Either that, or you can afford to maintain your house, but nothing else. No vacations, can't eat out, can't afford your kids college, etc. I would consider that the slang version of house poor.

Having said that, for many years after moving into our house, we were house poor. We bought in 2006 at the bubble peak, had a 80/10 double mortgage (10% down), and got hit with a 25K sewer assessment charge after we move in that we were not aware of. After that, furnishing the home (we now had more rooms from our prior home), we had just a little bit of emergency savings. We had originally planned to renovate the main bathroom after moving in, but the shock sewer assessment knocked that hope away, so we felt we were house poor for a number of years.
SilverDollars,

<<can't afford your kids college, >>

Do you consider folks that have to take a student loan for their kid's college as "House Poor"? If yes, most folks in my neighborhood of annual median household income of 150K is "House Poor".

KlangFool
Does anyone "have to" take a student loan? People may decide they should, or that it's the best way to do something they want to do, but "have to" is a bad construct to apply to a voluntary payment.
Last edited by EddyB on Wed Feb 28, 2018 7:55 pm, edited 1 time in total.

Dottie57
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Re: Defining "House Poor"

Post by Dottie57 » Wed Feb 28, 2018 7:33 pm

KlangFool wrote:
Wed Feb 28, 2018 9:23 am
Jags4186 wrote:
Wed Feb 28, 2018 6:42 am
KlangFool,

My point is that your assumptions/rules are based upon such a tiny subset of people that maybe it isn’t appropriate for everyone. Your rules are based on facts when you want them to be and casual observation when the facts don’t work in your favor.

I’m all for buying a conservative house, but to pound doubt into people in completely different situations than you are is not helpful.

A median family in this country earns around $60k a year and does not have the luxury of paying full freight to many colleges for multiple children regardless of how inexpensive of a house or car or whatever you deem to be a too expensive luxury is. To say that someone is house poor because they can’t pay for their kids college is just a ridiculous statement.
Jags4186,

1) Okay. But, if a median family with household income of 60K buy a 240K house, it will affect their ability to finance their children college education. Do you claim that it is not true?

2) My point is even in one of the highest income neighborhood, average folks buy too much house up to the level that they need college loan for their kid's college education. This includes the cheapest college option: community college.

KlangFool
My mom and dad always said their smartest financial decision was to stay in their moderate '57 ranch house. They were able to finance a business, retirement and college education for us kids. I haven't moved from my starter condo and have financed my retirement. There is a lot to be said for having a moderate or small home.

Jags4186
Posts: 1848
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Re: Defining "House Poor"

Post by Jags4186 » Wed Feb 28, 2018 7:45 pm

KlangFool wrote:
Wed Feb 28, 2018 3:33 pm
Jags4186,

1) So, you are agreeing with my formula? Aka, whether a person is "House Poor" is dependent on both their income and their net worth excluding the house?

2) Average folks in my neighborhood. That is what I referred to in my sentence.

KlangFool
1) Your "formula" can be appropriate for some and not be appropriate for others. Regardless of whether or not I agree with your formula, your comment that a family is house poor if they cannot afford to pay college tuition is absurd. Using your formula shows that a real average family couldn't hope to pay for tuition for multiple children at a majority of colleges in this country. I don't believe it is helpful to browbeat people into thinking they have made a bad housing choice if they cannot afford the tuition cost for their children. Real average families, not your top 1% "average families" in your apparently extremely high income city, can follow whatever rules you want to make up and still may not be able to afford the high tuition costs at many schools. It doesn't mean they are house poor.

2) I know what you referenced, I'm making a point that you keep saying average and talking about your neighborhood. Your neighborhood is atypical and hence may not be a good reference point for the majority of people.

KlangFool
Posts: 8404
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Re: Defining "House Poor"

Post by KlangFool » Wed Feb 28, 2018 7:53 pm

Jags4186 wrote:
Wed Feb 28, 2018 7:45 pm

2) I know what you referenced, I'm making a point that you keep saying average and talking about your neighborhood. Your neighborhood is atypical and hence may not be a good reference point for the majority of people.
Jags4186,

Then, tell me what is median household income and median house price in your neighborhood?

KlangFool

samta09
Posts: 73
Joined: Mon Dec 28, 2009 6:45 pm

Re: Defining "House Poor"

Post by samta09 » Wed Feb 28, 2018 10:10 pm

thangngo wrote:
Wed Feb 28, 2018 6:39 pm
samta09 wrote:
Wed Feb 28, 2018 4:05 pm
thangngo wrote:
Sun Feb 25, 2018 2:27 pm
Simple Simon wrote:
Sun Feb 25, 2018 2:43 am
Can a renter be house poor?
If you rent more than you need, yeah for sure.

It's just a very simple principle: do not buy/rent more house than you need. With this principle, you can run the numbers and assess your personal situation so that buying/renting too much house will not have a detrimental effect on your wealth accumulation.

Why do we tend to forget the golden rule: live below your means, do not buy things you don't need.
Life is more than just needs. It’s more about moderation, no?
YMMV.

Life is not about material things. Life is built around the 3 pillars: Health, Happiness, and Knowledge. None of those are tangible. But without money and means, you'll find yourself struggle to survive.

Big house don't bring me happiness. Having knowledge and ability to understand housing needs for my family and make a sound financial decision is priceless.
Agreed with your philosophy BUT, it’s also not just about you. I’m sure your family would want to shop or take a short vacation once awhile but even if you can easily afford it, are you going to reject their wants? Where is the happiness in that? To me, that’s not living below your mean, more like living like a tightwad.

You’re right about big houses, but If I can afford a big enough house that has an extra bathroom so that our kids and guests can use without having to share ours, even though technically we don’t need it, how is that not enhance our level of happiness?

So you see, we don’t have to strip off of everything but our needs in order to be happy. I believe as long as we live responsibly and meeting our priorities, it’s perfectly acceptable to indulge in a few wants from time to time, within reasons and moderations.

LiterallyIronic
Posts: 543
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Re: Defining "House Poor"

Post by LiterallyIronic » Wed Feb 28, 2018 10:19 pm

KlangFool wrote:
Wed Feb 28, 2018 7:53 pm
Jags4186 wrote:
Wed Feb 28, 2018 7:45 pm

2) I know what you referenced, I'm making a point that you keep saying average and talking about your neighborhood. Your neighborhood is atypical and hence may not be a good reference point for the majority of people.
Jags4186,

Then, tell me what is median household income and median house price in your neighborhood?

KlangFool
Probably something more like mine. Median household income of my city is $40,359 and median house price is $231,800. I live in the poor quadrant of the city; median house price is a little higher than $200k in our quadrant.

Jags4186
Posts: 1848
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Re: Defining "House Poor"

Post by Jags4186 » Wed Feb 28, 2018 10:25 pm

KlangFool wrote:
Wed Feb 28, 2018 7:53 pm
Jags4186 wrote:
Wed Feb 28, 2018 7:45 pm

2) I know what you referenced, I'm making a point that you keep saying average and talking about your neighborhood. Your neighborhood is atypical and hence may not be a good reference point for the majority of people.
Jags4186,

Then, tell me what is median household income and median house price in your neighborhood?

KlangFool
The statistic you want is median income of home owners and median home price. The town I live in is 44% renters. There is 0 possibility of me buying a home in the town I live in and we make more than the median household income, which is $165,000. The median home price is 713% of median income.

getthatmarshmallow
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Re: Defining "House Poor"

Post by getthatmarshmallow » Wed Feb 28, 2018 10:47 pm

Klangfool, with respect, whether that hypothetical family that makes $60,000 a year can afford College probably has very little to do with them being house poor, except at the extremes or in VLCOL areas. College costs are rising so fast that most families in that income bracket won't afford College without loans even if they rent or buy an affordable house unless their state universities are well-funded.

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Smorgasbord
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Re: Defining "House Poor"

Post by Smorgasbord » Wed Feb 28, 2018 10:54 pm

getthatmarshmallow wrote:
Wed Feb 28, 2018 10:47 pm
Klangfool, with respect, whether that hypothetical family that makes $60,000 a year can afford College probably has very little to do with them being house poor, except at the extremes or in VLCOL areas. College costs are rising so fast that most families in that income bracket won't afford College without loans even if they rent or buy an affordable house unless their state universities are well-funded.
Don't forget that financial aid has also be risen quickly. That hypothetical family making $60,000 a year will only be pay $4,600 a year to attend Harvard (assuming the family has $200k in assets and a paid off house).
https://college.harvard.edu/financial-a ... calculator

KlangFool
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Re: Defining "House Poor"

Post by KlangFool » Wed Feb 28, 2018 11:01 pm

getthatmarshmallow wrote:
Wed Feb 28, 2018 10:47 pm
Klangfool, with respect, whether that hypothetical family that makes $60,000 a year can afford College probably has very little to do with them being house poor, except at the extremes or in VLCOL areas. College costs are rising so fast that most families in that income bracket won't afford College without loans even if they rent or buy an affordable house unless their state universities are well-funded.
getthatmarshmallow,

1) There is a range between fully paying for college and provide some support for college.

2) In my neighborhood of annual median income of 150K, it should be possible for the family to pay for 15K per year of community college. But, average folks buy the median house of 500K to 600K. Hence, they cannot afford to pay for the community college.

<<probably has very little to do with them being house poor, >>

3) I disagreed. This is simple math. If the median household of 60K buys a 240K house (as per standard non-Boglehead's advice), it will affect their ability to pay for their kid's college education. They may never pay the full amount but they could afford to pay some portion without the house.

KlangFool

getthatmarshmallow
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Re: Defining "House Poor"

Post by getthatmarshmallow » Wed Feb 28, 2018 11:03 pm

Sure, if the kid is Harvard material. But that shifts the goalposts - if one needs to save only $20k per kid for Harvard then one isn't house poor even with a much larger and dumber mortgage.

I respect the spirit of the advice but the numbers simultaneously make me of the modest ranch house house poor and not house poor, depending on the school; thus the metric strikes me as not helpful.

LiterallyIronic
Posts: 543
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Re: Defining "House Poor"

Post by LiterallyIronic » Wed Feb 28, 2018 11:41 pm

KlangFool wrote:
Wed Feb 28, 2018 11:01 pm

2) In my neighborhood of annual median income of 150K, it should be possible for the family to pay for 15K per year of community college.
That's ridiculously high. You're getting ripped off going to a community college for $15,000/year. My local university charges about $5,000/year. https://imgur.com/a/BHpoN

wrongfunds
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Re: Defining "House Poor"

Post by wrongfunds » Thu Mar 01, 2018 10:56 am

what is the rationale behind whole bunch of you trying to convince KlangFool to change his thinking?

<beating_dead_horse_icon>

Frankly, this topic should have been locked 250 replies ago. I would challenge any of you to tell me otherwise.

stoptothink
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Re: Defining "House Poor"

Post by stoptothink » Thu Mar 01, 2018 10:59 am

LiterallyIronic wrote:
Wed Feb 28, 2018 11:41 pm
KlangFool wrote:
Wed Feb 28, 2018 11:01 pm

2) In my neighborhood of annual median income of 150K, it should be possible for the family to pay for 15K per year of community college.
That's ridiculously high. You're getting ripped off going to a community college for $15,000/year. My local university charges about $5,000/year. https://imgur.com/a/BHpoN
Understand that we in Utah have the cheapest university options in the country, by a long shot. Sucks that I completed all of my education in California and Texas, but at least I came out with zero debt.

KlangFool
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Re: Defining "House Poor"

Post by KlangFool » Thu Mar 01, 2018 11:03 am

wrongfunds wrote:
Thu Mar 01, 2018 10:56 am
what is the rationale behind whole bunch of you trying to convince KlangFool to change his thinking?

<beating_dead_horse_icon>

Frankly, this topic should have been locked 250 replies ago. I would challenge any of you to tell me otherwise.
wrongfunds,

<< what is the rationale behind whole bunch of you trying to convince KlangFool to change his thinking?
>>

You should know the answer to this question. It is not me that they are trying to convince.

<<Frankly, this topic should have been locked 250 replies ago. I would challenge any of you to tell me otherwise.>>

Why? This topic showed that the definition is not as clear-cut as everyone think that it is. There is no clear consensus. It had been educational to the whole bunch of people.

KlangFool

chevca
Posts: 1335
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Re: Defining "House Poor"

Post by chevca » Thu Mar 01, 2018 11:37 am

wrongfunds wrote:
Thu Mar 01, 2018 10:56 am
what is the rationale behind whole bunch of you trying to convince KlangFool to change his thinking?

<beating_dead_horse_icon>

Frankly, this topic should have been locked 250 replies ago. I would challenge any of you to tell me otherwise.
No challenge here, I very much agree.

Not my place to say how the mods should do what they do, but, IMO, they miss the mark on this one and about any thread Klang chimes in with his rules. The way he is allowed to stomp around like his rules apply to everyone everywhere and he knows better than all about any situation out there get sickening. Either give Klang a sticky with his housing rules available for anyone interested to see, or tell him to tone it down forcing his opinions and rules on everyone.

Klang, you're right in that there is no clear consensus on this. You're not right, if you think you have even tried to look at anyone else's point of view on this topic. Your experiences and your examples DO NOT apply to everyone everywhere.

LiterallyIronic
Posts: 543
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Re: Defining "House Poor"

Post by LiterallyIronic » Thu Mar 01, 2018 11:43 am

stoptothink wrote:
Thu Mar 01, 2018 10:59 am
LiterallyIronic wrote:
Wed Feb 28, 2018 11:41 pm
KlangFool wrote:
Wed Feb 28, 2018 11:01 pm

2) In my neighborhood of annual median income of 150K, it should be possible for the family to pay for 15K per year of community college.
That's ridiculously high. You're getting ripped off going to a community college for $15,000/year. My local university charges about $5,000/year. https://imgur.com/a/BHpoN
Understand that we in Utah have the cheapest university options in the country, by a long shot.
That's true, but it's not like people are required to attend universities that are near where they grew up. I'm not from Utah; I'm from Washington. There's the Western Undergraduate Exchange (https://www.wiche.edu/wue) that allows students from the states between Alaska and New Mexico to enroll in universities in other states in the region for 150% of the in-state tuition. And other regions of the US have their own exchanges. Or, you can do what I did, which was to just move to Utah long enough to gain my residency (one year) and just work and then enroll.

Not to mention that my university also offers in-state tuition rates to everyone during the Summer, so a person could show up in Utah, take classes for the in-state rate during the Summer, pay out-of-state for one semester, take the next semester off to work (since you took classes through the Summer, that shouldn't put you behind), and then start paying the in-state rate.

If the options are pay $20k/year locally or move and pay $5k/year, to me, the choice is clear.

wrongfunds
Posts: 1347
Joined: Tue Dec 21, 2010 3:55 pm

Re: Defining "House Poor"

Post by wrongfunds » Thu Mar 01, 2018 11:44 am

Especially given that his housing by any objective measure (aka either cost or area) would rank above 75% of the total housing market of entire USA! Only when compared to his immediate neighbors, he can claim to have purchased "smaller" house.

To be very fair regarding this particular topic, he was specifically goaded to chime in here and I am not blaming for him to reply and put forward his view albeit quite forcefully if I may say!

I am talking about the others who are arguing against him and are just not getting the utter lack of necessity to continue.

KlangFool
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Joined: Sat Oct 11, 2008 12:35 pm

Re: Defining "House Poor"

Post by KlangFool » Thu Mar 01, 2018 12:00 pm

wrongfunds wrote:
Thu Mar 01, 2018 11:44 am
Especially given that his housing by any objective measure (aka either cost or area) would rank above 75% of the total housing market of entire USA! Only when compared to his immediate neighbors, he can claim to have purchased "smaller" house.
wrongfunds,

It is very simple.

This is an open forum. Provide a better formula. Provide the reasoning and thinking process behind your formula if you believe you have a better idea.

<<Especially given that his housing by any objective measure>>

How is that relevant? This is a personal finance forum. If you have the money and you can afford to spend money on XYZ, how should anyone else spend their money on XYZ matters to you?

<<would rank above 75% of the total housing market of entire USA! >>

If you want to go that way, why not go all the way to the rest of world? Why should anyone live rank above 75% of the world?

<<Only when compared to his immediate neighbors, he can claim to have purchased "smaller" house.>>

I want to live and send my kids to the top 10 high school in Virginia. Hence, I have to live in this neighborhood.

KlangFool

chevca
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Re: Defining "House Poor"

Post by chevca » Thu Mar 01, 2018 12:04 pm

KlangFool wrote:
Thu Mar 01, 2018 12:00 pm
<<Especially given that his housing by any objective measure>>

How is that relevant? This is a personal finance forum. If you have the money and you can afford to spend money on XYZ, how should anyone else spend their money on XYZ matters to you?
That is really funny coming from you....

ThriftyPhD
Posts: 576
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Re: Defining "House Poor"

Post by ThriftyPhD » Thu Mar 01, 2018 12:06 pm

chevca wrote:
Thu Mar 01, 2018 11:37 am
wrongfunds wrote:
Thu Mar 01, 2018 10:56 am
what is the rationale behind whole bunch of you trying to convince KlangFool to change his thinking?

<beating_dead_horse_icon>

Frankly, this topic should have been locked 250 replies ago. I would challenge any of you to tell me otherwise.
No challenge here, I very much agree.

Not my place to say how the mods should do what they do, but, IMO, they miss the mark on this one and about any thread Klang chimes in with his rules. The way he is allowed to stomp around like his rules apply to everyone everywhere and he knows better than all about any situation out there get sickening. Either give Klang a sticky with his housing rules available for anyone interested to see, or tell him to tone it down forcing his opinions and rules on everyone.

Klang, you're right in that there is no clear consensus on this. You're not right, if you think you have even tried to look at anyone else's point of view on this topic. Your experiences and your examples DO NOT apply to everyone everywhere.
This seems like an overly strong reaction. Someone saying they think you're house poor isn't going to follow you around like poor credit, or a bad reference, or a bankruptcy. If you disagree, wouldn't it be easier to just nod, say you disagree, and leave it like that? I find a diverse set of opinions on what it means to be house poor rather fascinating. I've read these types of threads in the past, and the back and forth really got me to think hard about my own housing choices. It's been invaluable.
KlangFool wrote:
Thu Mar 01, 2018 11:03 am
wrongfunds,

<< what is the rationale behind whole bunch of you trying to convince KlangFool to change his thinking?
>>

You should know the answer to this question. It is not me that they are trying to convince.
And I think this is the issue right here. I think a lot of the posters arguing against KF are starting to feel house poor after thinking about what he said and looking at their own finances. Perhaps regretting that 5br 3,500 SF with chef's kitchen that locked up 50% of take home for a couple with one kid?

Someone who financed a new 911 turbo at 5% interest while making $50k/year is going to react strongly to someone saying you should only buy a car worth 6 months salary and only pay cash. No one wants to admit they made a mistake. There are threads where people ask for help, they aren't saving for retirement and have all sorts of credit card debt and want advice, but if you point out they don't need the mega TV ultra package 4k HD 3D they get defensive and say you need to live for today, not just the future. :?

The only reason people want the thread locked is so their world view is no longer challenged.

chevca
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Re: Defining "House Poor"

Post by chevca » Thu Mar 01, 2018 12:12 pm

Or, they're just sick of Klang's rules on housing. :happy

Klang could have chimed in, gave his opinion on what is house poor, and bowed out, right? How often does it go that way???

thangngo
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Re: Defining "House Poor"

Post by thangngo » Thu Mar 01, 2018 12:21 pm

ThriftyPhD wrote:
Thu Mar 01, 2018 12:06 pm
The only reason people want the thread locked is so their world view is no longer challenged.
Agree.

People know about concept of a rat race. Yet, some still cannot resist the temptation of "American dream" and a big & fancy house. They unconsciously walk right into that rat race.

Any thought provoking ideas should be appreciated and not get shut down.

I've been taking all advice on this forum (KlangFool's included) and apply it to my personal situation and get better. I might do it better than they do. So.. let's keep it coming.
Last edited by thangngo on Thu Mar 01, 2018 12:22 pm, edited 1 time in total.

wrongfunds
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Re: Defining "House Poor"

Post by wrongfunds » Thu Mar 01, 2018 12:22 pm

If you are going to go that route (aka Porsche on 50K income), could not I do the same and try to psychoanalysis KF's rationale for why he feels the way he does? But I know that is one of the quickest way to get smacked by the powers to be of this forum so I will not go there. Would it be fair if I were to put forward "resentment" or "jealousy" as underlying cause? That would be immediate grounds for strong reprimand and rightfully so. We should try to avoid speculating on why somebody might do something.

The bottom line is KF has his own reasons what constitutes "house poor" by his standard. Others may or may not agree with him but rather thank leaving it at that so many are trying to argue vehemently against or even for is rather striking. As I said before, if he were a Noble winner, I could understand all the attention but otherwise why?

KlangFool
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Re: Defining "House Poor"

Post by KlangFool » Thu Mar 01, 2018 12:35 pm

chevca wrote:
Thu Mar 01, 2018 12:04 pm
KlangFool wrote:
Thu Mar 01, 2018 12:00 pm
<<Especially given that his housing by any objective measure>>

How is that relevant? This is a personal finance forum. If you have the money and you can afford to spend money on XYZ, how should anyone else spend their money on XYZ matters to you?
That is really funny coming from you....
chevca,

Why? I have strong opinion and view on housing. But, I have strong opinion and view that no one should follow anyone's rule of thumb blindly. That includes my formula. Folks should examine my formula and any formula closely and understand their assumption behinds that formula.

It is perfectly reasonable to disagree with me as long as you can safely assume that my assumptions do not apply to you.

KlangFool

PhilosophyAndrew
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Re: Defining "House Poor"

Post by PhilosophyAndrew » Thu Mar 01, 2018 12:36 pm

I thank KF for his willingness to explain his views and engage others in rational dialogue. I’ve learned a lot from that dialogue, and I bet others have too.

It is unkind to ask the moderators to censor someone who contributed a lot through good-faith dialogue. I hope the general coarseness of our society does not infect this forum, which has been largely a pace of civilian to, kindness, and generosity.

The large point KF has made seems exactly right to me: Conventinal riles-of-thumb about house affordability may have some significant negative financial consequences for many families. Exploring this them and assessing whether that convential wisdom is correct is an eminently Bogleheadish thing to do!

KlangFool
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Re: Defining "House Poor"

Post by KlangFool » Thu Mar 01, 2018 12:51 pm

Folks,

The interesting fact about this forum is the historical record that it held.

1) Somebody ask for advice whether they should buy a house.

2) Many folks advise the person that he/she should not buy that house. He/she would be "House Poor" if he/she bought the house.

3) The person bought the house.

4) A few months or a year later, the person come back and ask

A) My spouse wants to stay home and be a homemaker. Can I do it? Answer -> no unless you sell the house.

B) I want to work less hour and spend more time with the family. Can I do it? Answer-> no unless you sell the house.

And so on... But, the person still claims that he/she is not "House Poor".

Those stories repeat itself regularly.

KlangFool

getthatmarshmallow
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Re: Defining "House Poor"

Post by getthatmarshmallow » Thu Mar 01, 2018 12:55 pm

LiterallyIronic wrote:
Wed Feb 28, 2018 11:41 pm
KlangFool wrote:
Wed Feb 28, 2018 11:01 pm

2) In my neighborhood of annual median income of 150K, it should be possible for the family to pay for 15K per year of community college.
That's ridiculously high. You're getting ripped off going to a community college for $15,000/year. My local university charges about $5,000/year. https://imgur.com/a/BHpoN
Great, great, great? ;)

RollTide31457
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Re: Defining "House Poor"

Post by RollTide31457 » Thu Mar 01, 2018 1:03 pm

Lots of wise council from KlangFool!

“House poor” may be one of those conditions that guilty parties refuse to acknowledge...

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Ged
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Re: Defining "House Poor"

Post by Ged » Thu Mar 01, 2018 1:05 pm

House poor is a subset of the general classification of being overly in debt.

If you cannot withstand a period of six months of unemployment without falling behind on your debt payments you qualify.

miamivice
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Re: Defining "House Poor"

Post by miamivice » Thu Mar 01, 2018 1:06 pm

chevca wrote:
Thu Mar 01, 2018 11:37 am
wrongfunds wrote:
Thu Mar 01, 2018 10:56 am
what is the rationale behind whole bunch of you trying to convince KlangFool to change his thinking?

<beating_dead_horse_icon>

Frankly, this topic should have been locked 250 replies ago. I would challenge any of you to tell me otherwise.
No challenge here, I very much agree.

Not my place to say how the mods should do what they do, but, IMO, they miss the mark on this one and about any thread Klang chimes in with his rules. The way he is allowed to stomp around like his rules apply to everyone everywhere and he knows better than all about any situation out there get sickening. Either give Klang a sticky with his housing rules available for anyone interested to see, or tell him to tone it down forcing his opinions and rules on everyone.

Klang, you're right in that there is no clear consensus on this. You're not right, if you think you have even tried to look at anyone else's point of view on this topic. Your experiences and your examples DO NOT apply to everyone everywhere.
I'm in full agreement here.

KlangFool loves to get in folks face about their finances, and he consistently uses his perspective (age, job security, etc) to set rules for everyone else in life.

HIs rules for home ownership are a classic example. They might make sense for a 50 year old. They don't make sense for a 30 year old. Yet, most 30 year olds would much prefer to raise a family in a house that they own as opposed to rent, for a lot of reasons.

And the vast majority of economists believe that a society of home owners is a more wealthy and stable society than one of renters.

So, I think KlangFools advice is contrarian and wrong....but he's stubborn.

alex_686
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Re: Defining "House Poor"

Post by alex_686 » Thu Mar 01, 2018 1:22 pm

miamivice wrote:
Fri Feb 23, 2018 12:54 pm
If a mortgage payment, which is used to purchase an appreciating asset, limits the amount of spending one can do on travel and eating out, I don't think that is a bad thing from a financial standpoint.
This is a point of contention. The Case-Shiller index finds that homes on average appreciate 0% to 1% after inflation.

A home is not a productive economic asset - it does not throw off any cash flow. Which is fine, one is consuming the imputed rent. But your house is not a great asset class. If one is looking to maximize one's financial return on should keep you housing asset allocation low in your AA.

miamivice
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Re: Defining "House Poor"

Post by miamivice » Thu Mar 01, 2018 1:28 pm

alex_686 wrote:
Thu Mar 01, 2018 1:22 pm
miamivice wrote:
Fri Feb 23, 2018 12:54 pm
If a mortgage payment, which is used to purchase an appreciating asset, limits the amount of spending one can do on travel and eating out, I don't think that is a bad thing from a financial standpoint.
This is a point of contention. The Case-Shiller index finds that homes on average appreciate 0% to 1% after inflation.

A home is not a productive economic asset - it does not throw off any cash flow. Which is fine, one is consuming the imputed rent. But your house is not a great asset class. If one is looking to maximize one's financial return on should keep you housing asset allocation low in your AA.
I agree that stocks outperform housing. No argument there.

I'm saying that housing, even at a 0% to 1% real return, is a far better financial investment than eating out, taking vacations, etc.

In other words, imagine two families. One eats out for dinner 3x a week and lunch 5x a week. They rent but spend $2000 in meals out every month. A second family owns a home, and eats out rarely (maybe $250 a month). In 20 years, which family will be in a better financial position?

chevca
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Re: Defining "House Poor"

Post by chevca » Thu Mar 01, 2018 1:55 pm

KlangFool wrote:
Thu Mar 01, 2018 12:35 pm
chevca wrote:
Thu Mar 01, 2018 12:04 pm
KlangFool wrote:
Thu Mar 01, 2018 12:00 pm
<<Especially given that his housing by any objective measure>>

How is that relevant? This is a personal finance forum. If you have the money and you can afford to spend money on XYZ, how should anyone else spend their money on XYZ matters to you?
That is really funny coming from you....
chevca,

Why? I have strong opinion and view on housing. But, I have strong opinion and view that no one should follow anyone's rule of thumb blindly. That includes my formula. Folks should examine my formula and any formula closely and understand their assumption behinds that formula.

It is perfectly reasonable to disagree with me as long as you can safely assume that my assumptions do not apply to you.

KlangFool
Why.... because you don't just leave it as your opinion and agree to disagree. You use your questioning responses to try and get the other person to see it your way. You can agree to disagree with others too, rather than force your view and opinion on them. Practice what you preach here sometime and let things be. You forcing your rules on everyone is pretty unbecoming, IMO, and I'm surprised it's allowed to go on as it does so often.

alex_686
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Re: Defining "House Poor"

Post by alex_686 » Thu Mar 01, 2018 2:00 pm

miamivice wrote:
Thu Mar 01, 2018 1:28 pm
In other words, imagine two families. One eats out for dinner 3x a week and lunch 5x a week. They rent but spend $2000 in meals out every month. A second family owns a home, and eats out rarely (maybe $250 a month). In 20 years, which family will be in a better financial position?
So family #1 spends much and saves little while family #2 saves much and spends little. Oddly enough, we don't have enough information here. Family #1 may have a much higher rate of return on their portfolio. After all, family #2 is consuming a fair amount of their investment - probably about 2/3 - via imputed rent.

What we need is a apples to apples comparison. We have 2 families who save the same amount. The family #1 lives in a modest home - either renting or buying - does not matter. Family #2 lives in a luxury home, in part paid for by their "investing" their savings into their home. So while their are saving the same amount, family #1 has a high proportion of their investments in productive assets. Who is financially better off in 20 years?

EDIT - my point is that housing somewhere between a middling asset class to - poor. There are better choices from a strictly investing viewpoint. Yeah, one has to have housing but one needs a cold eye to sort out the consumption verse investing when buying a house.

KlangFool
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Re: Defining "House Poor"

Post by KlangFool » Thu Mar 01, 2018 2:44 pm

chevca wrote:
Thu Mar 01, 2018 1:55 pm
KlangFool wrote:
Thu Mar 01, 2018 12:35 pm
chevca wrote:
Thu Mar 01, 2018 12:04 pm
KlangFool wrote:
Thu Mar 01, 2018 12:00 pm
<<Especially given that his housing by any objective measure>>

How is that relevant? This is a personal finance forum. If you have the money and you can afford to spend money on XYZ, how should anyone else spend their money on XYZ matters to you?
That is really funny coming from you....
chevca,

Why? I have strong opinion and view on housing. But, I have strong opinion and view that no one should follow anyone's rule of thumb blindly. That includes my formula. Folks should examine my formula and any formula closely and understand their assumption behinds that formula.

It is perfectly reasonable to disagree with me as long as you can safely assume that my assumptions do not apply to you.

KlangFool
Why.... because you don't just leave it as your opinion and agree to disagree. You use your questioning responses to try and get the other person to see it your way. You can agree to disagree with others too, rather than force your view and opinion on them. Practice what you preach here sometime and let things be. You forcing your rules on everyone is pretty unbecoming, IMO, and I'm surprised it's allowed to go on as it does so often.
chevca,

<<You use your questioning responses to try and get the other person to see it your way. >>

Why do you assume that? If somebody disagrees with you, won't you want to know their assumption and thinking behind their disagreement? Or, what do they disagree with you about? Isn't this showing a proper respect for the other person's opinion? Give someone a place and opportunity to speak their mind?

<<You forcing your rules on everyone is pretty unbecoming, >>

1) This is a public forum. You could provide your own rules and persuade others that it works a lot better. The best way to get rid of my rules is to come out a better one.

2) You do not have to read my posts at all. So, how could I force my rules on you? It has to make sense for you.

KlangFool

chevca
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Re: Defining "House Poor"

Post by chevca » Thu Mar 01, 2018 3:01 pm

KlangFool wrote:
Thu Mar 01, 2018 2:44 pm
chevca,

<<You use your questioning responses to try and get the other person to see it your way. >>

Why do you assume that? If somebody disagrees with you, won't you want to know their assumption and thinking behind their disagreement? Or, what do they disagree with you about? Isn't this showing a proper respect for the other person's opinion? Give someone a place and opportunity to speak their mind?
People do all of that. And, rather than just say, okay that's your opinion, you use your questions to try and get them to come around to your way of thinking. Again, practice what you preach....

wrongfunds
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Re: Defining "House Poor"

Post by wrongfunds » Thu Mar 01, 2018 3:11 pm

People do all of that. And, rather than just say, okay that's your opinion, you use your questions to try and get them to come around to your way of thinking. Again, practice what you preach....
But why that should be a problem? Cross examination or witness leading is certainly allowed here. The responder to KF forgets that KF has no subpoena power to extract answer from the person.

The approaching 300 replies tell me that responders think it is their solemn duty to answer every question or situation presented by KF. If I were arguing against KF, I would have stopped after making my point clear (once or twice) a while ago.

mbasherp
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Re: Defining "House Poor"

Post by mbasherp » Thu Mar 01, 2018 3:17 pm

:?

I honestly thought there would be more percentage of income, or be able to save and invest this percentage after the house type of discussion here. I didn't expect net worth to figure so prominently when I started the thread. To me, net worth is a backwards looking (though valuable) metric and the concept of house poor most often applies to younger folks who are buying or recently bought a home. Net worth often doesn't reflect all that much of their situation. That was certainly my case!

I would ABSOLUTELY have been called house poor by Klangfool when I bought my current home (and even now). Yet my purchase price was less than 2x income, my interest rate is at historical lows and our PITI is 11% of gross, enabling us to maintain a savings rate of 40%. There's no way I consider myself house poor right now. I just wondered if we might be feeling that way if DW stayed home and we had half the income for a few years.

EddyB
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Re: Defining "House Poor"

Post by EddyB » Thu Mar 01, 2018 3:28 pm

wrongfunds wrote:
Thu Mar 01, 2018 12:22 pm
If you are going to go that route (aka Porsche on 50K income), could not I do the same and try to psychoanalysis KF's rationale for why he feels the way he does? But I know that is one of the quickest way to get smacked by the powers to be of this forum so I will not go there. Would it be fair if I were to put forward "resentment" or "jealousy" as underlying cause? That would be immediate grounds for strong reprimand and rightfully so. We should try to avoid speculating on why somebody might do something.

The bottom line is KF has his own reasons what constitutes "house poor" by his standard. Others may or may not agree with him but rather thank leaving it at that so many are trying to argue vehemently against or even for is rather striking. As I said before, if he were a Noble winner, I could understand all the attention but otherwise why?
I don't know about arguing vehemently against it, but I think that many people, especially those in their late 20s and 30s, would be ill served by his advice in the long term. It is a conservative position, but avoiding the worst case isn't all it takes to make the best decision. So I think public dispute of his "rule" is appropriate in a forum that's general purpose is to help others trying to navigate financial decisions.

KlangFool
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Re: Defining "House Poor"

Post by KlangFool » Thu Mar 01, 2018 3:34 pm

mbasherp wrote:
Thu Mar 01, 2018 3:17 pm
:?

I honestly thought there would be more percentage of income, or be able to save and invest this percentage after the house type of discussion here. I didn't expect net worth to figure so prominently when I started the thread. To me, net worth is a backwards looking (though valuable) metric and the concept of house poor most often applies to younger folks who are buying or recently bought a home. Net worth often doesn't reflect all that much of their situation. That was certainly my case!

I would ABSOLUTELY have been called house poor by Klangfool when I bought my current home (and even now). Yet my purchase price was less than 2x income, my interest rate is at historical lows and our PITI is 11% of gross, enabling us to maintain a savings rate of 40%. There's no way I consider myself house poor right now. I just wondered if we might be feeling that way if DW stayed home and we had half the income for a few years.
mbasherp,

<< To me, net worth is a backwards looking (though valuable) metric and the concept of house poor most often applies to younger folks who are buying or recently bought a home.>>

And, what happened if they faced a recession a few years after they bought a house and they are unemployed?

<< Yet my purchase price was less than 2x income, my interest rate is at historical lows and our PITI is 11% of gross, enabling us to maintain a savings rate of 40%. >>

This is fine as long as you are employed. If a person is unemployed in a recession, it is their liquidity and net worth that determine whether they will outlast the recession.

I had worked for 30+ years. I faced recession and economic crisis regularly. This is the reality that I had to live with. Perhaps your life circumstances will not be as challenging as mine.

KlangFool

miamivice
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Re: Defining "House Poor"

Post by miamivice » Thu Mar 01, 2018 3:41 pm

To be honest, while I think KlangFool is sincere, the manner in which he writes and how he makes disagreements personal, it really falls under the category of trolling.

People keep responding to him the same way that folks engage trolls, even though we all know better. It's just too difficult to resist.

mbasherp
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Re: Defining "House Poor"

Post by mbasherp » Thu Mar 01, 2018 3:46 pm

Klangfool,

I'm actually in one of the least steady professions there is. Zero job security and no pay certainty, EXCEPT to the extent that one is valuable or irreplaceable. I appreciate that you voice the perspective of job loss, recession, etc because too many ignore it. In my case, we made sure that our PITI was something we could handle on two minimum wage jobs, if needed. I don't have the pride that many do with jobs and positions. If we need the money, I'll make the money-- whether it's as a cashier, manual labor, or one of my various existing side hustles. I've never had to do an entry level job as an adult, but you can bet that I would be happy to make $8.00 an hour!

If we weren't even able to bring in that amount, we really wouldn't be making enough to rent anyway (our PITI is cheaper than renting), but we would leave the house behind. Not actually the end of the world! It ends up being a calculated risk. All of us, even the most conservative, have to take calculated risks. I'm pretty darn sure I can find a way to make things work. If I can't, then I've got a different and difficult path to walk. But I've got age, experience, intelligence and work ethic on my side, so I feel good even about the bad scenarios. All that being said, most non-Bogleheads would call me very conservative with my home.

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Re: Defining "House Poor"

Post by prudent » Thu Mar 01, 2018 3:50 pm

Topic is locked (topic exhausted).

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