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On the flip side...
Sticking with the housing market, here's the story of a young first-time home buyer. And I mean young. She bought a foreclosed home about a month ago. At age 20.
In fact, Denise Tejada and her 22-year-old brother both bought homes in the San Francisco bay area. Denise is a reporter at Youth Radio, which featured their story:
You gotta like them. Two immigrant kids saving from age 15, working hard, encouraged by their father to be smart with their money. But we wanted to know why they wanted to buy homes, what the process was like and what they're giving up to do this.
This week, I interviewed Denise. You can listen to it below, but here are a few details, some of which aren't in the interview:
Denise works three jobs so she can afford her new house. She makes $2470 a month but pays $1328 to service her mortgage. That means 54% of her income goes to the house, leaving her with $285 a week to live on. Doable, but tight. She's breaking the 30% rule and then some, not to mention she's still spending out of pocket to renovate the yard, fix the roof and paint.
She got a loan to renovate the place, which was just a "box" with no kitchen or bathroom when she bought it. She says the renovation has increased the value of her home from $155,000 to $255,000. In the interview, she describes the process of getting the loan.
She also answers the question, "Do you see this as an investment or a home?" (That's at 6:10)
Denise is clearly intelligent and motivated. She's learning a lot through the experience. And she's already light years ahead of many young people in terms of respecting the money she makes. But so far, she's sacrificed going to college to buy this home. And she's spending an awfully big chunk of her income on it. I hope she doesn't lose one of her jobs.
If she can find a buyer, she might make a nice profit. She'll also collect the first-time home buyer tax credit next April. But is this what young people should be doing? Take a listen. What do you think?
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Unless one earns a "quantifiable" degree--nursing, engineering, pharmacology--the idea that a college degree is a passport to prosperity is one of the biggest myths of the late 20th and early 21st centuries. Sure, community colleges and state universities may be relatively affordable, but "Southern CT State U" doesn't have the same cache as "Yale" or "Notre Dame" on a resume. Assume even $40K of student loans for a working class student at a state school and then figure out how long it takes that student to pay off that debt and start making profit on their educational investment. . . .
Great hot-button, economy-relevant story. Good job Marketplace staffers! The money I've invested in American Public Media donations is paying off handsomely.
My message for Denise is: Chicken soup, girl! You can't afford to get sick for one day in the next thirty years!
I'm not sure that college is the right way to go either. Yes, in the long run, college degrees will earn more, but that's in the unknown future (and the US isn't looking so good right now).
At the Fed level, A bachelors degree will get you a GS-5. A GS-5 earns $29,656-$38,551. This won't cover any of her bills any better then her current jobs. In fact, she would make less. Was the $150,000 degree worth it?
As a young person who earned 2 full BA degrees as well as a minor in 3.5 years, I can tell you that a college degree is the new high school diploma and isn't getting anyone very far any more. I am currently taking home just under 2K a month in my "cushy" government job, with 900 of that going to rent-- that's just my half.(Not complaining, at least I have a job).But, I think it would be much more satisfying to be spending that rent money on a home I could really enjoy. If she wants to be in real estate, then what better education is there than being responsible for buying and fixing up a home?
It depends on what your college degree is in.
A 4-year degree in engineering or a technical field or a field where there is pent-up demand for skills can still get you very far.
In areas where there are a surplus of degrees, like psychology and sociology, students generally need to pursue a masters to compete.
You could find a lot of jobs with that degree, though. If you want to stick with government, One place you might try is looking at state and local agencies that do water quality monitoring. Water quality is increasingly biology-based now. Compost facility monitoring is growing now too with an incrase interest in food composting.
The US Public Health Service always needs inspectors and technicians, although might have to move out to New Mexico or someplace like that and the pay is not always the best.
Thanks for the tips. I haven't thought about that area specifically. I worked for a semi state institution for a period of time, but left because of the writing on the wall. I saw that older employees were getting paid less the new hires, employees didn't get raises or cost of living increases for a few years, and the state and local budgets in this area are heavily in the red.
It really bothered me that the state and local systems decided to build new buildings/projects then pay the employees the money from the missed raises.
Fascinating story. I'm now 40 and I still haven't bought a property. I was priced out and scared to death by the insanity of the last ten years so I sat on the sidelines and backpacked Europe instead of buying. Frankly, I've also saved a lot of money in my 403(b) account by not buying a house. OK, $100,000 isn't a lot of money but apparently it's twice as much as the average boomer who is about to retire has stashed away. I'm still not quite ready to buy. I don't think the market will bottom until the federal housing credit disappears and people in California, where I live, realize that houses are still above historically normal prices in many neighborhoods. I just hope this young woman does end up buying during an artificial rebound and then many years and a lot of taxes and spending later sell at an inflation-adjusted loss.
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