N.J. Loses Highest Median Income Honors
Sorry to inform you all, but we are no longer the highest median household income state in the country. According to Census data released yesterday, we've lost the top honors to Connecticut.
N.J. loses median income bragging rights to Conn.
Connecticut, with a median household income of $56,409, supplanted New Jersey as the country's highest wage state in 2003, the most recent year available. New Jersey slid to second, at $56,356, followed by Maryland, Massachusetts and New Hampshire.
The fact that New Jersey had the highest median household income in the country was often used as a rationalization for the bubble prices here. Now, while I may be nit picking over a few dollars, the truth is we can no longer claim that honor when it comes to median income.
Now, granted, those are 2003 dollars and it's 2005, but I'll argue wage growth in NJ has largely been unchanged over that period. I asked the question once before, with the median household income in the mid $50,000 range, who exactly can afford to buy a home in New Jersey?
The median family making $56,000 probably doesn't have $50,000 in savings but let's say they do. They probably have a bit of credit card debt, say $300 a month and a car payment of $300 a month (hey, I'm being generous here). Figure roughly $700 a year in HOI, and about $6000 in taxes..
Plug that into whatever trusty affordability calculator you use and see what you get. I got somewhere around $150,000 as a top end estimate. So, let me ask you, how are these folks stretching to buy homes? Easy. Use an I/O mortgage, Option-ARM mortgage, or some other Neg-Am mortgage. Maybe they borrowed against their 401K for a downpayment, dipping into their savings every month to make ends meet (and hoping for a huge payout in a year or two). Maybe they bought with a 1.25% teaser IO (like one I heard on the radio yesterday, where the buyer can find themselves owing 125% of the original mortgage amount) not realizing what the heck they were doing. Or maybe they thought they could beat the market, using one of these loans as a high leverage play, hoping to get out before the real payments set in.
Caveat Emptor,
Grim
N.J. loses median income bragging rights to Conn.
Connecticut, with a median household income of $56,409, supplanted New Jersey as the country's highest wage state in 2003, the most recent year available. New Jersey slid to second, at $56,356, followed by Maryland, Massachusetts and New Hampshire.
The fact that New Jersey had the highest median household income in the country was often used as a rationalization for the bubble prices here. Now, while I may be nit picking over a few dollars, the truth is we can no longer claim that honor when it comes to median income.
Now, granted, those are 2003 dollars and it's 2005, but I'll argue wage growth in NJ has largely been unchanged over that period. I asked the question once before, with the median household income in the mid $50,000 range, who exactly can afford to buy a home in New Jersey?
The median family making $56,000 probably doesn't have $50,000 in savings but let's say they do. They probably have a bit of credit card debt, say $300 a month and a car payment of $300 a month (hey, I'm being generous here). Figure roughly $700 a year in HOI, and about $6000 in taxes..
Plug that into whatever trusty affordability calculator you use and see what you get. I got somewhere around $150,000 as a top end estimate. So, let me ask you, how are these folks stretching to buy homes? Easy. Use an I/O mortgage, Option-ARM mortgage, or some other Neg-Am mortgage. Maybe they borrowed against their 401K for a downpayment, dipping into their savings every month to make ends meet (and hoping for a huge payout in a year or two). Maybe they bought with a 1.25% teaser IO (like one I heard on the radio yesterday, where the buyer can find themselves owing 125% of the original mortgage amount) not realizing what the heck they were doing. Or maybe they thought they could beat the market, using one of these loans as a high leverage play, hoping to get out before the real payments set in.
Caveat Emptor,
Grim
19 Comments:
Just some evidence of our economy in NJ being eviscerated with the good jobs going with it.
High paying jobs evaporating in NJ.
Lucent AT&T Merck Pfizer Schering Plough Bristol Myers Public service all laying off.
Yes Morons are using Option ARM's to buy a overpriced house. I hope they understand the nightmare they are about to face. Fools fools fools. They all will be whining and pointing the fingers at crooked realtors appraisors builders and mtg brokers as this insanity ends.
I work in the IT department of a global Financial firm and the mood here is gloomy. New construction of buildings in India, wage freezes, harsher performance parameters and so on. But, people keep telling me that houses in North Jersey will always be in demand.
600K for a dump, 10K in taxes and everyone seems to be driving a new car. Ok, I guess I'm living in the dark ages.
No most are are living a phoney lifestyle not supported by rational financial planning. when you are retired these suckers will be greeting walmart customers.
We're going to see waves and waves of lawsuits against lenders in the near future. Every funny-money mortgage holder is going to be screaming bloody murder about how the lending industry took advantage of them.
Don't people actually read the contracts they sign? Nah, I'm giving these people too much credit..
grim
If jobs keep getting downsized or moved to Asia, who's going to be left? It doesn't calcuate. There's no logic. I think things are going to get real ugly in a couple of years.
The wealthy parent scenario isn't a likely one. While I'm sure it happens, the likelyhood of those scattered cases affecting the broad market is highly unlikely.
jb
"600K for a dump, 10K in taxes and everyone seems to be driving a new car. Ok, I guess I'm living in the dark ages."
seriously... I was over in nice part of San Diego over thanksgiving and there weren't that many nice cars as here in the NJ.
I guess people now equate lease payment as their monthly car payment. So $500/month will get you a decent BMW on a 3 year lease, whereas I'm stucking paying $440/month on my v6 Accord for next 5 years.
I live in Cliffside Park, where illegal renting is rampant, and you wouldn't believe how many luxury cars I see streetparked, because the owners are probably renting and cannot park their $60k babies on a drive way.
Some people need to get their priorities straight. I wouldn't dream of getting a $60k car unless I made at least $250k.
The mirage will all come to an end for many. A mirag lifestyle they do not have the cash to fund.
The economyis one big debt ponzi. It will unravel as prudence and thrift will be rewarded not punished.
Would it be interesting to know, how many people in NJ are first-time buyers? 5%? 20%?
Isn't it pretty clear that MANY people live in houses they bought 5 and more years ago when their earnings were somehow comparable with home prices? Buying a home here is a problem only for those who didn't make it years ago. Others make their $800-1000/month mortgage payments for houses, which is not problem for median-income houshold. If they didn't sell any equity, nothing will force them to sell.
So, it would be very interesting to take a look at the numbers telling us something about average/median debt assosiated with mortgages compared with current home prices.
skep-tic said...
I am pretty disgusted by the Christmas season at this point. Watching people fight over stupid laptops and whatnot. It's disgusting.
My wife and I didn't give each other presents last year. We're not going to this year either. Guess what? Christmas still happened and we still love each other.
Enough said Skep-tic, I am not doing Christmas presents this year myself. I am putting myself on a budget so I can pay down my existing debt, and then I can put away more money.
It's funny you bring tat up. I read an article a couple months ago talking about that very topic. You have to be an exec that has a pretty fat paycheck which corresponds to the earlier piece on layoffs. It is too expensive for companies to do business here do to relocation costs and there execs saying Im going to NJ and all my money gets is this?
"I wouldn't dream of getting a $60k car unless I made at least $250k."
wouldn't "dream"?...if someone earns between 100k and 250k and can't "dream" of affording a 60k car..they must have some crazy spending patterns..or a massive coke habit.
Slightly back on topic....
Remember that the median income figure of $56,000 also includes legions of tax receivers of Newark, illegal landscapers in Freehold, and retirees in Ocean County.
These folk will never be looking at McMansions or riverfront condos in Edgewater.
There may be a finite supply of 90-hour-a-week I-bankers or kids getting endowments by the Dad Bank & Trust, NA (here in Hoboken we have both species), but they are still out there and still willing to dump their chump change on what the rest of us consider overpriced residences.
Njres, congragulations. It is very heartwarming to hear young people like you and Njgal speak so pragmatically about finances, looking as far as retirement, cautious about the needs vs wants traps, not getting obsessed about looking wealthy, etc. etc. It is even more a pleasure that your significant halves also think like you. I am rasising mine also to be like what you are, I hope they will also choose partners like you did.
We dont do gifts religiously in the family either. Gifts are just spontaneous, somthing nice picked up for someone suddenly - a CD, a watch, a book, a shirt etc. No 'expected' gifts as on birthdays, anniverserys, christmas etc. Gifts are supposed to be surprise, right ? Expensive stuff is all about what we really need - computers, TVs, cameras etc.. They never come under the gifts category, they are all well-discussed joint decisions. For birthdays and other festivities/celeberations it is always grrreat and lotsa food and more food, lotsa extra laughs and hugs, but no 'gifts'.
"live small and think big"
that's just sad...reminds of that guy who was on dateline or one of those shows..He is a millionaire and shops at second hand stores, gets his furniture by picking through items out at the curb..drove around in some piece of junk..and was walking around in clothes he bought for about 10 bucks...all so he could stare at his bank statement like a mental patient...life is way too short for that nonsense..
"if someone earns between 100k and 250k and can't "dream" of affording a 60k car..they must have some crazy spending patterns..or a massive coke habit."
Sigh! we have come a long way with internalising consumerism. When someone lives sensibly as a he becomes highly suspect - "must be something terribly, terribly wrong there". I would call him a miser who wont spend on needs - and certainly there are those - who wont spend enough even on food, decent (not necessarily expensive) clothing, heating, etc. But one who wont spend on wants is just austere. What is wrong if Bill Gates decided that a Ford Escort was good enough for him ? Does not sound crazy to me.
"I think that most truly wealthy people don't spend frivolously."
....Funny..Every wealthy person I've ever met seems completely determinted to live a frivolous and meaningless existence.
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