६ एप्रिल, २०१३
"More than 50% of law school graduates from the 2011 class aren’t earning enough to buy a house..."
That's referring to new law school graduates, so you might think: What's the big deal? Since when do new graduates assume they can up and buy a house? On the other hand, they're assuming a house costs $100,000. I don't understand that. Where are these law grads practicing?
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In 1970 I started as a new lawyer (with a wife and two kids) at $15k per year. We bought a nice house in Milwaukee for $28,000. Stay at home spouse, two children and a house--and I was still able to buy life insurance and put aside a little bit each month for savings
Also I had no debt coming out of law school. Law school was a bargain then.
I didn't download the abstracts, but from the summaries it looks like the ability to buy a home is impacted by the amount of student debt carried by the recent graduate and future earnings, and I think that is the point - not just that there is an expectation to buy a home straight out of college (majority probably wouldn't want to buy right away anyway), but that the long term high debt and lower potential earnings may keep these recent graduates out of the housing market for more years than may have been the situation in the past.
Many years ago I sat on a local bank's CRA citizen advisory committee. At that time they had a special mortgage loan product with lower down payment requirements geared toward beginning professionals (teachers, doctors, etc.) that factored in future earning potential and job stability. Now it looks like high student debt could reduce the amount that can be borrowed, and the earning potential to support higher payments might not be there.
The top graduates from top law schools are still getting the $160,000 Big Law jobs right out of law school. Those law school graduates can afford to buy a house AND re-pay student loans.
50% of the remaining 2011 law school graduates are struggling. If they have a job, the job does not pay enough to cover both a house and law school loans.
But the average law school graduate is in his/her twenties.
Who needs a house then?
Well, lawyers made things the way they are today (they write the laws and regs, after all), so they have no one to blame but themselves.
Yes David that was possible in the days before Reaganomics-- since then the decline of the middle class has forced both husband and wife to work just to keep up. To get lower cost housing in Milwaukee, under $250,00, one needs to live in River West not Shorewood or the East Side.
A lot of people can't buy a home, that's why rents are up. Let a few thousand people plus dwellings be built in cities and watch prices fix themselves.
"The top graduates from top law schools are still getting the $160,000 Big Law jobs right out of law school. Those law school graduates can afford to buy a house AND re-pay student loans."
Buy what kind of house, where?
In the places where "big law" jobs bring that kind of salary, such as NYC, the real estate is expensive!
Find me a listing for a "house" in NYC that costs $100,000.
And keep in mind that when you buy a house, you have to pay property taxes, which are exorbitant in places where you earn big-law salaries like that.
I graduated from law school in 1981 and, after a 1-year clerkship, had a job at a big Wall Street law firm. After 2 years of that, I absconded to Madison, Wisconsin, for a more livable environment for my family of 4. Even then, we waited 2 years to buy a house (the house where I still live).
So that was 5 years beyond law school that I bought my first house, outside of the geographic area where I earned my "big law" salary.
And I didn't have much student debt -- just $15,000.
I didn't think oh this is so terrible. It was normal life.
And the house I bought in Madison cost more than $100,000 when I bought it in 1986.
So the linked article just doesn't make sense to me.
It alludes to expectations that shouldn't have arisen in the first place.
"It alludes to expectations that shouldn't have arisen in the first place."
-- But they have. I've seen a lot of people trying to buy houses realizing that they are very, very expensive if you want to live around here (Metro Virginia). People believe the tripe that if you just get a valuable degree, you'll have all the money in the world to do as you please. Reality is harsh; and it isn't Reagan's economy that has seen the labor force drop to nearly 60% and unsustainable debt.
But, Voltaire and those on his side would rather conjure boogeymen then address why grads these days can't afford everything they want (and determine whether it is that they want too much or earn too little, or some combo of both.)
If individual citizens got together and created an enterprise that left so many people financially ruined, there would be a Congressional investigation, a class action suit, and possible charges of racketeering. Enjoy it while it lasts.
Why don't these fresh faced progressive law school graduates pioneer in Detroit, which is loaded with $20,000 houses? Time to walk the walk big talkers.
Althouse makes a good point: a $100k house is not going to be found in an area of the country where one would also be able to earn top salaries right out of grad school.
David also makes a point that I made the other day in the liveable income on a single salary thread: school debt is weighing down today's current graduates much more so than it did back then, making buying a house and being a stay-at-home parent all the more difficult, if not impossible.
The "Leave It To Beaver" lifestyle simply isn't possible for the vast majority of people these days, and I truly believe that skyrocketing student debt is one of the main reasons for that. Of course, one could always go to a part of the country that offers lower salaries but also much lower overall cost of living, which is what I did. It still isn't easy, but in the long run I'll be a lot better off than my colleagues in the big cities, who will never be able to afford a house, a decent car, or even possibly a family.
Can't get past the WJS paywall to read the rest of the article, but I think the point is that 50% of the graduates can not afford a $100,000 house (or condo). Whether or not there are $100,000 properties available is a moot issue. If they can't afford a $100,000 home or condo, they certainly can not afford a $200,000 home.
I didn't find that in the abstract that WJS linked to, but what I did find was the usual affordability metrics - 28% of income for mortgage payments, and a maximum of 43% of income for Mortgage and all other debts (student loan, auto loan, credit card) as it relates to financial viability. What the study seems to show is that a significant amount of graduates will be outside those margins (i.e, "marginal" borrowers).
In this age of buying on credit and of instant gratification, many young people have never lived in a house where they saw purchases being deferred until their parents could afford to buy. A subset of those young people may come to assume that once one is an "adult," graduated from college and working a job--especially a prestigous job such as lawyering--one should be making enough money to similarly buy anything one wants, especially top drawer "stuff," including homes.
This expectation that we should be able t acquire anything we want without delay is inculcated in us by our consumer society.
Heck, I had the money in the bank to buy a new computer and monitor back when I wanted to buy it, but I refused to pay by monthly credit card payments and I refused to simply draw out from the cash I had on hand. I spent nearly two years putting money aside every week for the express purpose of buying an Apple Mac Pro with an Apple 30" monitor, so when I purchased the items with my credit card I was able to pay off the bill in full on receipt of the first notice and I didn't deplete my prior extant savings. Other benefits: in the nearly two years I accumulated purchase capital, Apple came out with improvements to the products and the monitor price dropped half. Thus, I got better products and paid less than I had budgeted for! Also, I continue with my weekly setting aside of cash and my savings have accumulated faster over time than if I had not established the habit.
Deferral of gratification has many benefits, some unexpected.
If word of this finally gets around and results in fewer lawyers; that's good, no?
The top graduates from top law schools are still getting the $160,000 Big Law jobs right out of law school. Those law school graduates can afford to buy a house AND re-pay student loans.
But, how many newbie lawyers get that sort of gig, out of all the LS grads every year? A handful, really. And, this was true even before the crash of the market for newly minted lawyers and the Obama Recession, and is even more the case now, as a lot of the mega-firms paying top dollar significantly cut new associate hiring. Far better, at least in the short run, to hire laterally, where the attorneys come in trained and with their own book of business. And, after the handful making $160k as Big Law associates, and maybe $120k or so in regional firms, what do you have left? The bulk making far less, as they always have, esp. with supply and demand driving starting salaries down even further. And, yes, you need to combine this with often in excess of $100k, maybe double that, of undischarable student loan debt when discussing purchase of a house.
What's your take-home pay in NYC on $160,000?
Now, subtract all your costs of getting to work, dressing for that job, acquiring the needed food and temporary housing and the debt payment.
How do you build up money for a down payment and qualify for a loan on a place that would be appropriate to live?
You'll be paying $24,000 a year on your apartment in this time. Your loans might be another $24,000. After taxes and you spend a normal amount per month, I think you will discover that you have just about NOTHING left.
You're not going to be buying a "house."
"If word of this finally gets around and results in fewer lawyers; that's good, no?"
It already has. Applications to law schools are apparently at a 30 year low.
Is it a good thing? I guess it depends on one's perspective and experiences with lawyers.
"The average Manhattan apartment, at $3,973 a month, costs almost $2,800 more than the average rental nationwide. The average sale price of a home in Manhattan last year was $1.46 million, according to a recent Douglas Elliman report, while the average sale price for a new home in the United States was just under $230,000. The middle class makes up a smaller proportion of the population in New York than elsewhere in the nation. New Yorkers also live in a notably unequal place. Household incomes in Manhattan are about as evenly distributed as they are in Bolivia or Sierra Leone — the wealthiest fifth of Manhattanites make 40 times more than the lowest fifth, according to 2010 census data."
"Is it a good thing?"
-- There's a glut of lawyers if not enough of them are getting jobs lawyering.
Cook
That's very conservative sounding.
Of course, buying private single family homes on individual lots is a non-sustainable way of life, (as is "the American way of life" in general), as it is a highly inefficient use of resources and available land. Apartment living is far more efficient and less wasteful of space. We will all have to adjust our expectations in many ways and for many reasons.
We still have 3 times as many lawyesr per capita as the runner-up, Great Britain, and everybody else get along just fine with a quarter or less as many.
On the bright side, in the "big law" job I had, there was high-quality free lunch and free dinner served in the office dining room, and you could avoid ever buying food outside of work. You could also spend all your time in the office and not have to see much of your apartment (making it easier to live in a very minimal place).
I live in Manhattan and I pay way less per month than the "average Manhattan apartment" as stated above. But then, I've lived in the same apartment for 30+ years.
Is it rent controlled? If so, those people paying more are essentially subsidizing your good luck.
"On the bright side, in the 'big law' job I had, there was high-quality free lunch and free dinner served in the office dining room, and you could avoid ever buying food outside of work. You could also spend all your time in the office and not have to see much of your apartment (making it easier to live in a very minimal place)."
This may or may not still be largely the case, but things are changing. A friend of mine works at a major Manhattan "big law" firm (he's not a lawyer but is employed in another capacity), and he has told me of the lay offs and cost-cutting measures that have occurred at his company in the last few years. Changes in technology have changed the nature of may law jobs and computers now do the work formerly done by hordes of associates, who are now redundant, (in both the literal and the British meaning of the word).
Rent stabilized, not controlled. My rent does goes up and it has tripled in price in the years I have lived here.
So, not as subsidized as control, but still somewhat.
Again, the main focus of the article is not about law school graduates wanting to buy $100,000 homes, or issues of instant gratification. As stated above, I can't access the remainder of the article, so I can't state for sure that the article didn't make more points to that effect. The linked abstract is an analysis of economic statistics, and housing affordability is always a key component of that conversation. It drives city planning/zoning (numbers of apartments/duplexes/condos/home sizes). It also affects economic development decisions - where businesses locate is dependent on the availability of housing that their employees can afford.
In my community, I know people who work at WalMart that own condos or homes worth well more than $100,000 and they did not go to school for six years & incur debt.
That is the real crux of the story - in today's market who is better positioned to buy an affordable home - a recent law school graduate or someone who spent that last six years working at a place like WalMart.
"That is the real crux of the story - in today's market who is better positioned to buy an affordable home - a recent law school graduate or someone who spent that last six years working at a place like WalMart."
-- There's something to be said about opportunity cost of school.
And that is: You're going to pay it if you go to school instead of working. So, make sure that you're willing to do so (which you probably are if you want a more technical job.)
"Is it rent controlled? If so, those people paying more are essentially subsidizing your good luck."
Of course, such disparities in pricing commonly occur everywhere. The house down south where we moved when I was 10 years old was (barely) affordable for my parents at the time because it was in a beach community. Aside from its utility to those who came to the beach on weekends to enjoy the shore, the community was a backwater and no one with money wanted to live there: all shopping, dining, and other entertainment was "downtown," in the city area 20 miles inland.
In the decades since, as downtown areas have declined and suburbs have expanded and shopping, dining and entertainment has spread outward to service the new population areas, that beach community has become a desirable place to live, and new homes being built in the neighborhood are exorbitantly expensive. My parents would not be able to afford to move in to the area were they younger house buyers now.
The ever-changing world is different from rent control.
Along the same lines (as my previous comment), areas of NYC that are now being redeveloped with expensive glittering high rises affordable only to the wealthy were--literally--slums just 10 and 15 years ago. The people that have lived in these areas are being pushed out en masse as their former neighborhoods are turned into playgrounds for the rich.
In Virginia that is happening because we're literally not allowed to build anywhere but already-developed places, and thus you get gentrification since we can't expand the suburbs any.
"The ever-changing world is different from rent control."
Different mechanism, same end result.
Given the destructive power of money to trample over all in its path, rent control laws are certainly a justifiable means to mitigate to a degree the swifter uprooting of working people from their homes.
But, all rent control does is essentially make it so other poor people have to live in worse, further out areas as other properties are able to jack up their rents even higher due to the even more artificial scarcity the rent controlled properties allow, while also causing people to not move when they start making more because they've locked in a better rate than is available elsewhere due to legal shenanigans.
Having cheap rent is a real need; rent control does not serve that need for the larger population.
There seems to be all sorts of statistics on lawyers per capita.
So,
There are lies, damned lies, and statistics.
What matters are not the numbers, but who are collecting them for what purpose.
In many countries law schools are "open," so many young people who don't know what they want to be in life take Law as a general education background, but actually go on to work in other fields.
The need to show status is what makes the cost of living so high for these newly minted law school grads. Take away most of their "must haves," which aren't, and an "appropriate" house would be within range for these young strivers. This comment is made in the full knowledge that the importance of signaling status is central and therefore it is, if not literally impossible, damn near impossible for most to stop acquiring must haves.
"Having cheap rent is a real need; rent control does not serve that need for the larger population."
It could if municipal areas where affordable apartments are becoming scare would expand rent control laws to serve their working populations.
And what does that do to all the new people looking for places to live?
It's a trick headline. More than 50% of the Law School graduates have no job at all and many of the 50% who do are interning at minimum wage or nothing deals.
Now it looks like high student debt could reduce the amount that can be borrowed, and the earning potential to support higher payments might not be there.
Duh. As a former loan officer, here is a clue. Debt of ANY kind reduces your ability to borrow....or get MORE debt. Loan officers tend look at the here and now as well as the past. Not your future earnings potential. No one can predict the future and giving someone a big wad of money and future debt based on a kiss and a promise is not the job of a financial institution which is dealing with OTHER people's money.
Student loan debt is just a big gamble that unsuspecting marks....I mean students, were conned into accepting. The big pay off, being the large salaries, didn't come through. They gambled. They lost. Just because they took poor choices, bet on the come, doesn't mean that the rest of us who didn't get into massive debt for the promise of fairy dust and happily ever after, should have to subsidize their pipe dreams. Gamblers tend to be greedy people who want the easy way to riches.
"And what does that do to all the new people looking for places to live?"
If more apartments were covered by rent controls, then, as people die or move away, there would be a larger inventory of lower-priced apartments available to would-be new tenants. At it is, over time, fewer apartments are covered by rent controls, and thus those living in protected apartments are less willing and able to relocate. The newer apartments being built are NOT priced for new apartment seekers of modest means. Municipalities could require that a fixed percentage of all new apartment construction be of housing for working citizens, (the grocery clerks and store attendants and cab drivers and school teachers and butchers and office workers who make up the majority of any city's working population).
They do that in the Fairfax area, with income requirements to live in cheaper areas. I, essentially, make too much to live in areas where I'm not throwing almost 50% of my income away in rent. All you've done, yet again, is decrease the supply for people, since people are living longer and retiring later, without actually reducing the rent payments for most of the population, except the lucky few.
@ Robert Cook
It sounds as if you have a good grasp of finances and the ability to defer gratification or purchases. The key to success is to be able to assess your current situation realistically and be able to plan for the future.
Perhaps if these students had been taught some very BASIC financial concepts in their earlier years, they would not have fallen prey to the lure of easy money and woke up from that siren call to find themselves in financial ruin. Some people get this training or life lesson from their own parents and family, but it appears that the majority of students are just ignorant of the basic rules of life.
Whose responsibility is this? Perhaps if the schools were to concentrate on actually TEACHING hard subjects instead of politically correct indoctrination, our young adults wouldn't be so naive, stupid, ignorant and not be trapped in a lifetime of debt that could have been avoided.
Part of the reason for housing becoming unaffordable in Northern Virginia is the practice - encouraged by the Dem local governments - of tearing down existing sturdy WWII-era buildings which are affordable and constructing new flimsy buildings on those sites, which necessarily have to add in all of those construction costs to the rental prices.
As a consumer of legal services, I find this frieghtening and (currently just barely) observable. What do you get when the price of mediocre law drops? Answer: lots more mediocre law. And, it's not as if its in short supply now.
Shit. Houses in Mississippi cost more than that. And we have actual work for lawyers down here.
Professor Althouse is right: "It alludes to expectations that shouldn't have arisen in the first place.".....especially if the 2011 law school grad already is burdened with what amounts to a $150,000+ debt. The 2011 law school grad begins post-grad life with the equivalent of a mortgage --a mortgage with a high interest rate.
Medical school graduates face the same financial challenge except they must train for many more years at relatively low pay and their med school debt continues to grow.
Robert Cooke wrote:
If more apartments were covered by rent controls, then, as people die or move away, there would be a larger inventory of lower-priced apartments available to would-be new tenants. At it is, over time, fewer apartments are covered by rent controls, and thus those living in protected apartments are less willing and able to relocate.
Rent controls are one of those govt inentives that are great for the people who are in them, but which drive up housing prices for the vast majority of people who aren't in them.
Robert Cooke wrote:
Along the same lines (as my previous comment), areas of NYC that are now being redeveloped with expensive glittering high rises affordable only to the wealthy were--literally--slums just 10 and 15 years ago. The people that have lived in these areas are being pushed out en masse as their former neighborhoods are turned into playgrounds for the rich.
Who says the democrats aren't friends of big business? NYC is a blue state through and through.
My daughter graduated from law school in 2006, got married last fall and she and my son in law are first now able to buy a home, Madison's east side, lovely neighborhood, but not ritzy. She works for the state and graduated with student loan debt.
Also, my daughter didn't take on student debt because it was "easy money". Law school isn't cheap.
"Who says the democrats aren't friends of big business?"
I don't know, who says that?
I certainly don't.
My house cost $16,000 and came with wheels.
Robert Cook wrote:
I don't know, who says that?
I certainly don't.
The DEMOCRATS say that, at least when they are out on their pogroms to demonize the rich people.
If more apartments were covered by rent controls, then, as people die or move away, there would be a larger inventory of lower-priced apartments available to would-be new tenants. At it is, over time, fewer apartments are covered by rent controls, and thus those living in protected apartments are less willing and able to relocate. The newer apartments being built are NOT priced for new apartment seekers of modest means. Municipalities could require that a fixed percentage of all new apartment construction be of housing for working citizens, (the grocery clerks and store attendants and cab drivers and school teachers and butchers and office workers who make up the majority of any city's working population).
Rent controls spectacularly reduce the number of apartments. That ought to figure into the theory somewhere.
It's the primary perverse consequence.
"Rent controls spectacularly reduce the number of apartments."
Why?
If true, is it an immutable law?
Can it never be otherwise?
As with all articles about "new law school graduates" it is concerned only with those practicing in major urban areas. You know, where the writers are located. Similarly, all articles about "law school" or "law students" are concerned only with the "top" schools, as though the experiences of the snotty league law schools and urban practitioners are all there is. I graduated without debt from a law school so far down the list that it would be sneered at if it could be called Third Tier - which I'm not sure it could be. It's located in a rural part of fly over country where costs are low, yet it had a track record of its students passing the bar at the highest rate of all schools in a large state, public and private. My practice is located in a community of 120k, near no major urban area where we all make a good living and own our on homes. Consequently, all these articles seem like so much nonsense.
"... is it an immutable law? "
Now you're getting it grasshaffa,
.
Unfortunately too many will go into politics, in which they'll get filthy rich.
Syracuse, NY, where you have plenty to choose from. Now let me explain school and property taxes to you...
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