November 18, 2007

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The Dual Income Trap Elizabeth Warren, A Harvard Financial Law Professor writes in a very revealing article titled “The Middle Class on the Precipice” wherein she examines the dilemma now facing dual income families as spouses no longer have the added ability to enter the work force if even to temporarily buoy a family's income. Ms. Warren’s assertions can be seen as they apply to this year’s increase in foreclosures. In the 1970’s many households were single breadwinner families who purchased their home based upon a single income. This of course meant that if the sole money earner lost their job the other could fill the income void with temporary employment. Now that families are reliant on dual incomes, and qualify for their home loan based on two incomes, a loss of either income can be catastrophic if sufficient reserves do not exists. Where will the next infusion of income growth come from? It seems highly unlikely that another source of income as significant as when dual incomes materialized will could arise in the future; leading one to speculate that the rapid increase in home values as experienced in the last 30 years is unlikely to continue at the same pace. Housing is a necessity yet also very much a part of one’s financial portfolio—especially in the Bay Area. Own a home and let your equity develop. Over the long term home ownership continues to be a sound investment. Buyers who are looking to purchase their first home should consider their job security. There...

Drew Morgan

Sponsored by Drew & Christine Morgan"Helping People Make Good Decisions"smReal Estate Sales and ConsultingCarlmont Associates

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