Living in Steamboat
Sunday, August 26, 2007
Steamboat Springs — As Steamboat Springs grows and real estate prices soar, conversations often have turned to whether the city can remain an affordable place to live for its working class. Using salary schedule information from the Steamboat Springs School District, the Pilot & Today met with local financial planners to assess how a hypothetical first-year school teacher could expect to live in Steamboat, and whether goals such as owning a home are within reason.
The results, for the most part, were discouraging. On a teacher's salary, minimal savings require major sacrifices. Home ownership - at least in Steamboat proper - is a pipe dream, and a second job is a virtual necessity.
"If you don't have at least two jobs in Steamboat, you're unemployed," said Joe Birkinbine of ATP Financial Services.
The numbers
Birkinbine used the school district's salary schedule to create a budget for the hypothetical teacher. Assuming 20 percent goes to taxes, the teacher's first-year gross salary of $31,382 would net $25,105.
Birkinbine said living in Steamboat requires sacrifices, but people should also balance their lifestyle with some indulgences. Therefore, while the budget uses average costs for things such as rent (including utilities) and car insurance and assumes sacrifices in monthly costs for food and recreation, it does provide for luxuries such as cable television, Internet and a cell phone.
If the teacher were to try to save $100 a month, they would end up $335 in the hole by the end of the year. And that's assuming the absence of the credit card and loan repayments many people have when they leave college.
Strategies
When it comes to saving money, Birkinbine advises his clients to treat themselves like a business. He said the key to a successful business is not how much it makes, but how much it retains. Therefore, Birkinbine said it is important to "pay yourself first" and put away some money into a savings account before doing anything else with a paycheck.
"The first few months, it's going to hurt," Birkinbine said.
While saving money might mean making sacrifices such as giving up a few six-packs a month, Birkinbine said being disciplined early is well worth the cost. He likes to use the example of two clients, one who begins saving for retirement at age 30 and another who saves more, but doesn't start until age 40. The first client could contribute $2,000 a year for 10 years to a retirement fund with an 8 percent compounded rate of return, and that fund would have a value of $214,295 at age 65. Starting 10 years later, the second client could contribute the same amount a year for 25 years and that fund would be worth only $157,909 at age 65. Despite contributing $30,000 less, the first client's fund is worth $86,386 more.
"You can't live all for today because you're losing out on the key part of the formula, which is time," Birkinbine said. "Set goals, be disciplined and have balance."
Birkinbine said it is also important to pay attention to your money, and make sure it is earning interest, at all levels. Birkinbine said too many people settle for checking accounts that earn zero interest, when there are plenty that offer interest.
Many of these accounts, however, require large minimum balances. For example, online bank Everbank requires a $1,500 minimum balance for its interest-paying checking account.
Ed Allbright of Columbine Mortgage believes that before savings, any financial discussion should begin with having a good credit score. Allbright said this is the first place lenders look when considering a mortgage or any other type of loan.
"The biggest mistake I see people making is not focusing on improving their credit," Allbright said, adding that most people should be able to achieve a credit score above 700.
In the case of buying a home, Allbright said the next thing lenders look at is assets. They want to see at least three to six months worth of the mortgage payment saved, Allbright said, to ensure the ability to pay in the event of unexpected expenses such as car repairs.
"Mortgage people don't have a sense of humor," Allbright said. "They want to get paid first."
But even with a good credit score and modest assets, buying a house in Steamboat is still probably unattainable for many in the local working class, Allbright said. Besides the 3 to 10 percent down payment that would be required on a home purchase, Allbright said monthly mortgage payments would be unaffordable.
Taking into account the debt-to-income ratio of about 40 percent that lenders like to see, Allbright said a starting teacher could probably afford a mortgage in the neighborhood of $100,000, when a more realistic figure in Steamboat would be $400,000.
Reality check
Daniel Foley, a certified financial planner with Sleeping Giant Financial Services in Steamboat, said home ownership in Steamboat is an unrealistic goal for anyone making less than $50,000 a year.
"I don't care where you live, you don't own a house right away," Foley said. "A school district person starting out is not going to be able to afford a condo."
Foley said taking on a second job is a reasonable idea.
"The bottom line is, if they can't afford to pay for their lifestyle and desire to own in Steamboat, then we're blessed in this town to need more labor," Foley said. "People are scrambling for good people."
Foley said with the current workforce shortage in Steamboat, finding a second job shouldn't take more than a week.
"I think that, quite frankly, is the only alternative," Foley said. "That or rent."
The other option, Allbright said, would be to settle for a home in an outlying community such as Hayden or Craig.
"The easy answer is commute," Allbright said. "That's just the way life is."
Birkindine, Allbright and Foley agreed the struggles of the working class are nothing new and not Steamboat-specific.
"When you look at comparable places in the country that have allure and draw, we're not that much different," Birkindine said.
Foley said living in a high-amenity community requires sacrifices, and for many people, just living here is enough.
"You already are rich living in Steamboat," Foley said.
No end in sight
According to the most recently available data from the Bureau of Economic Analysis, when adjusted for inflation, Routt County's per capita personal income increased from $38,712 in 2003 to $41,558 in 2005. That 7.4 percent increase was higher than Colorado's as a whole, which was 3.8 percent.
Scott Ford, co-founder of the Mountain Learning Network, said per capita personal income usually moves at a glacial pace.
"When it does move up and down significantly, something's going on in the economy," Ford said.
And that something isn't that people such as teachers are making 7.4 percent more money. Rather, affluent people, with income largely derived from pensions and investments, are increasingly moving to Steamboat, pushing up real estate prices and pushing out the working class. Ford said the trend is a threat to Steamboat's infrastructure.
"I don't think anybody's denying that it's an increasing problem," Ford said.
Exacerbating the problem, Foley said 75 million baby boomers are expected to retire in the next 15 years. If only one-twentieth of one percent of these baby boomers decide to move to Steamboat, that would mean an additional 37,500 new people in the city, further intensifying the housing shortage.
"It's going to be a big problem," Foley said.
Comments
Jason Miller 5 years, 9 months ago
You know i think it would be darn impossible for a family to live on this anywhere.It is my opinion that teacher should be paid at least twice that a year.
BigOil 5 years, 9 months ago
Our teachers are vastly underpaid. Our glorious school board led by the Honorable Dr. John D wrestled for months about a 3% raise for teachers but had no problem spending $300k+ to buy out the super.
nightbird 5 years, 9 months ago
From reading this article the only person interviewed that seems to understand the core problem is Scott Ford. He is correct in describing workforce housing as an infrastructure issue. Dan Foley suggest just living here in this beautiful place is payment enough. The problem is that you cannot eat the view or live under the stars in January. Ed Albright solution to address the problem is "drive until you qualify." The problem with this is drive where? The "affordability" of workforce housing in the communities of Oak Creek, Hayden and Craig is evaporating. I guess that Albright thinks Maybell and Walden are viable options.
Workforce is an infrastructure issue that is equally as important as utilities, transportation and water/sewer. If our community was experiencing a shortage of drinking water there would be a demand of government to build a reservoir and the citizens would be willing to tax themselves for its construction. One does not see too many reservoirs constructed by the private sector and that is why government involvement is necessary to meet this type of infrastructure need. Just as a reservoir stores water which supports a community's infrastructure into the future "storage" is needed for the workforce. This storage is called affordable housing and it is going to need the active support of government to make it happen. Hopefully this can take place sooner rather than later.
It is a myth to believe that it is possible to pay the workforce (teachers-firefighters-bank managers, etc.), enough to live here. This does not mean that wages for the workforce is unimportant but money alone is not the magic bullet to the problem being faced. More money just will not solve it. The solution is getting attainable housing in the 30% to 35% of total household income which does not involve commuting daily to Maybell or Walden.
PS I thought it was somewhat ironic that this article is in the same section as an article titled "Million-Dollar Homes March At Double Time"
rodcarew 5 years, 8 months ago
Well put, nightbird.
buck 5 years, 8 months ago
I don't know of any profession where someone straight of our college with a BS degree (same as an entry level teacher) can buy a million dollar house (without parental support). Suggesting that teachers are underpaid because of this is ridiculous. The engineering firm I work for hired this year's BS grads at $32,000, no benefits for 3 months, after 3 months the employee starts to accumilate 2 weeks of vacation per year, and the health and retirement benefits are likely way below teachers. Oh yes, staff engineers are expected to average 55 hours of work per week. And these are boom times for engineers. I started out at $7/hour 21 years ago. In a USA Today published an article on hourly compensation. Because of the high benefits and low annual hours worked, teachers were behind only attorneys and MDs. This was a few years ago, but I'd wager that is true still today. So, if teachers are benefit rich but salary poor, maybe they should scrap their union and negociate what they really want for themselves. It is interesting how these poor-teacher articles never show the salaries of tenured teachers.
thecondoguy1 5 years, 8 months ago
I am 60 years old and worked three jobs from the time I was 18 years old, up until just recently people would not believe the work I have done, quietly as well because it would have been frowned upon a professional doing this or that as a side job. grow up,,, landscape, wait tables, serve booze, deliver papers, stand the counter at the Grand, drive truck, weekends and summers, none of us are entitled to that much time off, until we die.................
QuitYerWhining 5 years, 8 months ago
That's pathetic Condo Guy. I work to live not the other way around. I moved away 3.5 years ago from the Steamboat area because I saw the writing on the wall. Unless I kill myself working 2-3 jobs I would never be able to afford a home there. What's the point of living there if you never have enough free time to enjoy the life style we all seek when we move there in the first place. I don't want to live (or die more like it) in Steamboat that bad...there is more to life than working 80 hours a week just to be able to claim that I paid $70 to spent 7 hours on my 1 day off skiing. Anyone but Boaters would consider that masochistic. As Joseph Campbell said "I think the person who takes a job in order to live - that is to say, for the money - has turned himself into a slave. "
QuitYerWhining 5 years, 8 months ago
.....PS When I think of living in Steamboat I always replay the scene from Animal House where the pledges are stripped down to the underware getting paddled and all they can say through bared teeth is "Thank You Sir....May I have another!" Not me... Im hanging at the Delta house.
thecondoguy1 5 years, 8 months ago
to each his own Quit, but better to be a slave for the first 60 years than the last 60 years. "Thank You Sir". Good luck at all you do.......
longboard 5 years, 8 months ago
Shouldn't we be talking about what we really need - low income housing?
bolter 5 years, 8 months ago
My family and I are lucky. We bought our home in old town in 1989 for five figures. I earned enough at my job here to qualify for and pay the mortgage. So did my neighbors.
Fast forward to 2007---is there a job opening anywhere in Steamboat that pays enough to buy a home in Steamboat today? No. So---who is gonna move in next door when your neighbor cashes out? A rich second homeowner.
The teachers, police officers, and other working people who form the backbone of the community can't afford to live here anymore. Before long, the whole town will be occupied by rich people who don't make a living here. Is this a good thing for our community?
My house is now worth a fortune, worthless unless I cash out and leave, making room for someone who can afford a million dollar second home. My town is turning into Disneyland, and all I got was a t-shirt and a golden kick in the butt sayonara.
bolter 5 years, 8 months ago
... and a big wad of cash.
OnTheBusGus 5 years, 8 months ago
Bolter, what you have just described is Aspen. No one lives there, all homes are celebrity owned and/or 4th vacation homes. Aspen is like Disneyland, you can visit but you can't live there. What Steamboat needs for the workforce is affordable places to rent. Buying is not a reality for the working class but with an affordable place to rent, they could be doing well and live without spending 75% of their income on an impossible mortgage.
longboard 5 years, 8 months ago
No, I don't mean government subsidized housing, I mean housing for people with low income....almost the entire service community in Steamboat. Problem is that it may never become a reality here.....land prices being the ultimate denominator, but can you blame anyone for trying to maximize their return?
So what do we do?
bigdog 5 years, 8 months ago
Low income housing? Do you really mean "government subsidized housing"? Why should I or anyone else have our hard earned money confiscated by the imperial government to help pay for your housing?
Maybe I misinterpreted your comment?
id04sp 5 years, 8 months ago
Longboard,
Service workers shall henceforth commute to work in Steamboat, just as they do in every other town where the people who scrub the toilets and wait on tables cannot afford to live within walking distance of their employer.
When the town is taken over by second homeowners, there will no longer be a need for public schools in town. Schools will move to where the kids are, and that will be in a place where teachers can afford to live. The wealthy who remain in town and have school-age kids can either put them in a private school close-by, or (gasp) haul them out to where the school is. The circle will then be complete.
I only hope that, somewhere in all this churning, the U. S. Postal Service will be able to figure out how to deliver mail to individual residences. I have relatives in a very rural area in the east where there are no other homes within 1/4 mile. The USPS delivers their mail to a box across the highway from their driveway every day. The post office is maybe 30 by 50 feet for the whole building, and the customer service area gets crowded when a second customer comes in. Yet, somehow, they still deliver mail to homes every day.
With thinking this backward in the USPS in Routt County, dare we hope that anybody else can have an original thought? So, the answer is, no low-income housing. Let them eat cake. Kill them all and let God sort them out. It's better to be rich and poor than sick and healthy. When there's nothing left but second homes, nobody will be getting mail at home anyway, so it won't matter.
longboard 5 years, 8 months ago
id04sp - I fear you're absolutely right....and I hear you on mail delivery.
thecondoguy1 5 years, 8 months ago
who gets mail??? I don't want no shtinkin mail................
animalfarm 5 years, 8 months ago
It's better to be rich and poor than sick and healthy.
Did you mean "It's better to be rich and healthy than sick and poor"?
retiredinss 5 years, 8 months ago
Who should pay for 'affordable housing'? Who should get 'affordable housing'? Who should make the decisions? On what basis should the decisions be made? Should 'affordable housing' mean that those living in it do not get the benefits of housing price increases when they sell / move? If not, how do they eventually 'buy' a house?
nightbird 5 years, 8 months ago
Wow Just got back into town and was surprised by the number of comments this specific article has received.
I think it is naive to say dismiss the on-going role government has played regarding housing. Anyone that owns a home lives in government subsidized housing. I do not care how libertarian you may be if you own your home you live in government assisted housing. The assistance comes in the form of the deduction you can claim interest payments and property taxes. The amount by which these deductions reduce the amount of income taxes you owe is the value of the subsidy. For the average American home owner in the 25% tax bracket the government subsidy annually is worth about $4,000.
The biggest subsidy for homeowners often takes place when they sell their home because they are exempt from paying capital gains associated with the appreciation of the house. In America when you sell your home, if you qualify, you can keep, tax free, capital gains of up to $500,000 if you are married filing jointly or $250,000 for single taxpayers, or married taxpayers who file separately. To qualify for the $500,000 or $250,000 exclusion, the home must have been your primary residence of record for at least two of the prior five years. So long as you meet the primary-residence-of-record, two-out-of-five-years requirements you can take the exclusion as often as you meet the qualifications -- for life.
Since it is not uncommon in our real estate market where home prices have appreciated dramatically many people have $500,000 or more of equity in their home. The value of the capital gains tax exemption would be worth $75,000, ($500,000 x 15%). The government subsidy to the individual homeowner is.
I have lived in old town for 15 years. Being able to deduct interest and property taxes from my income has reduced the income taxes I would have otherwise had to pay by over $60,000. My situation is not unusual. I and other homeowners in America live in housing that is subsidized by both the state and federal government.
If you own your home you live in government subsidized housing.
id04sp 5 years, 8 months ago
The tax break on mortgage interest is designed to create jobs in the housing industry. The exemption on capital gains up to $500,000 (or whatever the limit is) is designed to let people reinvest it and, guess what, provide jobs in the housing and construction industries. It's a bit of fuel for the economic engine.
If you took the time to do the math and figure out how the government tax breaks for mortgage interest and capital gains provide wages for workers and create more tax revenue for the government over all, you'd understand the reasoning. You and one or two other people buy a new house which provide jobs for carpenters and other building trades for the whole year, plus the people who supply lumber, concrete, electricians, etc., and in the end, they all pay more tax to Uncle Sam than they would have otherwise. More than enough to make up for your tax break.
Yes, I meant it's better to be rich and poor than sick and healthy. It's like, "Time flies like an arrow; fruit flies like bananas." There's more meaning in the phrase than the words can convey. Like, "As if . . . "
nightbird 5 years, 8 months ago
Good Morning i04sp
Appreciate our civil discourse. I think you and I would both agree there are all sorts of twist and turns in state and federal tax codes that are intended to provide incentives for all sorts of things that are intended to encourage economic growth. Carefully engineered and targeted tax reduction incentives are not a bad thing.
I would agree with you that tax reduction incentives offered by the government often represent an investment in the future of the economy. This government investment is done with the hope that the value of the incentive is more than offset by increased revenue. I think in most cases this actually occurs.
However, from my perspective incentives and subsidies are interchangeable terms.
id04sp 5 years, 8 months ago
The King of the fiefdom has to allow the serfs to prosper or they will starve to death and so will the King.
A wise farmer doesn't kill the last hen until she stops laying eggs.
Our problem is that our governments are run mostly by lawyers, and lawyers are like prostitutes; they get their money up front, or there's no service rendered. It's an arrangement which is exactly the opposite of how a productive economy operates. You work first, then get paid by the results (as in the harvest of crops, or the drilling of an oil well).
We'll always have Kings, but they need to be people who understand that the rest of us have to eat too.
JLM 5 years, 8 months ago
Affordable housing is a worthy public policy issue which can be addressed by aftfully creating a set of financial incentives which motivate the private sector to meet the demand.
The City Council should craft a package of incentives --- reduced property tax rates, property tax credits, infrastructure rebates, land grants, etc. --- which will motivate the private sector to solve the problem.
On an individual basis, the City Council should give consideraton to creating a mortgage pool which would also qualify for similar incentives.
Government cannot solve the entire problem but government can provide the push which gets the problem started down the road to a real solution.
The private sector will provide the final solution when the solution is affordable and profitable. Capitalism is a very good thing because it provides market solutions to market problems.
And, that's a good thang, ya'll!
JLM 5 years, 8 months ago
A home is the single best and largest investment that most families will make. The beautiful thing about real estate is that is can be appreciating while you are sleeping.
More importantly, it is the symbol of the free market at work --- you got yours! And, it provides a tangible source of family pride while knitting the family into a single cohesive unit.
Yep, home ownership is a good thang, ya'll!
Nobody should be ashamed about building huge equity in home and cashing it in --- hell, that's what you would do with a CD or a mutual fund, no? The equity is the result of making a wise investment decision, paying that baby off over a long period of time and the time value of money --- all good thangs in themselves but just wonderful when used together!
And, that's a good thang, ya'll!
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