[kenberg]

OK, here I am drinking my coffee and reading the Washington Post. There is a longish article about aftershocks of foreclosure, especially about something called deficiency judgments. In many states the lenders have many years (exactly how long depends on the state) to attempt to recover money. Got it. But then I read

Quote

In most cases, the only way out of a deficiency judgment is by filing for Chapter 7 bankruptcy. But because of the Bankruptcy Reform Act of 2005, that's only available to people earning no more than the state's median family income by family size, which is $108,915 for a family of four in Maryland.

Full article at
http://www.washingto...ry.html?hpid=z1

Say what? The median income in Maryland for a household of four is $108,015 ? And again i say ????.

So I mention to Becky that I was under the impression the figure was somewhat over 64 K, and somewhat over did not mean 108K. Then I google around and arrive at some figures from the Census Bureau.
http://www.census.go...ta/statemedian/
The bottom link on tha page gives median income by states and going to Maryland I find a median household income of 67,469 which is roughly consistent with what I expected. A bit higher perhaps. But the second from the top link breaks the data down by family size as well as by state. That gives, for a Maryland household of four, a median income of $106,707. More or less what the Post said and I find it astounding. New york is 81,522 and California is 74,122. Moreover, in Maryland the three person income is 85.438.

The Post reporter, pretty much like all reporters, just reports his figures with no hint that he finds them as astounding, unbelievable really, as I do. Surely a normally curious person would ask "Why is it that specifically four person households in the State Maryland have a median income that is grossly out of line with all other figures, whether we look at different states or we look at different family sizes?"


Apparently a young couple who wish to make good money should have two kids as quickly as possible. No that's not really a suggestion but I have seen some pretty stupid applicarions of statistics to policy decisions so I thought I would toss it in.


Anyway, I am very suspicious of this data point. Sometime back Winston put up some data and it turned out that income was being divided by some square roots or something. But unless there is some special Maryland gimmick, that doesn't seem to be the case here.

Anyone have any thoughts about how this outlier might come about?

Becky submits her guess as: Four person households are often a married couple, both working, and two kids. Three person households are often a single mother with two kids. Maybe so, that would go toward the three person/ four person issue. It still leaves the question of why the four person household makes so much more in Maryland than in California or new York or pretty much anywhere else.


Something is screwy here.

[Winstonm]

Proximity to DC and a LOT of double dipping going on, I would bet. Oklahoma has a median income of 63K for family of 4. Oddly, that represents the highest median income in OK when compared to other size families.

[kenberg]

Winstonm, on 2013-June-16, 09:33, said:

Proximity to DC and a LOT of double dipping going on, I would bet.

Montgomery County, adjacent to D.C. has a lot of high incomes. But the Eastern Shore has a lot of low incomes. There are a lot of people in Baltimore with low incomes. But whatever the case, why does a household of four have such a dramatically greater median income than any other grouping? If you look at three person households you conclude that Maryland three person households, as measured by the median (an only so-so measure) are in decent shape. Comparable to the rest of the country. For example 85K in Maryland, 75K in Minnesota. It is specifically the four person household that is way out of whack.

Thinking more about Becky's guess. If typically a woman has two kids then indeed it might be that a four person household is much more likely than a three person household to have two working adults in it. This sort of backward reasoning is highly risky, but perhaps that is what is going on.


I just find a median income of 108K to be so surprising as to require some sort of explanation. Going from 85K to 108K by adding one more household member is such a jump it seems to shout for someone to read the data more carefully to see how it could happen.

I often see news stories where I want to grab the reporter and ask him/her if they did not find this surprising and, if they did, why they did not ask a follow-up question or two. Apparently they have no sense of curiosity in them at all.

Added: Who cares, one might say. But think about it. Here is a family, husband, wife and son, making $105,000 per annum. You have this foreclosure on your record, you want to get rid of the hassle, so you are going to go with the Chapter 7 option. Oops, you make too much. You have to get your income down to 85K or so and that's giving up a lot. Ah, but there is a solution. You tell your son that contrary to what you may have said in the past, it is now just fine for his girlfriend to move in. Presto, you are up to a household of four. You file for Chapter 7 and ditch the problem. Then you kick the bitch out. This is an even better idea than the sequester. Your government and mine, helping us all out with our problems.

[blackshoe]

ROFL!

Perhaps the statisticians should specify how many earners there are in these families.

[y66]

My Excel skills are not to be trusted. But it looks like 12 other "states" -- Alabama, Connecticut, DC, Kentucky, Louisiana, Maine, Massachusetts, Mississippi, New York, Ohio, Rhode Island and Puerto Rico -- have even larger percent differences between 3-person families and 4-person families.

[Cyberyeti]

I wonder if there's a prevalence of adult children living with parents in the states with high averages so you have 3 or 4 earners in some cases

[kenberg]

All of these are possibilities. I am still really stunned.

Sometimes I feel I am still in touch with the world. I am running a summer program for students from other schools and they are stunned to find I was born in 1939 and can still walk and, mostly, speak without drooling. but there are other times when I feel I have totally lost touch. My father made about $5,000 a year and we lived pretty well. Now the median income for a household of four is $108,015. I am aware of inflation but still... Am I Rip Van Winkle? The middle class is hurting? Should I send them some money?

And I still do not get why the reporter's jaw did not drop.

If $108K a year is just a normal expected number for a median salary, I think I have totally lost touch with the world.

[hrothgar]

I am pulling this out of my ass, however, here's a couple things that might be worth looking at:

First, I'd want to see the relationship between number of children and education.
I suspect (but can't prove) that there is a negative correlation between the two.

Next, I'd want to see the relationship between age and number of children.

I am speculating that families with two children have well educated wage earners in their prime earning years...

[awm]

It seems like this is a common pattern (4-person household has higher income) and not just a Maryland thing. My suspicion is that family of four has the following properties:

1. Unlikely to be an unwed single mom plus so many kids (whereas family of two or three could easily be this situation).
2. Unlikely to be very young people not yet in their prime earning years (family of one through three could easily be this situation).
3. Unlikely to be retirees on a fixed income (family of one or two could easily be this situation).
4. Unlikely to have one of the adults providing full-time child care (larger family could easily be this situation)
5. Unlikely to be supporting older relative (larger family could be this, and poverty passes from one generation to the next)
6. Children more likely to be "planned" than larger families (two kids often desirable; "unplanned" kids often derail education and/or career)

I found a chart of income by age. Properties 1-3 mean two wage earners and likely between 30-54 in age. On average this would already put the income around $75K/year... and this is a nationwide average (with Maryland being an outlier on the high end). Adding 4 and 6 bumps this up a bit more, to the point where the $108K is perhaps not that surprising.

Another chart indicates that for two adults 25+ with a bachelors degree or above, the average income nationwide is over $100K/year. Now obviously "family of four" does not mean college-educated, but the odds do probably go up (non-college folks often marry younger and wind up with more kids) but again this is nationwide and Maryland is an outlier on the high end.

[kenberg]

Adam's links, and the links from his links, are interesting. But I was looking more at the numbers directly from the census. They have a link for median family (family not household) income with no wage earners. Now that's not a typo because they include various welfare income. In D.C. the median is 14,761. In Delaware it is 42,091. Apparently if you are not going to work, Delaware is a pretty good spot to not do it. especially since with one earner the Delaware figure only rises to 47,305.

When I see data like this that is are all over the map I figure there is a lot going on that is hidden from view. Not the sort of data you want to base policy on.

Probably many of the suggestions made above have some validity but if no one has actually studied it I would say that someone should. At a first glance, it looks nuts. If no one used the data for anything then the oddities could be ignored. But apparently it gets used, for example in determining eligibility for bankruptcy filings.

[WellSpyder]

kenberg, on 2013-June-16, 15:52, said:

And I still do not get why the reporter's jaw did not drop.

I think you hinted at the answer to this in an earlier comment you made - journalists generally just don't think about the numbers they report! I'm not sure whether this is because they are always under time pressure and are pleased just to have found some numbers to report, or because they often just aren't comfortable with numbers, but I see it time and time again. My wife is fed up of the number of times I end up saying "if they had only thought for a moment about what this number is telling them they would have known it couldn't possible be right", for example when the decimal point is in the wrong place or they have simply misunderstood a definition and the average implied by the way they have written it obviously contradicts experience. It doesn't sound like this is the case with the figures that caught your eye, but it nevertheless suggests that reporters' jaws are unlikely to drop even when they should...

[dwar0123]

What a reporter is thinking and what a reporter reports are not the same thing and I would be wary of presuming to much about one from the other.

Especially as a hallmark of good reporting is concision and staying on target. Rambling about every odd thing you run across is rarely considered good reporting and would certainty be edited out by the editor anyway.

[kenberg]

dwar0123, on 2013-June-17, 13:01, said:

What a reporter is thinking and what a reporter reports are not the same thing and I would be wary of presuming to much about one from the other.

Especially as a hallmark of good reporting is concision and staying on target. Rambling about every odd thing you run across is rarely considered good reporting and would certainty be edited out by the editor anyway.

Fair enough except that reporters often make such observations about non-numerical things and, further, the point was the difficulty in getting out from under the consequences of foreclosure. If a report shows that in order to escape via chapter 7, I would not think that noting that the criterion is sharply different for a family of four than for a family of three is particularly off target. But true, I am neither a reporter nor an editor, and i will not browbeat the reporter.

At any rate, I quizzed several colleagues today, asking them what they would expect the median to be. They were way, way off, even further than my estimate of 60K or so was. One of them says his son studies such numbers and wanted the reference. Everyone was thoroughly amazed that the median income for a household of four exceeded 100K.

[FM75]

I am surprised that you did not browse around a bit - given that you wondered about the numbers, it would seem only logical to wonder how it was measured.

http://www.census.go...bout/index.html

[kenberg]

FM75, on 2013-June-17, 15:20, said:

I am surprised that you did not browse around a bit - given that you wondered about the numbers, it would seem only logical to wonder how it was measured.

http://www.census.go...bout/index.html

Actually, I did find this earlier and I read some of it.

There are times in life that I just feel I must be really out of it. This is one of them. The median household income in Maryland is 68K. A little higher than I would have guessed, but no shock. Seems about right. The 105 for a household of 4? Amazing.

Your reference begins:

"Census money income is defined as income received on a regular basis (exclusive of certain money receipts such as capital gains) before payments for personal income taxes, social security, union dues, medicare deductions, etc."

Sounds about like what I would think income is. It's good to see this written down, but reading it I don't find myself saying "Oh, now that I have read this I understand why the median is 105K".

[Phil]

kenberg, on 2013-June-16, 09:07, said:

OK, here I am drinking my coffee and reading the Washington Post. There is a longish article about aftershocks of foreclosure, especially about something called deficiency judgments.

This is what stopped me.

Lenders rarely pursue deficiency judgments, because they require a judicial foreclosure that can take several years to obtain.

Is this something new in this arena?

[kenberg]

Phil, on 2013-June-17, 18:14, said:

This is what stopped me.

Lenders rarely pursue deficiency judgments, because they require a judicial foreclosure that can take several years to obtain.

Is this something new in this arena?

As the man said, I only know what I read in the newspapers. As I get it, what's new is the large number, or at least large compared with previously, of people who could keep up payments on the mortgage but aren't. Several of the comments in the article indicate that these strategic defaulters are the targets.

An example from the article:

Quote

“Pursuing these collections against borrowers we believe have the ability to pay but who have decided not to helps us minimize our losses, which in turn helps minimize taxpayer losses,” said Malloy Evans, an attorney and Fannie Mae’s vice president for default management. “And we think it’s our responsibility to try to minimize those taxpayers’ losses as much as we can.”

Now I am not so naive as to take everything that is said at face value but it does make some sense. Coupled this with a continuing large number of defaults and perhaps that is what's up. Elsewhere in the article someone describes it as nothing new. True, I suppose, but the magnitude is probably up.


I'm happy to say that I have no direct experience with such matters, but I can only wish I could say that no one I know has such troubles. The article was, I think, reasonably balanced. People are in really bad straits, people who borrow money are expected to repay it, the clash of these two facts is a tragedy.

But really, I know little.

[barmar]

kenberg, on 2013-June-17, 14:30, said:

Fair enough except that reporters often make such observations about non-numerical things and, further, the point was the difficulty in getting out from under the consequences of foreclosure. If a report shows that in order to escape via chapter 7, I would not think that noting that the criterion is sharply different for a family of four than for a family of three is particularly off target. But true, I am neither a reporter nor an editor, and i will not browbeat the reporter.

I suspect most people (or at least the ones who matter in this case) know whether they're above or below the median for their family size. Maybe families of 4 are the most common, so it was reasonable to include the specific amount for that size. A parenthetical "but much different for families of other sizes" doesn't really shed much additional light.

And it't not likely that someone is going to take this article as financial advice. Suppose there's a family of 3 making $80K. Do you think they're going to declare bankruptcy based only on the assumption that they're significantly below the income mentioned in the article, without actually trying to find out the criteria for families of 3?

The fact that incomes vary significantly for different family sizes, and the reasons for these differences, is certainly interesting, as this thread has indicated. But it doesn't seem like it's relevant for the topic of the article. All he was doing was mentioning an example, perhaps the one applicable to the largest segment of their readership, it hardly necessitates detailed analysis.

[FM75]

kenberg, on 2013-June-17, 17:18, said:

Actually, I did find this earlier and I read some of it.

There are times in life that I just feel I must be really out of it. This is one of them. The median household income in Maryland is 68K. A little higher than I would have guessed, but no shock. Seems about right. The 105 for a household of 4? Amazing.

Your reference begins:

"Census money income is defined as income received on a regular basis (exclusive of certain money receipts such as capital gains) before payments for personal income taxes, social security, union dues, medicare deductions, etc."

Sounds about like what I would think income is. It's good to see this written down, but reading it I don't find myself saying "Oh, now that I have read this I understand why the median is 105K".

http://www.census.go...out/cpsdef.html

Click on definition of family, family group, etc. The average household size in Md 2010 was 2.61 unchanged from 2000. 4 / 2.6 x 68 = 104.6! - A linear relationship.

http://baltimore.cbs...ize-stabilized/

What I don't understand... You are a smart guy. You did not research this. Why would you then expect a reporter - likely an English major - on a deadline to do any better?



Kudos to you for reading critically and intelligently. If only very many more did!

[mycroft]

My guess is like awm's: a family of three is quite likely to be one adult and two children or a newly married (and newly-earning) couple. Four is much less likely to be one adult and three children. The former is more likely to stay as three and stay in the wage bracket than the latter - and several, especially high-wage-earning professionals, tend to stop at two children. So they don't tend to migrate to "family of 5".

Of course all of this is ad fundamentum extractum.