Buying a house in 1906, Part II

August 26, 2007

Buying a house in 1906, Part 2

Continuing the excerpts from Upton Sinclair's "The Jungle," you quickly learn more ways to compare buying a house in 1906 to a 2007-era transaction.

The Jungle, Chapter 6:

...And yet all these things were as nothing to what came a little later. They had begun to question the old lady as to why one family had been unable to pay, trying to show her by figures that it ought to have been possible; and Grandmother Majauszkiene had disputed their figures – "You say twelve dollars a month; but that does not include the interest."

Then they stared at her. "Interest!" they cried.

"Interest on the money you still owe," she answered.

"But we don't have to pay any interest!" they exclaimed, three or four at once. (Today, it's "We don't pay any principle!") "We only have to pay twelve dollars each month." And for this she laughed at them. "You are like all the rest," she said; "they trick you and eat you alive. They never sell the houses without interest. Get your deed, and see." (People didn't read and/or didn't understand the paperwork they signed in 1906 either.)

Then, with a horrible sinking of the heart, Teta Elzbieta unlocked her bureau and brought out the paper that had already caused them so many agonies. Now they sat round, scarcely breathing, while the old lady, who could read English, ran over it. "Yes," she said, finally, "here it is, of course: 'With interest thereon monthly, at the rate of seven per cent per annum.'" (They used a lawyer, two actually, but both answered exactly what was asked --"How much is the payment?" Some of today's borrowers didn't know enough to ask about negative amortization and/or paying down the principle.)

And there followed a dead silence. "What does that mean?" asked Jurgis finally, almost in a whisper.

"That means," replied the other, "that you have to pay them seven dollars next month, as well as the twelve dollars." ($1200 balance time 7% = $84 divided by 12 = $7 /month.)

Then again there was not a sound. It was sickening, like a nightmare, in which suddenly something gives way beneath you, and you feel yourself sinking, sinking, down into bottomless abysses. As if in a flash of lightning they saw themselves – victims of a relentless fate, cornered, trapped, in the grip of destruction. All the fair structure of their hopes came crashing about their ears....

All their outcry did them no good, of course. There sat Grandmother Majauszkiene, unrelenting, typifying fate. No, of course it was not fair, but then fairness had nothing to do with it. And of course they had not known it. They had not been intended to know it. (Hiding a detail such as a hidden charge was one of the original purposes of "fine print.") But it was in the deed, and that was all that was necessary, as they would find when the time came. ...

...(B)y seven o'clock Ona and her stepmother were standing at the door of the office of the agent. Yes, he told them, when he came, it was quite true that they would have to pay interest. And then Teta Elzbieta broke forth into protestations and reproaches, so that the people outside stopped and peered in at the window. The agent was as bland as ever. He was deeply pained, he said. He had not told them, simply because he had supposed they would understand that they had to pay interest upon their debt, as a matter of course. (How many times do you suppose this is happening today as interest-only and ARM teaser rates reset?)

So they came away, and Ona went down to the yards, and at noontime saw Jurgis and told him. Jurgis took it stolidly – he had made up his mind to it by this time. It was part of fate; they would manage it somehow – he made his usual answer, "I will work harder." It would upset their plans for a time; and it would perhaps be necessary for Ona to get work after all. Then Ona added that Teta Elzbieta had decided that little Stanislovas would have to work too. It was not fair to let Jurgis and her support the family – the family would have to help as it could. Previously Jurgis had scouted this idea, but now knit his brows and nodded his head slowly – yes, perhaps it would be best; they would all have to make some sacrifices now. (Here in 2007, children such as 10-year-old Stanislovas are no longer turned out of school and put to work. However, you just know second jobs and other sacrifices were needed in thousands and thousands of families over the last couple years.)

The Jungle, Chapter 10

...During the early part of the winter the family had had money enough to live and a little over to pay their debts with; but when the earnings of Jurgis fell from nine or ten dollars a week to five or six, there was no longer anything to spare. The winter went, and the spring came, and found them still living thus from hand to mouth, hanging on day by day, with literally not a month's wages between them and starvation.

...They were willing to work all the time; and when people did their best, ought they not to be able to keep alive? (Again, "working for the house.")

There seemed never to be an end to the things they had to buy and to the unforeseen contingencies. (Nobody buying a house today ever seems to allow for any unforeseen expenses.) Once their water pipes froze and burst; and when, in their ignorance, they thawed them out, they had a terrifying flood in their house. It happened while the men were away, and poor Elzbieta rushed out into the street screaming for help, for she did not even know whether the flood could be stopped, or whether they were ruined for life. It was nearly as bad as the latter, they found in the end, for the plumber charged them seventy-five cents an hour, and seventy-five cents for another man who had stood and watched him, and included all the time the two had been going and coming, and also a charge for all sorts of material and extras. (A buyer with no budget for maintenance is, of course, extremely common today. Even 40-, 50- and 60-year-old Silicon Valley houses are assumed to need zero work for the indefinite future..)

And then again, when they went to pay their January's installment on the house, the agent terrified them by asking them if they had had the insurance attended to yet. In answer to their inquiry he showed them a clause in the deed which provided that they were to keep the house insured for one thousand dollars, (Why only $1,000? Didn't the house cost $1,500?) as soon as the present policy ran out, which would happen in a few days. Poor Elzbieta, upon whom again fell the blow, demanded how much it would cost them. Seven dollars, the man said; and that night came Jurgis, grim and determined, requesting that the agent would be good enough to inform him, once for all, as to all the expenses they were liable for. The deed was signed now, he said, with sarcasm proper to the new way of life he had learned – the deed was signed, and so the agent had no longer anything to gain by keeping quiet. And Jurgis looked the fellow squarely in the eye, and so the fellow wasted no time in conventional protests, but read him the deed (finally!).

They would have to renew the insurance every year; they would have to pay the taxes, about ten dollars a year; they would have to pay the water tax, about six dollars a year (more "new" expenses spelled out in the paperwork they didn't signed but didn't understand.) – (Jurgis silently resolved to shut off the hydrant). This, besides the interest and the monthly installments, would be all – unless by chance the city should happen to decide to put in a sewer or to lay a sidewalk. Yes, said the agent, they would have to have these, whether they wanted them or not, if the city said so. The sewer would cost them about twenty-two dollars, and the sidewalk fifteen if it were wood, twenty-five if it were cement. (Today in California, these "fees" are so routine that most homeowners pay 1.2% or 1.3%, or more, in annual property taxes, despite a 1.0% legal maximum.)

So Jurgis went home again; it was a relief to know the worst, at any rate, so that he could no more be surprised by fresh demands. He saw now how they had been plundered; but they were in for it, there was no turning back. They could only go on and make the fight and win – for defeat was a thing that could not even be thought of. (There they go, "working for the house," again.)

* * * * * *

Of course, we all sympathize with poor, uneducated, non-English-speaking Lithuanian immigrants from over 100 years ago. Many of today's "cumbersome" rules and regulations were developed to prevent the types of abuses described.

Even in today's "enlightened" and "full disclosure" society, however, people sign paperwork they don't understand to "buy" houses they can't afford.

Perhaps the main difference between 1906 and 2007 is today's grand-standing politicians trolling for votes by proposing to bail out those who managed to overcome the rules and regulations invented to protect them from greedy builders and agents --and from themselves.

Check back later this week for the conclusion...