How To Get Out Of A Housing-Fueled Debt Hole
It’s Friday desk clearing time for this blogger. “Buying a house in the East Bay is not for the faint of heart. The sellers set a listing price, but everyone understands that it is more of an opening bid than an actual sales price. So, a guessing game ensues, and buyers understand they may need to bid at least 20% — or sometimes 25-50% — over that price. Daniel Winkler of the Winkler Real Estate Group, listed a house at 5738 Clover Dr. in Oakland for $1.595 million on March 21. The seller, a developer, did not get the price he wanted, so the house was re-listed on a transparent basis at $1.995 million on April 5. It sold a few weeks later for $1.94 million. ‘We didn’t get what we wanted, but we made a deal,’ Winkler said.”
“‘Transparent pricing can be misunderstood by the buyer population, because the price appears high and buyers are already conditioned to overbid,’ said Laura Arechiga, an agent with Coldwell Banker. How do I know if I overpaid for my house? That is one mystery beyond even Berkeleyside’s ability to answer.”
“Mortgage broker Samantha Brookes is trying to figure out how to get one of her clients out of a housing-fueled debt hole. The couple, a 59-year-old Toronto city worker and her husband, 58, have so much debt that they stopped making payments on the $410,000 mortgage for their suburban home. They wanted to refinance but regulations imposed last year will disqualify them. In a few weeks, they won’t even qualify for an uninsured loan at an alternative lender as more rules come into effect.”
“They opted for a third route: adding a second mortgage with an interest rate of 10.5 per cent to pay off their debt. Their salvation came from a private unregulated lender, a move many other Canadians are making as the government tries to rein in a home-price surge that’s driven household debt to a record. ‘People need solutions — it could be temporary, but at least they have a home over their head,’ Brookes said.”
“Sweden’s housing slump deepened last month as the market struggles to absorb a supply glut and households lose confidence. The slump in Stockholm apartment prices is even more dramatic, according to Valueguard. The monthly drop of 4.2 percent is the steepest since October 2008, while the annual decline of 6.0 percent is the largest since June 2009. Greater supply ‘has resulted in buyers having more to choose from and taking longer before buying,’ Hans Flink, head of sales and business development at Maklarstatistik, said in a statement. ‘The sellers are therefore starting to adjust their prices to the tougher competition.’”
“The cost of renting apartments and villas around Dubai fell at a much faster rate in recent months, according to a review by Phidar Advisory. Accommodation costs across properties in the emirate posted the biggest quarterly decline in October since the slowdown started in the middle of 2014. The decline continued to hit many communities, including popular areas like Downtown Dubai. ‘Rent declines are escalating, largely driven by the combination of weak job growth, new supply handovers and reduced housing budgets,’ Jesse Downs, managing director of Phidar Advisory, told Gulf News. There are still some landlords out there who are hesitating about lowering their asking prices. Downs said this is leading to ‘long void periods and lost income.’”
“‘In many cases, it’s more rational to reduce the rent and fill the unit. Landlords often think their units in popular areas are immune, but nothing is fully immune now,’ he said.”
“Nigeria’s real estate sector is still going through tough time. According to latest New Telegraph investigation, most streets in Lagos and Abuja’s high brows are still filled with huge number of vacant houses. Managing Director, Jetobless Properties Limited, Mr Toluwa Jekede, a property agent in Lagos, blamed huge empty houses on absence of institutional and corporate investors/ buyers, who he said left the country due to uncertainties in the nation economy.”
He said the vacant houses most especially in Ikoyi, Ikeja GRA, Lekki have refused to go despite reduction in rent to attract tenants. According to him, most of the properties in his care for more than two years have been vacant without anyone asking for them for occupation. ‘I have some vacant houses in Ogba, Adeniyi Jones, Opebi and Ikeja GRA. They are just emptied for two years now. Accommodation seekers do not even have the money to rent some of these houses unlike before when it was based on who came first,’ he said.”
“Sydney apartments, townhouses and semi-detached homes fell 1.4 per cent in value in the September quarter, their biggest loss in almost six years, as investor credit curbs tightened and larger volumes of apartments settled. House prices also turned negative in the NSW capital in the three month period, with values falling 1.3 per cent from June, confirming a slowdown in a market that has thrown the brakes on price growth compared with its buoyant start to the year.”
“‘They have completely turned 180 [degrees],’ said Dan Tussie, a real estate agent with Kirribilli-based Deborah Richardson Real Estate. ‘”It’s not from the lack of viewers or the lack of enquiry. It’s the attitude that’s changed. It’s pretty severe. The vendors are still in gagaland. They still think they can price [their properties at the level of] eight months ago and they can’t.’”
“The weaker-than-expected overall figures confirmed the end of Australia’s housing boom, Capital Economics chief economist Paul Dales said. Housing prices were likely to be ‘broadly stable,’ next year, but could turn negative and this would hit overall economic growth, he said. ‘More up-to-date indicators suggest that prices fell further in the fourth quarter and may even decline next year,’ Mr Dales said. ‘That could make 2018 a challenging year for the wider economy.’”
‘Transparent pricing can be misunderstood by the buyer population, because the price appears high and buyers are already conditioned to overbid’
How do you like that bay aryans? Will you fetch and sit and feed the squirrels on command of the REIC?
‘More up-to-date indicators suggest that prices fell further in the fourth quarter and may even decline next year,’ Mr Dales said. ‘That could make 2018 a challenging year for the wider economy.’
Yeah Paul, prices may even fall the years after that. It could be challenging, or it could be a complete, decade-long disaster. Boy it sure was fun getting into this situation, though. Remember all those TV shows? What a hoot the past 25 years have been.
May 13, 2017
A report from the Mercury News in California. “At a Silicon Valley of Realtors meeting this month, Carole Rodoni, president of Bamboo Consulting, said realtors need to educate buyers that this market is not a negotiation market; rather, it is a competitive market. ‘Buyers have to be quick, fast and ready to perform, or the house will be gone. Price is not price; it’s just a number,’ said Rodoni. She said to realtors, ‘Tell your buyers ‘If you can’t go higher, then you need to go somewhere else. If you want to live here, the key is to get in and pay the price because that’s the way it is.’”
http://thehousingbubbleblog.com/?p=10083
“Price is not price; it’s just a number”
Bahahahahaha … insanity is not insanity; it’s just a word.
Bamboo Consulting…..
I prefer “Potemkin Consulting”
OMG, the video of Carole Rodoni is something else
https://www.youtube.com/watch?v=v5DaG750Muo
“…then we are going to do a little bit of time on these millenials”
The woman is an absolute kook. But she is suitable for an audience of realtors.
Bonus points: Hair made of dyed-blond steel wool.
Her outfit looks like a skydiving thing.
Actually, this lady is a HBBer at heart but just took a wrong turn into real estate, poor thing. She’s actually fun to watch. She
a lot.
Part 2 of the video is *much* better than Part 1. That’s where she “does the time on these Millenials.” She spends about 12 minutes ripping Millenials to shreds. She even has a handy-dandy snowflake waiting in the room to stand up testify to his intelligence.
She points out how marketing to Millenials is very different than serving Baby Boomers. (Not a word about GenX, again.)
Rodoni seems pretty damn sharp to me.
And I think GenX dodged a bullet by being ignored by Madison avenue. No stupid patronizing by the (((media))) 24/7/365.
“Rodoni seems pretty damn sharp to me”.
I was thinking the same thing although the white hair along with her outfit reminds me of the “family” from the movie “The Omega Man”.
These are great videos - she is very centered.
Herr look does crack me up - put a pointed kit hat on her, and she could put any Wisconsin garden gnome to shame!
“…then we are going to do a little bit of time on these millenials”
Don’t knock what she says about millenials, she NAILS them.
Nails them big time.
She’s channeling Phyllis Diller a touch.
“OMG, the video of Carole Rodoni is something else”
LOLZ!
it is true….
after four years of living in East Bay, we are ready to move out to another state…… come and take a look at Alabny and Berkeley, the house is old and shady and they are asking 1M and 30% higher than the asking.
and you can’t even order online because the homeless take the packages before you get a chance. this is American dream!!
“…you can’t even order online because the homeless take the packages before you get a chance.”
Good for the homeless - fighting back!
Rising interest rates, lower MID, and SALT & Property tax deductions capped at 10k. Look out below!
The homeless are fighting back against… whom? Regular schmos ordering stuff? Probably heroin addicts selling for the next fix.
I wonder what would happen if, instead of having a war on drugs, the gov simply BOUGHT the drugs and handed them out for free at approved treatment centers. Buy enough to satisfy (or overdose) the entire addicted population. The entire drug trade, and all the crime and theft that goes with, would grind to a halt overnight. Can’t sell if nobody’s buying.
I’ve read some pretty convincing economic analysis that the state should buy and provide drugs to the addicted (and provide rehab programs for those interested in quitting) and then simultaneously outlaw all drugs. It might seem counter-intuitive, but this approach would separate the criminal aspects that fuel addiction.
Winter Springs, FL Housing Prices Plunge 23% YOY As Housing Correction Expands
https://www.movoto.com/winter-springs-fl/market-trends/
“They opted for a third route: adding a second mortgage with an interest rate of 10.5 per cent to pay off their debt.”
Interest rate of 10.5 percent. Check.
“Their salvation …”
“Salvation”, a loan with an interest rate of 10.5 percent is seen as a salvation. Check.
“… came from a private unregulated lender, …”
Luca Brassi, maybe?
“… a move many other Canadians are making as the government tries to rein in a home-price surge that’s driven household debt to a record.”
I love this blog.
Yeah, the salvation of being in too much debt is another loan, at high interest. Here’s your salvation Canucks, prepare for bankruptcy, rent an apartment and stop borrowing for things you cannot afford. All mortgaged out at 58! What were you thinking…
GOLDMAN SACHS: Buy stock in companies spending the least on employee pay.
In the US stock market right now, efforts to keep labor costs down are paying off.
A group of companies that spend the least on employee pay has outpaced a basket of high-labor cost stocks by 13 percentage points over the past year, according to data compiled by Goldman Sachs. That’s the biggest outperformance since early 2010.
And while it’s not entirely surprising that the market would reward companies keeping costs in check, the divergence in performance highlights a broader theme: Investors see inflation rising in the near future, and want to be positioned accordingly.
Since wage growth tends to occur as inflation inches higher, investors want to own the companies best positioned to withstand that. That means the ones already successful in keeping wage costs low.
“Wage inflation is a factor in the equity market,” a group of Goldman strategists led by David Kostin wrote in a client note. “Low labor cost firms will continue to outperform as wages rise.”
“Buy stock in companies spending the least on employee pay.”
Or pay nuthin`. Or, better yet, arrange it so the employees pay you.
Story time: Years ago a Hollywood mogul needed a lot of extras for a film shoot so he put out flyers to one and all saying that if anyone wanted to be in a movie then they could do so by showing up at the location for the shoot and fork over to the studio a fee of ten dollars.
BTW some (most? all?) strip joints charge their strippers fees for stripping in their joints.
Lol, now I now youre really a banker!
And doesn’t Uber effectively pay $2.50/hour when you figure in depreciation to your private car?
The very same is true for the independent-contractor delivery drivers at Amazon.
Ain’t our new ‘gig’ economy grand?
Not quite that bad. A survery by Time this summer showed the average is $16/hr before expenses and the average % for expenses is 20% of earnings. So About $12-13/hr net. Which isn’t terrible.
And of course that average can vary quite a bit based on location, type of car driven, time of day worked (peak pricing = more profit but that’s usually late at night).
Nobody’s going to get rich driving for Uber. But if you have some free time and want to make a couple of extra bucks, it’s a great way to do it.
My uncle is retired and decided to be an Uber driver just because he was bored. He drove high-rollers up in Park City, UT around the Sundance Film Festival. He said that other Uber drivers say you can only make money as an Uber driver if you’re driving a Prius. Otherwise, the gas cost eats too far into your margins.
In London, hybrids and electrics are exempt from the special tax (AKA the congestion charge) which is £11.50 per day (about $15). That and the high price of fuel (more than 2x of what it costs in the US) made the Prius the hands down choice for Uber drivers in London, and I saw Priuses everywhere when I was there this summer. London has now banned Uber so if you want a taxi you have to pay through the nose for one now. Oh, and the London Underground (subway) is one of the priciest in the world.
$10 is cheap compared to a date with Harvey.
“… Investors see inflation rising in the near future…”
I’ve been waiting YEARS for inflation to rise! Still haven’t figured out how it has stayed so low. (Referring to the official rate here.)
Do you know how hard it is to get productive, experienced employees when you have a cheapskate reputation?
You’ll spend much more on labour acquisition, training, defects, etc than you will ever save.
Could bitcoin and such be siphoning money that would have been “invested” in real estate? It would be ironic or perhaps moronic if bitcoin is the black swan.
Or the cooked goose.
or botcoin may siphon $ away from gold/silver
since it’s a great “store of wealth”
pimpsters say that 10 times a minute on the talking head shows
Could bitcoin and such be siphoning money that would have been “invested” in real estate?
could the sellers of bitcoin and such be buying real estate?
‘The couple…have so much debt that they stopped making payments on the $410,000 mortgage for their suburban home. They wanted to refinance but regulations imposed last year will disqualify them’
Looking to refinance a 400k shack loan? Stop making payments! That’s sure to make lenders pop out of the bushes.
But..but…they are fighting to keep their house!
That you Stanley?
“They wanted to refinance but regulations imposed last year will disqualify them’
https://www.youtube.com/watch?v=LG-Z-kYSC4s
I posted on this a few days ago.
Those Canadian homeowners with equity take out a home equity loan (say at 5%) and then “lend” it to folks who can’t get a regular bank loan, in this case, at 10.5%
It all works as long as housing pricing keep going up.
What a tidal wave when housing prices go down. Even a modest amount.
The “secret from the bank” subprime borrower stops paying. The home equity Canadian now has to start a foreclosure and will not be able to make their house payments or the foreclosed house payment.
And the primary mortgage holder will foreclose on BOTH houses.
Hey - that is a 2:1 deal!
+++++
“They opted for a third route: adding a second mortgage with an interest rate of 10.5 per cent to pay off their debt. Their salvation came from a private unregulated lender…”
…”How do I know if I overpaid for my house? That is one mystery beyond even Berkeleyside’s ability to answer.”
Well….that’s pretty easy…are the payments more than 25% of your household income? Can you finance it on 15 years? If you answer no to both questions you’re overpayin’.
Is the monthly mortgage payment (plus taxes, insurance and upkeep) more or less than rent in the area?
How much?
1x - OK
2X - You overpaid
3X - You really overpaid
4X - You are fooked
Well….that’s pretty easy…are the payments more than 25% of your household income? Can you finance it on 15 years? If you answer no to both questions you’re overpayin’.
So, if you make $1MM per year, you would be OK if they spent $2MM on a piece of crap 2 bedroom house outside Fresno?
Just because you CAN afford a house, doesn’t mean you didn’t overpay. The better metric is comparing your cost of ownership to the cost to rent a similar home in the area.
It isn’t a 1:1 comparison.
A $2000 mortgage does not equal a $2000 rental.You have to add in property tax and MID deduction as well as mortgage principal payback every month. In the world of 3% interest rate, that’s yuuuge.
Plus there is a premium people are willing to pay to not have to rent. I’ve owned and rented numerous times over my life, and all else being equal, owning is better. Yeah there is the proverbial paint my walls any color I want (which you can do in a rental as long as you paint it back). But it’s also things like I can have 3 dogs. Good luck finding a rental that will allow that. When I had 2 dogs I had a hell of a hard time finding a decent home to rent and even then, I had to pay an arm and a leg in security deposits. With 3 dogs, I really don’t think I could find a place to live without getting rid of one of the dogs. And then related to the dogs, I put in 2 doggie doors, couldn’t do that in a rental. Over the summer I built my kids a playhouse/swing set. I wouldn’t do that in a rental. Even if I could I wouldn’t invest the time/money into building something that will be used for a year or two before moving. Cuz that thing is never moving from where it stands now. And things like that.
I get the feeling that most of the commenters here are single or married with no kids. And then yeah it’s no big deal to pack up a few things and move to a new apartment every year. I remember when I was in my 20s, I packed the day I moved since I had so few items. I had a bed, a couch and aTV basically. Add a couple of kids (and dogs) to the equation and moving around yearly to isn’t trivial. So if it costs $500 more a month to not have to do that, it’s a price people are more than happy to pay.
I made hundreds of trips to the dump hauling off junk like you described working in the foreclosure biz. Yeah, a lot of it was covered in dog hair.
Ben, do you get shots every two years or so to ward off whatever disgusting, communicable crap you come across as you make your money?
You might want to.
I’ve seen dog ownership dictate some pretty insane home purchases. Not saying this is your case at all, but I see this all the time.
Late to comment here, but for me, pet ownership is a big issue. I am shocked that people regard their pets as disposable. I’m sure Ben has run into this issue and I don’t want to hear the stories, I’m depressed enough. In Las Vegas they have a shelter specifically for pets left behind in foreclosed properties.
Probably will end up buying if we can, no matter what the market is when our lease ends, though I’ve said that before. One year at that higher rate is all that’s been offered - is the LL worried? Why not two?
Haven’t heard from the prop mgr after I called and cancelled my husband’s acceptance of the rent hike about three weeks ago, so I have no idea what’s happening now. The PM is remarkably casual and I appreciate that. I stated my case re that much of an increase being unjustified, and we’ll have to deal with whatever happens.
BTW, when I drive around, I still see a lot of empty, if not boarded up, houses.
I generally agree with you. While you can do the math (yes, even factoring in tax breaks and principal reduction) to compare renting to owning, there are intangibles.
If the only thing that matters is living in the cheapest digs, then the math is the only thing that matters.
However, if you have school aged kids, you have a greater desire to “control your own destiny”…all-else equal, you would be willing to pay a bit more for stability.
And by “stability”, I primarily mean the inability for someone else to decide that you can no longer occupy a residence–regardless of economics.
‘inability for someone else to decide that you can no longer occupy a residence’
How many millions of foreclosures were there? You guys are talking like there’s no bubble, and that’s fine. But forces are at work that make this more than about owning dogs. The feds have upped the amount you can borrow to 50% of pay. When I would go go look at a foreclosed shack, you know who really got hit? The neighbors. The FB’s were long gone. The neighbors had to look at the thing. Weeds to your waist. Trash, stench. Kids breaking in and doing drugs. Abandoned cars because the lenders were too cheap to haul them off. The HOA’s! Yes, these stable households got to cover the snow plowing, the community pool. In condos it’s even worse. I can’t remember how many condo units froze up and water would ruin adjacent air boxes.
I know, you’ve forgotten all this stuff. Nobody expects the Spanish inquisition.
I never said there’s no bubble. I’m saying there is more to the rent vs buy decision than pure math.
I’d also never buy a condo, it’s almost always a bad investment because of HOA fees that always go up up up and away.
And let’s not pretend that living in an apartment is all roses and rainbows either. I’ve lived in 6 apartments. One of them had a neighbor that thought playing drums at 2am was perfectly fine. Another one had walls so thin that I could hear everything said by the people next door. They told me they always knew when I came home because they could hear when I put my keys in the bowl I had by the front door. Or my favorite, the place I had where the upstairs neighbor was a woman who wore heals 24/7, on parquet floors. Good times!! Plus my very last apartment, about 30% of the time, someone was in my assigned parking spot that I paid $125/mo for. But I didn’t want to make too much fuss over it because the type of people who park in someone else’s spot on a regular basis are also the type to key your car if you complain about it….don’t ask me how I know.
Nonsense. It’s all depreciating square footage.
I get it. Prices are high. People are too aggressive in their borrowing. And nothing good comes from when they are foreclosed. In fact, it can often be disastrous–especially when there are foreclosures en masse.
However, I have a good and stable job. I have children. And I need to live somewhere–preferably relatively close to where I work and near good schools. And I have a choice–rent a place, or buy a place.
My home is an expense. It is shelter. And I found a place to live that I can afford, and will last my family until my young children move out (15 or so years from now). As long as I pay my mortgage, and my property taxes, I can live there.
If I rent a place, and my landlord decides that they don’t want to rent it to me anymore, that is a big negative for me…and I’m willing to pay something to avoid that potential.
‘who wore heals 24/7, on parquet floors’
I had an upstairs neighbor like that. She’d put her heals on right before going out the door to work. It worked out though, she was my back up alarm clock. If I heard her clippity clopping around up there I knew it was time to get out of bed!
RW:
Sounds like we’re in a very similar phase of life. My kids should be out the door - hopefully - in 12 years. It’s hard for single people to understand the difference in mentality when you have kids, I think.
Could I save a lot of money by renting a 2 bedroom, 1 bath apartment in a so-so neighborhood? You bet. I’d save thousands every month. Could my kids live a perfectly good life sharing a bedroom in an apartment, without a yard, without having pets? Yeah I suppose. Lost of people around the world get by like that.
But I want more out of my and my family’s life than just “good enough to get by”.
That’s not to say I’ll be reckless and buy a house I can’t afford. But I’ll “waste” money on a house to give them a better life, without blinking an eye.
No but you could have rented it at half the monthly cost.
+1
It is somewhat analogous to food.
Yes, hamburger is cheaper than steak, and largely the same thing (beef protein and beef fat).
I surely could save a lot of money by only ever buying hamburger. But I don’t want to live that way, and can afford to eat steak from time to time…so I do.
All of which is good is that’s what you want to do.
Just don’t complain about being middle class (not that the two of you have, but others here have…and they need to learn that they are NOT middle class).
MacBeth,
I’m not sure I get your point.
I like pistachios much better than peanuts. Pistachios are priced kinda high considering you get about the same nutrition from peanuts, but I deserve the pistachios.
Houses however are in the biggest bubble in history. Two above don’t get that. If you make a $1 million a decade you get to choose how to spend $1.5million over 30 years, and you better damn well show up to work and not screw anything up. Are you going to spend $1million of that on a shack that should only cost a fraction? Your choice. You deserve it. Insert your own numbers. Explain to the kids why you are so poor.
I suspect your calculation is that the house will make you rich.
Well first off I could go around 3 years without working and still pay the mortgage just fine. As I said above, I don’t spend recklessly and I save voraciously.
But that aside, you present a false choice
a. Buy and potentially go broke because you WILL lose your job
b. Rent and never go broke because nobody who rents EVER loses a job
And who are you to say a house *SHOULD* only cost a fraction? In my opinion a move *SHOULD* only cost $5. But it’s $12. And I can scream all I want about how unfair it is, I’m not getting into the theater for $5.
I agree that we are in a bubble and prices will come down at some point in the future. That’s how real estate has been for as long as I’ve been alive, boom, bust, boom, bust, rinse repeat. We’re in a boom, we will have a bust. That is a given. But my original point was that my decision on how to live my life is based on more than what I think home prices will be in 2 or 5 or 10 years from now.
I get a senior’s discount at the movies, so it’s only $6.
I didn’t say anything about losing your job.
My point is that this is not “the business cycle”. It is an immense mania. The biggest in history. I bought my first house before this thing got really rolling. You apparently have been an adult during the entire thing. I have no idea how much you will lose or gain with your leveraged investment in a house, but if prices went down 75% and then we talked, I don’t think you’d be so much playing King of the Mountain.
I could pay my mortgage for 3 years too, but I’d have to cash out my Roth (leaving 401K intact). But no way would I do that. If I lost my job, I’d assess job prospects for 2-4 months. If nothing looked imminently available, I’d sell the house, take the cash profit, go to flyover, and market myself as a math/science teacher in high school or community college. I could easily go back to a one-bed and buy another house later.
I just want to interject here as a married guy with only one kid. We live in a 2-bed, 2-bath condo. It works for us. We are the outlier since most everyone in our area moves to SFH once they start having kids. We could afford to buy a house, but don’t want to make the most expensive purchase of our lives at the time when prices are literally the highest they’ve ever been. So we rent. My wife would like the amenities and the trappings of the SFH lifestyle you describe, but she understands the trade-offs. Our upstairs neighbors (college students) are way too loud and we sometimes hear their music and sound system on the weekends.
I did the opposite. I paid for my house from savings. Maybe not the best tax dodge, but as a completely degenerate boat bum I won’t have to think about “payments”.
I make nowhere near the income others on this board do. Never made anything close to $100K annually.
Yet, I can go without a job for FOURTEEN years and not worry about paying bills.
Retirement for me won’t come at the earliest until 2033.
Question: How is this possible? BTW, no inheritance and I paid my own way through out-of-state Big Ten college.
“As I said above, I don’t spend recklessly and I save voraciously.”
Do you actually know how much you spent last month? Can you honestly say yes to that question, plus or minus $50?
Very few people can answer yes to that, and offer an honest “yes” month after month after month.
Quite a few people make pretty good coin in this country ($75K+ annually). A good portion of them have little to show for it. I can only surmise that these folks aren’t very bright.
Re-read Sky’s posts today. Very valuable to anyone who wants to accumulate wealth (and, more importantly, freedom of choice).
Learn how to buy time. Learn the value of time. (MacBeth’s #1 Rule of Economics)
I suspect your calculation is that the house will make you rich.
Not really. I bought in 2011 after being a lifelong renter (watching the prior madness from the sidelines), and was fortunate to find a place that is great for my family for an indefinite timeframe.
Unlike many, I’ve only owned this one home.
My commute is about 7 minutes and my wife now works from our home office. We have a 10 minute walk to the middle school where all my kids will go. I honestly don’t care what I could sell my house for right now.
It might matter in 15-20 years when the last of my kids is through college and out of the house, but that’s a hell of a long way off.
My partner and I only care about math. We have a 7 yo, a 4yo, and a baby girl on the way. Because we cared about math and hiking/mountain biking/travelling more than the paint on our walls and countertops, we have enough money to buy cash. Sorry, mr. Banker, no interest for you. Did I mention we live in the second highest priced real estate market in Ca? It can be done. And, according to my calculations, by not paying PITI, well have an extra $2.8 million in retirement. My quality of life is not and has not been impacted by my lack of ability to change my paint from neutral tan to neutral gray no matter what JoJo Gaines would say.
Oh, also, my kids are in great schools. No inheritance or help from either set of parents. We live in a working class neighborhood, but everyone looks out for each other and my kids have friends to play with and safe places to play. Like I said, I consider the opportunity cost of renting much lower than where we’d be if we’d bought when we got married in 2005. I can ride my bike to work in 15 minutes. Any young people listening: you want to change the world? Spend less than you earn, save regularly, find joy in relationships and low cost hobbies, and STARVE THE BANKERS.
Oh, sorry. that’s the personal metric I’ve heard recommended. You’d have to have a pretty gianormis down payment to make that metric work the frothy overpriced markets these days. Yeah, I get the rent metric but so many people don’t factor in the Murphy Rule when they compare rent/owning. Owning is always more expensive but more equitable in the long run.
Good observation. This reminds me of a CNBC article that I read a few weeks ago where some financial analyst was prescribing a rather one-size-fits-all, reflexive rule of thumb that retirees should have 10x their annual salary saved before their retirement. These hard and fast rules break down pretty quickly when you just think through them. On the one hand, one way to get there would be, obviously, to save more and spend less to in order to meet that 10x threshold. Presumably, if you already had modest savings, you could dramatically cut your income and you’d also hit that 10x mark. Of course the latter doesn’t mean you’d be ready for retirement.
$400K in Toronto is literally a shack, lol.
To be fair. We don’t know how big of a downpayment and the house in the “suburbs of Toronto” - like maybe Buffalo.
Ahem, Buffalo is not a suburb of Toronto.
Over on the east end of Lake Ontario a house on the Canadian side of the St Lawrence is easily twice the price of the same house on the US side.
And I assume everyone here knows, but in Canada there is no MID and no property tax deduction. Which makes the insane prices in Vancouver and Toronto that much more insane.
But…but…our democrats in America have told us that is racist and something Hitler would do…
So when all those Trump refugees went up there, were they rudely surprised to find those deductions weren’t available?
They were rudely surprised to find that they weren’t welcomed with open arms and would have to apply and wait (and wait and wait) for an immigrant visa.
I wonder what happened to all those Haitians who were going to claim asylum in Canada after Sessions told them he was cutting off their bennies after 7 years. Any follow-up?
Being that they are third worlders who will immediately begin suckling at the Canadian taxpayers’ teat and never work, I’m sure they were fast tracked, while people who would actually work and pay taxes were told to go to the end of the line and wait patiently.
But there is Recourse lending. You don’t pay ALL of your mortgage debt and you will owe a great deal more than the difference. Lawyers, RE agents, etc are expensive. And of course interest on interest, and penalties for not paying, and administration fees, etc.
Speaking of shack, here’s the $2 million shack in Oakland:
https://www.zillow.com/homedetails/5738-Clover-Dr-Oakland-CA-94618/24810737_zpid/?fullpage=true
It’s even more fun to google-earth the place. The house is the third house from exit 4a on Freeway 24. Part of why it was so expensive — easy access to the highways and walking distance to UC Berkeley. But I gotta admit that’s a cute house. Put it on the beach or in the mountains for $125K and I’d hit it.
waits for HA to respond, Hey Donk that shack is 1/4 that.
And only $16K in taxes a year. A true bargain!
See post below.
The blue state high property FB just got crushed…
They didn’t really get crushed.
What the MSM never mentioned in their breathless reporting about SALT and MID changes is the tax rates are going to be lower. High property also means hign income. So high income peeps will get fewer deductions but lower rates. And the standard deduction now is $24K so it’s not like every previous $1 of deduction is going away. Combine the doubling of the standard deduction with lower rates and it will be a wash at worst for most people in CA.
On the other hand peeps in low cost / low tax states will get a significant tax cut. They get the lower rates but without the lost deductions.
If we had an honest MSM in this country, that would be the story. But the opposite is happening. There is virtually no reporting of the doubling of the standard deduction or lower rates.
The people who really get hammered in places like CA are the folks who make $1MM+ per year.
“The people who really get hammered in places like CA are the folks who make $1MM+ per year.”
Say someone has $100K in SALT that now is capped at $10K. They lose $90K of deductions at 39.6% = $35,640. Ouch. But that’s only 1/2 the story.
The top rate goes from 39.6 to 37%. Every other bracket goes down by 1-3% and the brackets themselves are more generous, ie the higher rates kick in at higher thresholds. So on that $1M, the total taxes paid will be about $35,000 less.
What do you know….it’s a wash!
Again, 99.9% of the focus has been on the lost deductions. Nobody in the media is talking about the lower rates. And for really high income earners, chances are a significant portion of that income is business income. What happens when the corp rate goes from 35% to 21%? Why I do believe it means business owners will pay less in tax.
There will always be some exceptions. The media will look long and hard for the sad story of the Doctor who performs free surgeries on disabled immigrant children and who will pay 100% more in taxes. But generally speaking, everyone will either pay about the same, or pay less.
You forgot my “+”.
It may be a wash at $1MM, but the highest marginal rate in CA used to be 0.87*0.396=34.4%. Now it will be 37%.
Fair enough. And you’re right above $1M (not sure where above but somewhere up there) the tax plan will mean higher taxes. But I’m not going to spend too many calories worrying about rich CA liberals paying more taxes.
I just know rich CA conservatives…lol.
It is in Rockridge which is pretty darn nice. College Ave is full of stores, restaurants, etc. There’s a Bart station at College and 24 as well. Had to believe prices are $740 / sq ft.
Realtors are liars.
I give her an “A” for spunk.
A “D-” for planning and thinking ahead.
+++++
‘They wouldn’t treat a murderer like they treated me,’ says woman, 93, arrested during eviction
WFTV.com | 12/15/2017 | Len Kiese
LAKE COUNTY, Fla. - A 93-year-old Eustis woman arrested this week after allegedly refusing to leave the apartment she was being evicted from, has been released from jail.
Juanita Fitzgerald was taken to the Lake County Jail after police said she refused to leave her apartment.
“Now, can you imagine anybody doing that to an old woman?” she asked. “They wouldn’t treat a murderer like they treated me.”
Bodycam footage released by Eustis police show officers taking a screaming Fitzgerald to jail. At one point, she slides out of her wheelchair onto the ground to avoid arrest.
“There’s no reason for me to leave. Not one,” said Fitzgerald.
She said she couldn’t understand why she was being evicted, but court records show she owed rent and would not pay.
According to police reports, she told officers, “Unless you carry me out of here, I’m, not going anywhere.”
Police said they offered Fitzgerald assistance from nearly a dozen agencies to avoid arresting her, but she refused, so they had no choice but to place her under arrest for trespassing.
DJT just crushed high tax and high housing price Blue States.
I have friends in northern NJ who pay $20,000 in property taxes ALONE (on a nothing special house). Add in the the 6% income tax…
NY, NJ, CT, CA, MA, IL - all crushed.
And - oh yeah. Obamacare is basically repealed.
++++
“It’s Done”: Here Is What’s In The Final GOP Tax Bill
Dec 15, 2017 - ZeroHedge
Here is Bloomberg’s breakdown of what we know so far as the final Republican bill heads for votes in the House and Senate next week.
Individual State and Local Tax Deductions
Current law: Individuals can deduct the state and local taxes they pay, but the value is subject to certain limits for high earners.
Proposed: Individuals can deduct no more than $10,000 worth of the deductions, which could include a combination of property taxes and either sales or income taxes.
Obamacare Individual Mandate
Current law: An individual who fails to buy health insurance must pay penalties of $695 (higher for families) or 2.5 percent of their household income — whichever is higher, but capped at the national average cost of the most basic, low-premium, high-deductible plan.
Proposed: Repeal the penalties.
Mortgage Interest Deduction
Current law: Deductible mortgage interest is capped at loans of $1 million.
Proposed: Deductible mortgage interest for new purchases of homes would be capped at loans of $750,000.
Obamacare isn’t repealed. It’s on course to its end goal of socialized medicine.
The real problem with it is the essential benefits, which forces men to buy policies with maternity coverage and 60 year old women to buy policies with abortion coverage. Plus the removal of existing conditions, which allows people to buy insurance after they get sick. That’s not going anywhere, ever. And it’s why premiums have tripled in 5 years.
Removing the mandate will just accelerate the cost spiral which will eventually lead to BernieCare. That was always the goal. And the useless GOP is in on it.
Prosper, TX Housing Prices Crater 5% YOY On Record High Housing Inventory
https://www.movoto.com/prosper-tx/market-trends/
senator dan johnson committed suicide yesterday after being accused of sexual misconduct that he swore he didn’t do.
And he left behind a wife, 5 kids, and 9 grandkids.
He was convicted by the press.
So the final tax bill is out. The tax bracket reduction is YUUUUGE. Not only reduction in rates but the brackets themselves. Plug your numbers in this and you’ll be hard pressed to not come out much better off.
New:
0 percent: $0 to $19,050
12 percent: $19,050 to $77,400
22 percent: $77,400 to $165,000
24 percent: $165,000 to $315,000
32 percent: $315,000 to $400,000
35 percent: $400,000 to $600,000
37 percent: $600,000 and above
Old
10% $0 to $18,650
15% $18,650 to $75,900
25% $75,900 to $153,100
28% $153,100 to $233,350
33% $233,350 to $416,700
35% $416,700 to $470,700
39.60% $470,700+
0 percent: $0 to $19,050….
I suspect that 0% is actually 10%. Not important to high powered earners like me but a very important to the me of 2018, as I’ll be a retiree drawing just a tad of tax deferred savings. Oh wait, that is for married dudes.
For single filers it is:
10 percent: $0 to $9,525
Together with the elimination of the personal exemption, this is a classic Nothingburger. Just for me. You enjoy!
Could be a moment of tears for a lowish income family with rug rats and a HELOC, hand to mouth and no prospects of a raise in this glorious booming economy you speak of.
Oops. Yep should be 10% not 0%.
Amazing how you can look at the lowering of every tax rate, the increase of every tax bracket and conclude that you will pay more taxes.
Some people see a glass 1/2 full, some see it 1/2 empty and some don’t even see a glass.
And also forgot to mention the doubling of the standard deduction, which again is never mentioned in the media. 70% of people don’t itemize. Which means 70% of people just got an extra $12K (married) or $6k (single) of deductions starting next year.
But why let facts get in the way of a good story?
Oh an did I forget to mention the extra $1K per kid tax credit? Why yes I did. But wait there’s more….currently the tax credit phases out at $150K. The new credit phases out at $400K. Which means for someone like me who makes between $150-400K and has 2 kids, I just saved $4K in taxes starting next year.
But again, you will never hear any of this in the MSM.
“an extra $12K (married) or $6k (single) of deductions starting next year…”
Slow down there and consider that the personal exemption is gone.
Like I said, a nothingburger.
Props to senator Rubio for holding out to give the working class a bit more. This tax cut skews towards corporate American and the wealthy, but there are some benefits to be had in the middle. They aren’t near as big as the benefits to the wealthy, but at least Rubio held out for the working class.
No, NO props to Rubio.
Had he won the nomination in 2016, I would not have voted for him for this very reason.
I am tired of subsidizing those with kids. And women.
Those without kids just got screwed by Rubio. Again.
“Which means for someone like me who makes between $150-400K and has 2 kids, I just saved $4K in taxes starting next year.”
Well, SFMF, I’ll save about $100 annually.
You can thank me personally for your windfall. In fact, I expect you to.
I also expect your kids to be extremely well disciplined, respectful of their elders, and to work extremely hard.
Otherwise, the $3900 you are about to receive at my expense now should be paid back to me in full come January 2019.
“Props to senator Rubio for holding out to give the working class a bit more.”
Exactly why I would NEVER have voted for Rubio had he been nominated for President.
He didn’t give anything to the working class. He gave it to irresponsible people who bring children into the world that they cannot afford to have.
Irresponsible parents of ANY class, not just working class.
And that I am told I get to pay more for year after year after year. Congratulations on that.
Just so I understand, you’re for giving corporations, which are sitting on records piles of cash and which are flush with money, and the very wealthiest of all massive tax breaks, but you’re not willing to give working families with some tax relief? Sounds a bit cold to me.
Don’t put words in my mouth.
I have said all along that the tax cuts for all workers should be the same amount regardless of income - say a 3% reduction for everyone earning a paycheck.
No tax deductions for having kids. That itself promotes irresponsible behavior. Unwed broodmares shouldn’t be rewarded. Nor should wedded broodmares.
In fact, cut taxes but eliminate ALL deductions. Every single one of them, For everybody.
Finally, I’m very much in favor for tax cuts for businesses, especially small businesses. That US corporations pay the highest tax rates in the world is inexcusable.
“Sounds a bit cold to me.”
Why should working class single people pay for working class families? Or for higher income families with kids?
Single people who own properties already pay property taxes - and you want them to pay more?
That’s infinitely more cold-minded than anything I suggested.
“I am tired of subsidizing those with kids. And women.”
You’ll pay for that vertical smile whether you are getting some… or not.
I used to work with a guy that had a couple kids of his own and married into a few more. Every year at tax season he’d come in and thank the single guys for buying his new couch, new bedroom furniture, table saw, whatever it was he was buying that year with his refund check.
Good times.
Eliminate the personal federal income tax altogether. The whole thing is ridiculous. The shortfall between tax revenue and spending is made up with mountains of debt that will never be repaid, why not just skip the revenue part and put it all on credit?
Or, have the feds bill the states instead. States can bill the counties and counties can bill the locals. Consolidate all the various taxes into a single lump sum so people can really see what they are paying.
Taxes and all the logistics of their collection are the biggest waste of human energy and spirit ever devised. I don’t care what’s in the new tax bill because it’s not a single line that says “This bill hereby eliminates the Federal Income Tax”.
“conclude that you will pay more taxes…”
I didn’t say anything like that. You are arguing with your own imagination.
Hey, buy some vowels.
Wait, so there’s an elimination of the personal exemption and a doubling of the standard deduction? I thought they were the same thing?
They are separate. One the tax filer gets, the other is a pile on for each dependent. Since you aren’t herding a pack of juveniles, it wouldn’t be on your radar.
They’ve always been separate. For 2016 tax year, the personal exemption for a single filer was $4050; the standard deduction $6300.
Together, one person with no kids and no deductions could write off $10,350.
Under the new plan, the $4050 would disappear. The standard deduction is doubled to $12600. (I’ve heard that it will be $12000 and not $12600, so not a true doubling).
The difference for a single filer is +2250. So, depending on income, in this scenario, the actual tax savings for singles with o kids (and no other deductions) would run approx. $75 to $300 yearly.
Not much.
Single people continue to subsidize everyone else.
Unwed broodmares shouldn’t be rewarded. Nor should wedded broodmares.
I have difficulty taking you seriously when this is the language you use to refer to “parents.” But I’ll bite. The reason families and parents should receive tax advantaged status is because, well, they are children. It’s difficult to raise children, and costly. The social cohesion of the nation depends on the strength of families. Every adult was once a child, everyone benefits indirectly from this at some point in time.
I’m actually for lowering the corporate tax rate and removing deductions, but our corporations, as a whole, don’t pay anything near the highest rate in the developed world once deductions are factored in. And, they are paying a historically low amount in taxes as percentage of GDP.
An unwed mother who has 3-6 kids by 2-3 men is a broodmare.
Some social shaming might do them good.
“The reason families and parents should receive tax advantaged status is because, well, they are children.”
Nonsense. Pure unadulterated nonsense.
“So the final tax bill is out.”
Did it kill the health insurance mandate?
I’m glad the FIFO rule was killed. You can still choose which lots to sell.
Me, too! That single reversal was probably the most important thing about this entire tax bill. Few people realize it.
The second most important thing is the eliminate of single payer requirement re: ObamaCare if that goes through. Not important monetarily, but massively important philosophically.
Maybe it’ll lead to an eventual elimination of what is a national travesty. Death of ObamaCare by a thousand cuts, if need be.
Perhaps individual liberty will continue on in some manner.
Renton, WA Housing Prices Crater 9% YOY
https://www.movoto.com/renton-wa/market-trends/
Former FBI Ass’t Dir says DoJ cabal is a conspiracy
https://www.youtube.com/watch?v=LFYuKHwAgRc
‘NUCLEAR’ Sen. Grassley Lashes out at FBI, DOJ in Fiery Senate Floor Speech
https://www.youtube.com/watch?v=VkN3-u2xCuo
29:20
Unbelievable. Jeebus. Sometimes I think George Webb’s theory that the FBI was running the Clinton ratlines is true.
“Ensure it will never happen again”
Somehow I’m not seeing that. Yet.
Kallstrom: He belongs in Leavenworth in my view.
Agree. But why are these people even still in the FBI? They’ve been “demoted”, or “re-assigned”. That’s ridiculous. They should be long gone.
Furthermore, I just love this line that keeps getting spouted, about how the majority of the people who work for the FBI are decent, dedicated, hard working, blah, blah. What a load. Show me the management and I will show you the rank and file. That’s because the rotten apples spoil the bunch.
This country would probably be relatively crime-free if it weren’t for the FBI
‘the majority of the people who work for the FBI are decent, dedicated, hard working’
It’s horse hockey.
It’s like I said a while back. We don’t have a “criminal justice system”. It’s a system to protect TPTB, and prevent others from cutting in on their action. I get that people hate characters like Martin Shkreli, just on general principles, but if he’s in jail, so should be Jon Corzine and many others.
We’d have a YUUUUGE drop in crime if the FBI went away. If not committing crime themselves, they’re inventing incidents and entrapping people to justify their existence.
http://www.abc.net.au/news/2017-12-11/australian-real-estate-vulnerable-to-variable-interest-rates/9237202
The above link is to the article with the headline noted below:
Real estate: Australia’s property market is riskier than Canada’s, here’s why
First paragraph: Australia and Canada have a lot in common when it comes to property — both nations have record housing debt and have had surging prices in two of their key cities.
But there are some key differences in housing policy and financial practices that may make Australia more vulnerable to a housing crash.
It is understandable why despots occasionally appear and rid the country of those with clean soft hands.
the tax bill is a joke.more can kicking