“What Kind Of Income Does It Take To Afford One Of These Monsters?”
Readers suggested a topic about incomes and home prices. “I would like to see bloggers reponse on how much money you should make to afford a home that costs:”
150K
300K
500K
50K
1M
“Just to get a feeling for what kind of income does it ‘really’ takes to afford one of these monsters.”
A reply, “The question is income growth. If you have a high income but it is not growing then you will be left behind soon until this bursts and comes back down. Only the very rich at CEO level and above have had income gains of two figures or more year after year.”
Another said, “50K, 95-100K. 250-300K, 500K+ for anything above 750k. If I’m going to buy anything over about 350K, I’m going to pay cash. If I can’t pay cash, I don’t want it.”
One replied, “I agree with you all the way up to 750-1M. I would think that as you get into this range, you can start to spend a larger proportion of your income on housing (as the rest of your costs do not rise proportionally to your income)? So, for example, someone making 300K a year can probably afford to spend a larger % of their income on housing then someone making 30K a year?”
“Other then that, I pretty much agree with you. 3X income seem to be your rule?”
“I have been told by several banker friends down here that qualifing at 10X income is not all that unusual anymore. That’s just amazing, I don’t understand why people would wake up and decide to throw out lending standards that have worked for 100 years. Just don’t get it.”
One suggested alternatives, “Agree. IMO, one should earn about $30K per $100K mortgage up until you get to the $250K income level. At that point, one **could** go to 50% mortgage-to-income, IF they wanted to. Of course, they could also invest that money or (gasp!) give some to charity.”
One suggested caution, “My income is currently very high, about $200,000, and I figure the 2 and a half times that would be $500,000 house. However my income can greatly vary. I could go back to a $90,000 annual rate in a couple weeks. With outsourcing these days and a global economy, I think there is no way people can count on their income levels to remain the same or go higher - not anymore.”
“As a result, I think either the 2 and a half times rule is too high, people ought to go for short term mortgages, or people ought to save enough in government securities to save up for at least 50% of the price of a house before they take out a loan. And that’s in case they have to downsize their jobs.”
“I told this to someone before and they complained: ‘But what about young people who want to start families? They should have a house when they are in their 20s and cannot afford to save 50% of their incomes!’ I tell them that starting a family is a free choice and not a necessity.”
“It’s their own responsibility to look at the global trends and seriously consider how long they think their career and incomes will really last! Many people start families in their 30s. My buddy became a father at age 45. The point is to adjust your savings and investment for the the liklihood of downsizing your job in a global economy.”
Another notes total debt load. “We are comfortable at an income of $200K-$250K with a good 20% down payment in a $700K house. Only one car payment of other debt (1.9% interest). We also have the assets to pay off most of the mortgage if we needed to.”
One poster brings up taxes. “You have to balance home prices with what taxes you’re paying with that property, where you are in your life cycle, and how many people you’re responsible for, and what inheritance you’re counting on (joke, LOL).” “In many homes locally, taxes are the greater proportion of the monthly mortgage payment.”
“I own a home we paid $160k for (with $5k taxes) although it was in tough shape. We’ve dumped another 30K in material cost into it but did almost all labor ourselves. Even though we put 50% down I wouldn’t recommend it to anyone making less than six figures in household income, not if you want to save money for college and retirement at the same time. BTW, we’re not big spenders either.”
And one looks at the total picture. “There are so many variables. Does the person have kids? If so, how many? The income should also allow the person to fully fund retirement and save for a rainy day. I have found that most owners go ‘all in’ on their house. Once they own a house they don’t think they need to save for retirement or a rainy day. Their house will see them through all possible emergencies.”
“The last house my wife and I had we paid less than 2.5 our annual income and I was still nervous as hell. I think a married couple with no kids should stick to 2.5 times income. A married couple with kids should really stay at 2.0 times income because they have so many potential disasters they might face.”
“I think we forget personal safety nets on this blog. If a potential owner has the bank of ‘mom and dad’ to protect them in a bind then this figure gets skewed once again. They can be a little more aggressive.”
Another point regarding the more expensive homes: it’s not just about mortgage and taxes. Large, expensive homes with large landscaped yards require considerably more money to maintain.
Here is northern Arizona, a huge house with decks and a pool can be rented for around $2k/month. I’m pretty sure the property managers would throw in the landscaping.
Wow! Ben that was a great first person post. It kind of brings you down to earth, well done!
I recall the broker/family friend that sold my wife and I our first house 32 years ago. I wanted to push for more house and of course that would entail a larger payment. He cut me to the quick when he turned and looked me in the eye in front of my wife and said ” it’s easy to talk thousands, but easy to repay them”…. thank God he did not add “sonny”
We bought a fine house for 43,000 3+2 1700 sq feet.
“Not”
That’s not the right way to think about it. Remember, the house pays the mortgage, not the homeowner. So anybody can afford any home. They just have to cash out the price appreciation and stroke the check. The house does all the real work.
Unfortunately, we need to extended the scale for to 2m for nice family home in bay area ….
Then buy two, that way you’ll have two houses paying the mortgage.
Heck, why stop at only two houses when I could buy out an entire subdivision. Trump, watch out!
Speaking of Trump . . .
http://www.blogmaverick.com
Trump is a dirtbag and I hope rosie smears him in the dirt.
That was funny! Thanks TX
Does this mean the house takes the blame when its value drops 20% and the owner is foreclosed?
I think people are getting into houses these days without any reserves . A year - two years in income reserves would be nice to have just in case you lose your job or have a emergency .
To many low down unqualified people getting in by the skin of their teeth with no back up money .
It was easier 35 years ago because one could count on being employed long term, more than you can count on it today .A Company would take care of health care , retirement , etc etc., so owning a home was a natural at 25% of income housing expense .
If anything home ownership should of became less attractive because of the current conditions of the labor market .
“I think people are getting into houses these days without any reserves.”
Agreed. I’ll bet it’s a LOT of the 2003-2006 buyers. Our first home was 2.5x income, with down payment help from parents. Second, third and fourth were right about 2.5x income. For the fifth one, we overextended and it was grim every month — three kids in private schools and, as Wiz noted, no reserves. We got out of it OK, but barely. Can’t imagine the stress had we ever gone upside-down in it.
As someone posted recently, this surely will lead to a spike in divorces and separations.
“I think people are getting into houses these days without any reserves.”
Trust me, you dont even know how much of an understatement that is…..I am astounded by the applications i take everyday. Every conversation goes like this (well at least 95%).
Me- when did you buy your home?
FB- within the last year.
Me- Did yo do 100% financing?
FB-
Me- Let me rephrase, did you put any money down?
FB- ohhh, no.
Me- Do you have any liquid assetts?
FB-
Me- let me rephrase, checking, savings, stocks, bonds, 401, anything….any cash that you can access even if you have to pay a penalty to get it.
FB-no, maybe 1000 in checking.
Keep in mind that my bank advertises for mostly bill consolidation mortgages, so the people calling me are in hock and do not represent the society as a whole but, you cant realize how often i have this conversation.
Ben, I have next weeks weekend topic. The trials and tribulations of being a loan officer. There are enough of us on ths board that can tell stories, offer advice and explain the process.
Those blank spaces by the FB responses were supposed to say —-FB- silence, crickets chirping, they dont even understand the question.
bad html, sorry
I got it. “FB -” = “What’s financing? What’s liquid assets?”
I like that idea — a thread that encourages posts by those in or close to the lending business, with replies and questions from the rest of us.
My bank does loans to people with good incomes, decent assets, good credit and make a down payment of usually 10-20%. That is because we have old fashioned lender standards (the way it was done in the previous 40 years ending in 2001 for most other lenders.)
But, I see many people in with the opposite situation: questionable and low income, no assets, poor credit, and no down payment. We do not make them a loan. I think in the long run, loans to people who we turn away (and always get a loan from another lender) may not be in the borrowers best interest (or the lenders.)
Our delinquency rate is 1/10 of the state average. Some are critical of this saying the standards are too high. However, the world changed their standards and we didn’t (and couldn’t, since we keep all of our loans.)
Sensible,
It’s good to hear about **someone** in the mortgage industry using sensible standards. No doubt, your bank will do far better than most others when the SHTF.
I’d also like to hear from our lenders on a post of their own. They have so much to offer.
Wiz, 100% agree…again.
““I think we forget personal safety nets on this blog. If a potential owner has the bank of ‘mom and dad’ to protect them in a bind then this figure gets skewed once again. They can be a little more aggressive.”
Poignant. I have lived in the SF Bay Area for 15 years, and do not know a single case of sub-40 something friends buying a house here without El Banco Des Padres underwriting/co-signing. Zero. Now, I’m sure there are thousands of cases, but it’s pretty amazing to me that I know of none personally.
Guess I could hang with more brokers and lawyers and VC’s… Nah.
True…..
My son lives in SF and makes damn good money, invests for retirement, has a six month emergency fund, and lives a very fiscally responsible lifestyle. That being said, if he ever decides to buy a house/condo in the BA, I’ll have to pony up the downstroke if he’s going to do “old fashioned” financing….large downpayment and meet the debt/income ratio.
I look at the prices people are paying for BA POS and it blows my mind.
Dan - thats the problem. The better job, salary, responsible lifestyle you have the MORE you will pay.
Case in point.
When Google went public and stock screamed past 200-300 per share the home sellers started to increase their prices hoping to get a Google employee flushed with cash. In the local paper we had one homeowner raise their price by 20% to max his gains on sale. Had nothing to with the actual value of home going up, its all about grabing as much cash out of the buyer.
>> I have lived in the SF Bay Area for 15 years, and do not know a single case of sub-40 something friends buying a house here without El Banco Des Padres underwriting/co-signing. Zero.
As they say, “born on third base and think they hit a triple”.
“As they say, “born on third base and think they hit a triple”.”
LOL. I have never heard that before, but I love it. It describes so many people I have known over the years. I will find ample opportunities to use it in the future.
I know one, and that’s my sister. In fact, she and her husband own a cabin in the mountains as well.
BUT, and this is a biggie, they married in their thirties and EACH had six-figure incomes when they bought their primary house in the late 90s. In other words, they moved in a different financial tier than most of the known world (and my family, BTW.) And expensive though the house seemed at the time, it was still at half or less of its present “value.”
As it is they would like to have a bigger house (two kids in one bedroom and no playroom), but are too financially saavy to try and upgrade. And even with the fact that my sister no longer works full time, they are still in the six-figure salary range.
If they can’t make Bay Area prices work, what makes the average schlub think he can?
Bing Bing Bing!!!…
Sister of B.Durbin wins…
What are you going to do now Sis?
“I’m going to DisneyWorld!”
Why has this attitude that your sister has become so absolutely foreign and incomprehensible in today’s world?
There is a big difference between having your parents give you money for a down payment, and knowing that they are a fall back position. I know that my parents or my wife’s would loan us money if we needed it (e.g., lost job, medical problems, etc.)
That makes it eaiser to go out on a limb, without having to worry quite as much about foreclosure etc. if something bad happens to you and you use up your reserves.
Those numbers are about what I thought they would be. I’ve determined that despite working 60 hours a week to make 120k here in California, that I am ‘priced out forever’. I’m beginning to think that the economic conditions that ran housing up were put in place deliberately to enslave the middle class. I’m starting to doubt that housing will ever return to a doable price level for me.
No house for me. No kids either. So I’ve cut back to working one week a month and pursuing my own interests. I save a little, and have the typical bull$hit health insurance policy for my wife and I, but its readily apparent that sooner or later, something unexpected will happen, and I’m going to have my hand out for some taxpayer assistance.
This is a terrible moral conundrum for me…I’m not on the dole, but have chosen a course that will probably put me there eventually. However, the alternative is to burn away my life to earn money that melts away like a sugar cube in a glass of water…before I even spend it.
Pondered relocating, but for places that I could get work in my field, the income/house price ratio stays pretty much the same. Impossible.
So here I am with my fancy Computer Engineering degree, and I can be a slave, or a bum. If I’m a slave, I contribute to the system that enslaves me and others. If I’m a bum, I weaken it ever so slightly…not to mention I get to do whatever I want 3 weeks a month…so long as it does not involve money.
So I’m a bum with a Computer Engineering degree now. If I become a drain on the system, it’s only because I’m trying to free my ex-fellow slaves.
The capacity of the human mind for rationalization is amazing!
I don’t see why you have a problem. If you make $120K a year, you can certainly pay $2,000 a month in rent. In many areas, this will get you something pretty nice, especially if you have no kids. Maybe you kids us with this post.
Couldn’t agree more. Earn that 120K and rent a nice place at 1/2 the comparable mort pmt and have some flipper subsidize you. Beats the dole any day.
I’m in computer science too. and you’ve hit the nail on the head. All the good tech jobs are in areas where the cost of living is insane (NY,Boston, DC, BA).
That’s why I’ve considered going to school to get a degree in nursing or some other field with more portable job skills.
There are some good ones in some interior states. I’m currently raking in $83 per hour and my OT rate is $90. Worked 500 overtime hours so far. My next client has a 2 year gig (in a city I don’t want to mention yet) paying $75 per hour and lots of over time. earned $210,000 this year (two more pay periods left). Next year if I go to that other company, I figure I can earn just as much with the OT. I’m not ready to buy the Porsche yet. I’ll keep my Toyota Matrix and keep renting fot the time being. Keep a lookout. If you are patient and flexible and have no baggage, you can get top dollar. Over 20 years experience and a good network of other softies helps too.
Actually the tech jobs like in Intel HP Oracle Symantec are up north in Oregon, Texas China and India. I did a check on Intel for example and found R&D near HQ is around 15% leaving 85% of new hiring elsewhere. Check the career web sites for more research.
Sometimes I think the fed ran up housing to get rid of all the money that was being passed on to the children of the WWII generation. In a game of play money they can’t afford to have money sitting in banks compounding as it takes away their only source of power which is to provide money.
They’ll create one bubble after another until all that excess cash has been destroyed or transferred to friendly hands.
I’m voting food stuff as the next bubble.
Ahhh, no, you are not priced out forever at $120K income…wait 3 or so years and see. You won’t get a large house in the best areas, but they’ll come down. Especially, if HP and Sun amd Oracle follow IBM’s lead and transfers 50% of their US employment to India and Brazil, et al…
could that mean his 120k job may also disappear?
it depends….luck…who he works for…skills…job requirements (customer facing and some jobs must be done in US).
Those numbers are about what I thought they would be. I’ve determined that despite working 60 hours a week to make 120k here in California, that I am ‘priced out forever’.
That’s insanity.
Why not do exactly what a ton of other Californians have done: LEAVE!
Check out the latest Census Bureau figures. States with ridiculously expensive housing are losing people (or losing ground): CA, NJ, NY.
Vote with your feet!
I bought a Dodge Magnum from some kid who lost his job in RE. He had to sell it and I bought it for $15,000 with just 16,000 miles on it. The car was worth at least $25,000.
With today’s housing market, we have suffered an ecoomic earthquake not unlike the dot com bubble burst of 2000. But, home prices are going down every day. Three years from now you will be paid more and three years from now homes will cost less. Enjoy your low rent and buy cheap Chinese furniture while it lasts. Three years from now you will find some poor bastard who has to sell because of the upcomming recession. Enjoy your low rent while!
I guess I’m lucky. I have an advanced Computer related degree and earn a wee bit more, live in SoCal, have a kid and rent a nice place for 2k a month. Just finished up paying alimony and am reworking the budget to do two things. 1) sock away as much as I can in my 401k and 2) save as much as I can for a down payment on a house when prices collapse to where PITI will be close to my current rent plus a wee bit. I have to figure out the true MID taking AMT into account. Russ, I can understand how you can feel like you do, but I urge you to keep the faith on this one and look at it this way. If the price declines, and I truly belive they are coming, take a few years that just means you will have more money socked away for a down payment. I cannot tell you when or by how much, but my personal guess is it will happen within 3 years and we will see at least a 40% haircut here in SoCal. I am hoping for an overcorrection, but being realistic.
I telecommute 100% of the time so I could work from anywhere, except I am locked in due to custody issues for now. So I am doing what I can in terms of saving and watching. Cut back a bit and sock what you can away in one of the 5%+ savings accounts. EmmigrantDirect is one suggestion, but there are others. Try not to take the REIC BS about soft landing/small price drops, quick turn around, etc. as truth. It ain’t. I have been reading this blog for a while and I can tell you one thing. There are some very smart folks here who have predicted how this will play out and right now it is going exactly as they have predicted. So keep your powder dry, save as much as you can and hold on for a wild ride because this ball has only just started rolling down hill.
Even insurance companies like State Farm sell CDs over 5% that are FDIC insured. I’m in medium-risk banks right now, for the extra interest, but will be moving toward safety in 2007 as the risks rise.
“were put in place deliberately to enslave the middle class.”
no just lots of stupid people… which have become pawns of marketing.
No big conspiracy here. Starbucks doesnt sell coffee, 7-11 sells coffee.
Starbucks sell this thing called ambiance which your paying for.
What kind of idiot pays $5 dollars for a cup of coffee when elsewhere is sold for less than half.
We are puppets of Marketing firms!
i love 7-11 coffee that starbucks tastes like crap anyway
I agree, their regular coffee always tastes badly burned. Maybe it’s a ploy to get you to buy the $5 stuff? For standard coffee I like Dunkin Donuts way better than Starbucks.
Couple of points. In my neck of the woods, Vancouver, and although I don’t expect this to last, median priced homes cost well over 50% of median incomes to own. SFHs in the nicer areas consume 70%+ of median income. Some young, upwardly mobile executive making $100K, using the 3 to 1 rule of thumb wouldn’t be able to buy a lower end studio condo here.
Second point is that the question might have been better asked “how much income should one earn to carry X level of mortgage” There’s a huge difference between a person with no money down on a $1 million home versus someone with $500K to put down.
At any rate, I’m not at all surprised by the person who quoted banker friends saying that 10 x earnings is not uncommon. That is the only formula that would allow a great majority of prospective homeowners to buy a home in some of this continent’s frothier markets, of which mine stands near to the top of the heap all things considered.
“That is the only formula that would allow a great majority of prospective homeowners to buy a home in some of this continent’s frothier markets…”
Shouldn’t that read, “…a great majority of fools…”?
I must be in the wrong profession. I’m in San Diego and make no where near what people are talking about on this site. $250k per year? Heck, even $100k per year surpasses what I make.
I am doing very well… I thought. I have respected positon and career and do a damn good job. I am also smart and charismatic and with my training and background so far, there’s very little I cannot do… except bio type stuff. My income is at least x2 the local average or median. Yet… based what I am reading here… If I go it alone (no spouse) I could bascially only afford $200k to $300k for my first home. IN SD, that’s a fixer-upper shack in El Cajon or Alpine, or a 500sqft studio condo in an older building downtown. Or something in between.
Something is still wrong with the market if that is the only thing I can afford! Or again, I am in the wrong profession!
You’re not in the wrong profession.
“Something is still wrong with the market if that is the only thing I can afford!”
That’s why this Blog (and many others like it, exist). We’re subjecting the housing market to a level of scrutiny that should exist in the media, but does not.
Happy Holidays to you
(And to everyone else on Ben’s Blog!)
~Misstrial
Only a handfull of folks are pulling down that kind of cash. I had a client about a year ago (computer engineer guy, hooked different systems together for corporations) pulling down $14k/mo! Other than the top 5 at the corporations and triple that amount for skilled staffers not many are making this kind of money. I think the next highest incomes will come from private business owners (professionals, shopkeepers, tradesman, ) prolly coming in at $120kish. The high profile rich really move the housing market little, hell even Oprah only owns few homes (so expensive as to be beyond our scope). When they wash the rich (no affect) and those high wage earners (little affect) into to wages of the sheeple (entire affect) to arrive at there statistical numbers so many relevant flaws in their meaning render them useless.
Ben,
Ongoing thread idea. A running track of specific homes in trouble. An apples to apples comparrison of their sales price in 02′-06′ and their subsequent prices as they sell at a loss, short sell or the price the bank gets in foreclosure. No statistical bias (other that concessions given along the way) by mixing in irrelevant information.
I hear you, bmfarley.
I’m also in SD and there’s no way that I can reasonably afford anything but a collapsing shack in a scary neighborhood, even with a professional degree and a good income. I get some odd looks when people find out that I’m renting, but I really don’t care.
I’m curious to see how long it takes for fundamentals to knock some sense back into the market again. I’d rather be comfortably renting and saving than house (or shack) poor. For example, a guy I graduated with bought into the bubble here with a $700K garage mahal. He had taken on 4 different jobs, 6 days a week to feed the mortgage when I talked to him last. What kind of life is that? How long is he going to want to keep that up now that his house is worth less than what he paid for it?
Financial sanity seems to be in very short supply these days.
“garage mahal”
Nice one. I’ll be using that one, if you don’t mind…..
“garage mahal”
faux chateau
hummer haven
SUV chalet
Escalade estate
Starter castle
Carpet bombing house
Beltway baronial
http://en.wikipedia.org/wiki/McMansion
I made $120,000 last year and I rent. Yes, I could afford to buy some damn overpriced home and lose thousands of dollars while it devaluates. But…. I hate being stupid and losing money. That is why I suddenly sold my house Fall of 2005. I am so much better off now that I am not an owner. I have a house full of brand new furniture, new cars that are paid for and extra money every month. Before it was all bills and stress.
My plan is to wait a few years until things settle and buy some land with the cash that I have saved. I figure the costs of construction will be much less in a few years as well. Big Bob Slob will be living in style and man-o-man i will be the envy of all the greater fools and FBs who have bought in the past few years or are buying now.
Hey Farley how long have you been in SD? Two quick notes, even in the best of times traditional metrics don’t work here. It just ends up being more expensive to own here.
Second is that ignore that for now and understand that San Diego has the most un-natural RE market in America. Its so rediculously out of control that I had an acquaintence RE agent tell me that she was happy about the falling prices. She told me that in some areas prices had come down 50k (as if that were enough). I looked at her and said when it comes down 200k will start talking and proceeded to show her why most likely it will. At least here, the correction will NOT be pretty. It will also not be quick.
Isn’t it about time someone asked, “Mr Pine Box” how his investments are doing?
Josh
“It just ends up being more expensive to own here.”
Even if you bought in 1998???
Your the norm. I have seen salary information for 3 companies I have worked for and few get $100K. When your talking about $100K salary, that means you have 10-15years of experience under your belt. Recent college grads get much less than that. I have heard people say they get $250K per year. But that may include Salary, Bonus, and Commissons. Some fail to realize bonus and commissions can be cut back along with Salary. That has happened back in 2000-01.
bmfarley,
Stay the course, but don’t buy yet. Instead, take a few drives around town, to see where you might want to buy in 3-6 years. I especially recommend the area to the north of SR 56, between Rancho Penasquitos and Rancho Santa Fe. You will be utterly astonished at the vast expanses of undeveloped land interspersed with huge tract home developments built within the past five years (I would guess 50K+ new units — enough to rival Phoenix’s unsold inventory). San Diego has an affordable housing solution in place; it just hasn’t fully come to fruition yet.
Good luck!
GS
Thanks to all that responded and confirming what that I am … for lack of words… in a normal situation.
I am not buying now. I’ve been watching this bubble thing going on for a few years and am finally relieved to see some pressure released from it. Still more to go though.
I am most interested in areas downtown or within 5 miles. A 2bdrm condo or townhome at about 1000 sq feet would be perfect, but I’ll settle for a 700 sqft 1 bdrm for the right price. For a nice place… I think around $300 per sqft is reasonable. Unfortunately, the market will need to fall about 40% to get there… at least downtown. The same may be true for true for Banker’s Hill and Hillcrest?
I don’t feel pressure to get into the market… and like others here are seeing… I have the freedom to save or buy toys right now while I rent and wait out the market. Plus, not spouse or gf providing the pressure to buy.
Too dependent on where that house is being bought. We have a household income of $140K and bought a house for $247K in Austin. We have no debt other than two car payments under $400 each. The payment and taxes is painful. I can’t imagine paying more for a house on our income.
That’s the way I feel too. Ours is in the 300K range depending on how I do and I don’t want to pay over 250-300K for a house. I’m still mad that I didn’t buy a place we rented in the mid ’90s that was offered to me at 106K. I liked it a lot and now I’d have to pay 140K for it. I know that’s unrealistic in most of the places I like so I either have to compromise on where I want to live or keep renting.
“mid ’90s that was offered to me at 106K. I liked it a lot and now I’d have to pay 140K”
You think thats bad in SF Bay Area prices were around $100 per sq ft in mid 90s and now its over $500-600 per sq ft.
Hmmmm….we bought a house in 1992 in Austin’s Pemberton Heights (just past the bottom of the last bust) for $235K on about $100K of income. Taxes were in the $4000-$5000 range as I recall. It was not really too bad. We ate out, travelled. But only had one car payment of $400 per month.
Yikes - the taxes are almost $16K now on it! More than $800K according to Zillow!
Suppose you have $2M cash. You can make $100K/yr off of that taking very VERY little risk. You can certainly buy a $500K house and still have enough income to pay the property taxes etc. And you would save more in income tax than you would pay in property tax. HOWEVER, you would be a complete fool to do this in the present real-estate market environment. The fact that YOU can afford it doesn’t mean the other buyers of $500K houses can mostly afford it.
situation in the Netherlands: the cheapest home (e.g. very small and old apartment) will cost about 5x the median wage, the average home (by price, not by quality etc.) costs about 8x median wage and anything that is a notch above average in quality or features will cost 15-30x median wage. Even at 50x median income there are loads of homes to choose from. In many EU countries the situation is similar, although the multipliers for the mortgage are usually smaller there (this is because of the high Dutch HMD).
Around 1990 someone in Netherlands with a good job would have had no problem buying a first home for his/her family; mortgages were provided up to about 3x income then (with 20% or so downpayment). Nowadays, even two starters with high level jobs are unable to afford a very basic home in 95% of the country (despite, or maybe I should say because of, 10x income, 0 downpayment mortgages etc.). So we also have most of the tricks you hear about in the US like the parents piggy bank, the strangest housing subsidies, liar loans, lots of other fraud etc.
Hey NZ -
What is the RE tax in Holland? Say I own a 500K house in Holland. How much RE tax do I pay per annum?
NHZ - By the way, this is pretty much a loaded question. I’m Dutch by birth and my family still owns RE in Holland. From what I can gather, the RE tax there is next to nothing. The US folks on this blog just need to hear it.
Also, tell us what your income taxes are (as a %). Americans would $hit themselves if they knew.
That said, I’m here and not there for a reason.
you are right, RE tax in Netherlands is close to nothing. The state taxes your owned home as a source of income, at 0.6% of the value up to a certain maximum. You can deduct the value of the mortgage, so effectively the tax is just 0.3% (close to nothing). The tax is not based on the resale value of the home but on a separate, usually far lower taxation (often depends on how well-connected the owner is). In the past valuations were fixed for 4 years, but starting next year the value will determined every year (bingo for the RE mob!!).
At the local level there is an owner tax which is currently around 1% of the valuation (based on the same separate taxation as the state tax) and there are additional taxes for the Waterschap (upkeep for the dikes, other structures related to water management etc.).
For second homes there is a yearly state tax which is currently 1.2% of the assessed value of the home (also nothing compared to the 10-20% yoy gains; many upper middle class people own a second or third home). Just like in the US, it seems that many Dutch people file their French or Spanish second home as primary residence for the tax office (just like their home in the Netherlands). In that case the RE tax is effectively zero, because you can deduct the mortgage value. This is not allowed, but until this year the tax office didn’t really check.
All ‘private’ home sales are tax free (no maximum like in the US), but you pay a state transfer tax plus some other costs of around 7%. With an average of 10-20% yoy gains over the last 15 years, everyone expects to win this 7% back within a year. The transfer tax may disappear next year for ’starters’ to make the cheapest homes more affordable (of course, this will not help but just increase the price with 7%).
Dutch income tax is complicated; it only exists at state level and is officially 40-50% of all income over a certain minimum (used to be up to 72% 15 years ago). However, many people, expecially the rich, pay close to zero income taxes because of all the different tax deduction options (like HMD). In the last 10 years, the Netherlands has become a tax heaven for rich people and big corporations (who often pay less than 10% tax). On top of the income tax, people here pay a lot of other social taxes (for people unable/unwilling to work, care for the elderly and disabled and all kinds of other socialistic ideas). For the lower incomes this is by far the biggest chunk of the taxation - and for this part there are no deductions. I’m no expert on taxes so there might be a few glitches in this explanation.
I think that this is a nice topic for a quiet time of the year.
As I mentioned a few weeks ago, our town is in the middle of a school spending war. We had our tax revolt this year and they threw the bums out and the new board asked for level
funding but it looks like the budget will still go up by four
percent. Of course there is town spending on top of that.
So the old guidelines of 3x may be too much.
I think that our first loan was $100K though we qualified for
$130. We never really were in financial pain but we did have
to watch where the money went.
If we had to deal with the property taxes today that new
buyers have to deal with today, I think it would be more
stressful. Same with homeowners insurance, price of energy
though this year has been very warm so far.
Raising a family also means more demand for money for
clothes, food, education, etc. When I was a student, there
was far more money available and the ratio of a college
education to a McJob was much lower.
I agree with the comments on job stability. Many classes of
jobs are shaky with oursourcing and even those with high-
paying jobs but not enough savings should worry about a
continued stream of high income.
So I guess that you could count me in for 2.5 times with
lower income. If you have a higher income, assets (whether
your own or parents) or the ability to generate a lot of
income from the stock market, then things change quite
a bit.
If you can’t manage your credit cards, have health issues,
don’t have a solid relationship with your spouse, have other
extended family issues or aren’t sure about job security, then
things tilt the other way.
Even if you have a lot of money and a solid job, bad fortune
can come your way. Look at the Duke Lacrosse case where
the families spend about $80K per month in legal fees each
on a case that never should have been filed.
Overall, 3x income with 20% down. Carrying costs in some states might (FL, CA) might push the multiplier below 3x. Thus, a median American household could afford a $168K house. If people find they have extra cash, they can blow it on upgrades, furniture, vacations, or, heck, even save a little.
I would agree with 2.5-3.0 x income, with the higher number coming for wealthier folks, who can cover life’s expenses more easily. I am a riding at about 3.0 x and it is definitely a bit lean.
Merry Christmas to all!!
IMO if one is single (no kids), very frugal (low car payments, etc.), puts 20% down and has a stable job plus a 6 month+ emergency fund in savings, it would be feasible to purchase a home that is 3 to 3.5 one’s annual salary - depending on the frugality factor.
One also should factor in retirement savings into any calculation. Everyone needs to be building cash for retirement, and sacrificing this for the sake of a mortgage, as we all agree, is not smart. 15% of the top should be reserved for this.
Minus 2% savings rate last year. What cushion for retirement ? With a 54 trillion dollars government debt and no personal savings it’s very funny to talk about savings for retirement in the US and in Canada too. From minus 2% to 15% would mean a drasctic in reduction in spending and complete change of philosophy. It would mean a major economic crisis in the US. Anyways that’s what will happening either next year or in 2008.
If you haven’t overextended you should be able to save for retirement and own a home. If you’ve overextended and have the home but no retirement savings, then maybe you should think about a reverse mortgage in retirement to supplement Social Security.
The reverse mortgage will bite a lot of them in the butt when they need to move to assisted living.
Dickens said it best: Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
I would just like to add that, the real victims of the bubble are families with children with one earner, that is, families trying to do the right thing and have one parent stay home and raise the kids. So, the net effect of inflated home prices is that we are moving families, the future of our country, to the most undesirable areas to live, while selfish yuppies and dinks get their pick of the best areas. I suppose it always will be like this and there really is nothing that can be done to remedy the situation, but the bubble really accentuated this phenomenon, and I don’t think we had in the past an actual class of narcissistic self-centered high earners who have no desire to marry or raise children, as we apparently do now.
I would say that people who have kids are narcissistic.
Can you give me one good reason to bring another hyperconsumer into this already ridiculously overpopulated world?
txchick57 posts “I would say that people who have kids are narcissistic.”
AE replies “that is very rich comming from you. You are by far the most self-serving narcissistic female on the board period”
Can you give me one good reason to bring another hyperconsumer into this already ridiculously overpopulated world?
AE replies ” Thank you mummy and pappy they did not hold your high faloutooin’ ideas” txchick stick to your stocks and sailent views on housing, I read your posts and must say you are on strong ground.
You slip fast on some other issues.
I plead guilty to narcissism.
That is completely aside from the question.
txchick57 posts ” That is completely aside from the question.”
txchick57’s Question being “Can you give me one good reason to bring another hyperconsumer into this already ridiculously overpopulated world?”
In a nut shell Tx because that is what we humans do. We are wired to do so period. I will not attempt to answer the impossiable if you quit demanding it. Look at it this way…. regardless of your personal feelings on the matter.
There is no doubt it will continue to happen and usually by those world wide least likely to afford children.
Personaly being a WASP male the world is breeding me and my kind into nothingness. I have done my bit and cast my spawn…. but look at the birth rates in the Latin and Arab worlds….I supect we have more in common than not….Truce, I of course leave with the last word, having been married 34 years know you will have it any way… I will let it stand with you.
We have two kids and I plead guilty to narcissism. But really, who wouldn’t want more of me around?
Also, not to put a too fine a point on it (and I imagine I will get flamed for this one) - they are also the world’s oldest form of “social security”. And no, we aren’t planning on being a burden to our kids but it’s nice to know that there might be somebody who will give a crap about us when we’re 80 if we’re lucky and we do things right.
Shrug - having kids or *not* doing so can be thought of as “selfish”. It’s all a point of view thing…
People are under pressure to have kids I think. Just like there is pressure to get married. Society has all these things lined out for you in order to be percieved as successful.There are pleunty of kids in other countries to adopt.
But bush wants more consumers. I saw him giving a speech and telling americans to go out and spend a lot this xmas. We are in an insane time.I swear all people do for entertainment around here is buy sh@t they don’t need.It is really sad.
There were solid good reasons to have kids more than 100 years ago when there were quite a lot of farm families and labor was scarce. Now most professionals in developed nations are caught up in a rat race and they are short on time to spend with others. Others means spouses, girlfriends, kids, whatever. I see a lot of obese married couples with kids. Hardly ever any healthy, trim couples with kids. I observed that a few years ago and concluded that if you want a normal 8 hours of sleep per night, you have to choose at most two of these three: A successful career, great physical health, and a romantic relationship. There is a fourth category: Children. It’s no wonder the average adult American is obese! They chose career and marriage, but not health. Now someone may post that he or she is the exception, perhaps a triathlete, CEO, and with a large family. But that is the exception, not the norm. Some people can cope with 4 hours of sleep per night. I cannot.
I’m focused on career and health these days, but I’m willing in a couple of years to give up career and focus on relationships and great health, should I stumble on meeting a woman I admire.
I don’t know if you saw the link I put on the bits bucket about the hedge fund mgr. who was outsourcing the raising of the kids. Why even bother having them?
Ha! Yes, thanks! And I hope you take a look at the comments on that post. There are certainly a lot of witty people who read that article!
I was raised by old-fashioned parents from the mid-west. They would never resort to such cruelty as outsourcing nurturing. That’s essentially what that $4 million hedge fund manager is doing. Absentee parent. And those kids won’t ever think fondly of that guy/gal but think better of the “person/woman” hired as the caregiver if he/she is good.
Outsource nurturers beware! Remember the Menendez brothers!
Hey, if Bush Co. can outsource torture, I don’t see why we can’t also outsource nurture!
Certainly puts a different spin on the “nurture versus nature” debate.
My wife and I are both in the Army, hence staying healthy is part of the career. I guess we get a freebie.
outsourcing parenting is not a norm here in the usa. but in other countries, it is perfectly fine. i can pretty much relate to it having attended a class reunion in my country of birth where all local parents brought nannies, me and my wife pretty much looked like nannies, chasing our kids while the locals are having a grand time with one another. it was fun.
I agree. Because I choose not to perpetuate my wastefulness (and not have kids), I am narcissistic? Versus the yuppies in the 6,000sf McMansions with a car for every driving-age member of the family? We scrape by in the Pac NW - the two of us (and a neurotic dog). One car is a ’98 VW. Here is the other: http://www2.trekbikes.com/bikes/bike.php?bikeid=1382000&f=31
With wanting to live in a beautiful area comes a lot of tradeoffs: 800sqft of living space, rarely eating out, etc.
You got it. I would have let her post slide without the snark about narcissism. To me there is no more narcissistic act around than reprouducing yourself. The world doesn’t need more people.
You are just ensuring that people like you won’t be around in the future - the people who do reproduce will provide the people populating the earth.
and I’m glad I won’t be around to see it.
Hamster and Txchick (and LAinvestorgirl),
I agree parents can be amazingly narcissistic too. There is no doubt that having a pack with your genes can amplify self-importance and materialism. However, I can assure you that no child is exactly the spawn you desire to help you stroke your own ego. They are individuals, and watching a child develop into their own person is simply an experience that has few if any equals in this life. Your post makes it clear you are clueless to this fact.
Eco and geopolitical rants are certainly relevant, but implying that procreation is merely selfish or a tradeoff for granite counter tops and south sea vacations misses a pretty fundamental life aim for most humans.
I read recently (and no, I cannot quote the study; maybe someone else can) but couples without kids were more satisfied/happy than those raising kids. This was a very comprehensive study with something like 13,000 participants over many years and it covered all age ranges of rearing children. So statistically speaking, I am happier in life for not having children and made the right decision.
Fortunately neither I, nor my wife, possess the hormonal drive to procreate. But I feel the desire to have children exceeds logic (and by now I am probably pissing off at least half of the readers here). And placing more value in two shiny new $30,000 cars in the driveway over having a sit-down dinner with your own family shows you how skewed our values are in this society.
I am very lucky I have nephews and nieces to see grow up and mature into little people. And I am sincerely happy for you to be raising a great family, but I’ll pass on bearing offspring, thank you.
I’d better stop there.
no, you’re not pissing us. we’re happy for you, in the same way that we are happy with our decision. let’s just agree that it is different.
regarding the study, i am not a bit surprise. but to conclude that more of the couples happiness is because of not having kids is kind of a *stretch*. let me ask you these questions, were the families in the study of similar economic statures? are they of similar strong spousal relationship, meaning, exclude those who stay in marriage simply because of the kids? these questions are relevant for various reasons like there are much more families with kids than without across all economic strata, if relationship between spouses are not strong, it is very easy for no-kid families to opt for divorce ones a *disagreement* occurs. there ae probably other reasons, i cannot think of at the moment.
I have quite a few friends that don’t have kids. My attitude has always been that it’s best to follow what’s right for you….and best to get that figured out before having them.
I did not marry or have children until late…I never felt any pressure since most of my friends were as “Peter Pan” as I was. I only miss that part of my life now because the switch to “responsible do every thing just so society” is not such a great fit. (I credit this as to why the study found families aren’t as happy—the level of competititon among parents is soul sucking)
That being said my kids have made me a totally different person. I always say its good I didn’t have kids till 35 and 37 because I would have been awful at it. That being said, they continue to teach me things that make me a better person. Narcissistic? I don’t try to make them like me (God forbid!) I try to help them discover what they are strong at and help them follow their purpose. Interestingly they have their grandparents skills and strengths (more than mine) so during so much of it, I just have to sit back, help them figure it out and go along for the ride. If they were just like me it would be boring. Life should be an adventure. And for those that allow it, it is!
lainvestor
some couples just do not want kids
i know it may not be all that popular in some cases
but my wife and i are in agreement on this issue
don’t get me wrong i love kids and to tell you the truth
they really like me as well, i have many nephews and nieces
and lots of friends with kids and at the end of the day i am very happy to go home without them
we have our dog and love her very much
all in all kids are not for all
i agree with tx-chick this world is so screwy these days
you kind of remind of a happily married friend who loves pets and kids but never had any children by choice, but lots of pets. he says pets are like kids who will never grow up.
TX ( and everyone else)
There is NO reason to bring a hyperconsumer into this world. I have a 12 year old daughter. This is what I try to teach her:
Do not buy what you do not absolutely need.
Do not patronize national chains; buy from small, independent stores, even if you have to pay more. If you do, the money stays in your community, and does not go to China (as fast)
Do not covet.
Enjoy the river nearby. Take time to smell the roses.
See this. This is your bike. I bought it for you (yes it’s made in China but at least I bought it from the Indonesian guy that has a family business down the street). Enjoy the weather today. Go ride it and use your imagination.
Do not watch TV too much. Do not play computer games (too much).
Go play with your friends. Enjoy your friends; if you care for them they will last much longer that the TV.
Do good in school.
Enjoy your youth.
When you get older in America, the only thing that will matter is money. The choice is yours; choose wisely.
Overpopulated world?
And so goes Western Civilization down the toilet…
Another narcissitic parent, right here, and I’m proud to admit it. I would like to believe that I am raising responsible progeny. We certainly work hard at it, and hyperconsumers we are definitely not!
I have a feeling kids of posters on this board will not be hyperconsumers.
My son worries about money more than I do….and he’s 10. (I worry that I’ve gone too far) My daughter is about as anti-materialistic as you can get. (Healthy looks and body, and a good attitude…who needs the $500 outfit? If you take care of yourself, you can make Walmart look good.) Both work hard and are focused on the future.
It was difficult Chistmas shopping for them this year. At 8 and 10 I only heard 1-2 gift ideas that I had to pry out of them. Really Chick, you’ve pointed out things you’d like to buy on this blog. I’m thinking you’re way more materialistic than my kids will ever be.
txchick I want to thank you for really making things clear for me. I took your ideas to their logical conclusion and have swallowed an entire bottle of sleeping pills tonight to correct for my parent’s selfishness.
See you around… (guess not actually)… and hopefully you will have the moral fortitude to do the same. No wait, let me guess… the world needs you to stick around to explain to everyone what they are doing wrong.
Gotta go… that bed sounds so inviting… so… sleepy…
I’m not sure I agree with all of your post, but I do agree that in almost any market a one-wage earner family could afford a house is laughable. We try very hard to live on 1 income and did qualify for this house about 6 years ago on it. However, the house itself has required a great deal of work.
Most families I know that I have chosen to have 1 earner either rent or bought a small house a few years ago.
I don’t know if it will “always” be like this though. There is a huge demographics issue coming up - the baby boomers. It will be interesting to see how much housing stock we’ll actually need once they move out of their prime house owning years. It could be that housing will be worth very little if we get to a point where there literally aren’t enough bodies to fill them.
>> It could be that housing will be worth very little if we get to a point where there literally aren’t enough bodies to fill them.
Don’t worry - immigration willk take care of that.
i have two friends who are single income homeowners and lets see how they do it?
#1-owns a seat on the nymex exchange(90k shares!) and has worked on the mymex for the last 20 years and is very wealthy
#2-is the 3rd employee in the history of cerberus partners in
nyc and is also extremely wealthy
all the others both spouses work even if bought way back when you could buy a decent home in the burbs for 200k or less,
as for the topic i would only go at max 3x income with a minimum of 20% down
we save for retirement as well currently both of us contribute over 10% to our 401k’s and have a nice cash reserve on the side
my in-laws were pressuring me to buy last year and they are old fashioned and could not understand my insisitance of having 1-2years of expenses saved after the purchase
it is not the 60’s anymore job security is shaky all over
i wish i had parents that would fork the 20 down to me
i just save it myself
happy holidays to all
ben i will be making a donation to you for your hard work
and dedication, i have gained so much knowledge just reading this blog
Cerebrus, eh? Wow, that brings up a whole ‘nother set of issues.
yes tx-chick i know what you are saying regarding the hedgies-for what it is worth he is a real nice guy and extremely generous as well
I work with a lot of people that raise families on one income (and many with two as well) so it is possible. If you have relatively high-wage jobs in a relatively low-income area, then that makes it a lot easier.
I really don’t know the economic situation in Vermont though it’s had a high-tax
reputation in my mind.
Raising kids today with the effort needed
to do a good job is tough today as there are
so many distractions around and, as you
mentioned, the issue of income.
Vermont is a relatively high tax state, but they do actually issue a lot of refunds and rebates based on income (including to property taxes.)
Being a 1 one income family is always easier if that income is high.
In the end, though being a one income family on an average income requires only that boring frugality stuff.
50’s one income families lived in small houses, didn’t eat out, and took cheap vacations. Modern one income families like mine attempts to be (I have a part-time business) do the same.
“Cheap” vacations were great. Wish my grandkids could know the joy of them. But their families pile in the SUV, drive to the air port and fly out to exotic places. They are trained little brandwhores being cheated of what a really good time can be on the cheap. So when did cheap get a bad name?
“I don’t know if it will “always” be like this though. There is a huge demographics issue coming up - the baby boomers. It will be interesting to see how much housing stock we’ll actually need once they move out of their prime house owning years. It could be that housing will be worth very little if we get to a point where there literally aren’t enough bodies to fill them.”
Unless the birth rate and immigration can plug a 100-million population gap over the next 20-yrs your prediction of a housing glut will likely come true.
Vermonter — hurray! — thanks for mentioning housing.
Yep, I resemble that remark. Excuse me but some of us self-centered high earners are doing the world a favor by not bringing more polluters into the world. Resources are more scarce. Fresh air and fresh water. Along with that, people with a proper moral upbringing are very scarce these days. Many of us self-centered narcissists are paying a lot of taxes and hope the $ we spend on educating your kids are not wasted on them. But usually it’s the case. Many of us self-centered ones are very responsible people. More power to us!
We educate privately so presumeably we’re
not using your tax dollars earmarked for
education. Adults in other parts of the world are having kids like mad and if you want them to rule the world with their points of view eventually imposed on you, then don’t have kids. Demographics are a
very powerful force in the world today.
If you want to make sure that your taxes
aren’t wasted on the schools, spend some
time at your local school board meetings
to ensure that the money isn’t wasted.
Adults in other parts of the world are having kids like mad and if you want them to rule the world with their points of view eventually imposed on you, then don’t have kids. Demographics are a
very powerful force in the world today.
Actually, they aren’t. On almost every spot on the planet women are having fewer children, including arab countries and Mexico. (Although fertility rates haven’t dropped to below replacement like it has in Europe.) In a nutshell, anywhere women are half decently educated and have access to almost any form of birth control they choose to have far few kids.
I do agree that demographics will be a powerful force in the coming years, especially as the US, Europe, and China where we are aging rapidly.
Having fewer children doesn’t mean that they aren’t having kids like mad. I had a look at a chart at globalis and the US was ranked 99th in birthrate at a little over 2. Pales in comparison to Niger at 8. You also have a country like
China at 1.8 which is lower than ours
but they’re working with a much larger
base of people so we’re not going to
catch up anytime soon.
http://globalis.gvu.unu.edu/indicator.cfm?IndicatorID=138&Year=2000&Country=AF
Thanks for the graph. What’s interesting about that graph is the projection is that almost all countries’ fertility rates will drop below replacement levels by 2050 if current trends continue. (Niger will be at a paltry 3.55 !!! ;))
I guess I think of the fertility rates as relative. For instance most of the world that has high fertility rates also have short life expectancies.
I agree that we are losing “the war of the cradle” but my take on the numbers suggests that it might not be as bad as I, at least, first feared. China also has the same aging problem we have - but they will have many more seniors. In other words, all countries will be feeling the effects of a generally older population to more or lessor degree.
what made you think those projections will hold 40 or so years from now?
“Adults in other parts of the world are having kids like mad and if you want them to rule the world with their points of view eventually imposed on you, then don’t have kids. Demographics are a
very powerful force in the world today.”
So…We are supposed to combat a disease of barbaric cultures (Islam) by breeding so much that there is no room to sit down? I think the world is better off by nuking the terrorist regimes than to merely have 4 kids per household. Besides, it will take 20 to 30 years to have those 4 caucasian Judeo-Christian children per household become some significant force, but too late to offset the growth of Muslim populations.
I gave up on caring whether or not my tax dollars are wasted. I’m too busy. So I vote Libertarian when I can and I legally use as much tax shelter as I can. I have no time to go to school board meetings. I don’t know what good or harm our schools are doing these days anyway. I think most people feel the same and that could be the reason why people complain about the public school system. My libertarian druthers, all education should be privatized and paid for only by the parents of the children.
nuking terrorist regime? you might as well do that with one of the american cities, because the effect to the world will be the same, eventually.
Why dont you go fight the disease of barbaric cultures at the source BIll? Go to Iraq and kill the disease why doncha? Dont have the courage of your convictions? a coward are ya? important to do just not important enough for you to sacrifice anything for?
Republicanlibertarians so brave with the blood of others.
You should be ashamed of yourself you yellow belly.
I’m 47 years old. If you want me to go into Iran and tear them up, I will. Only after you move there and shout “I am an American” one hour per day in their main revolutionary square in Tehran for 365 days. I wonder if you would last one week there without your limbs being torn off and your silly looking head mounted on a stick.
Michael,
oh oh oh…Let me guess… Catholic school?
You are some freaked out born again whatchamacallit aren’t you? Proliferate like mad, home school, send my offspring to conqueur the world.
Just because you have numbers, does not mean you rule the world. That is SOOOOOO like 16th century.
Since you’ve decided to go private, you have obviously concluded that spending time at the public school board is a waste of time, so why do you suggest it would be of any import to the rest of us?
> oh oh oh…Let me guess… Catholic school?
No.
> You are some freaked out born again
> whatchamacallit aren’t you?
I’m not sure what you mean by born again. A rather
vague term to me.
> Proliferate like mad,
Two kids.
> home school,
Yup.
> send my offspring to conqueur the world.
I’d be pretty happy if they conquered math
and engineering.
> Since you’ve decided to go private, you have
> obviously concluded that spending time at the
> public school board is a waste of time, so why do
> you suggest it would be of any import to the rest
> of us?
The OP was concerned about his tax dollars. In
our district, three candidates ran and took over
the school board on anti-tax platform and are now
taking an axe to the school budget.
Parents do go to our public school board meetings
to lobby for more stuff or less stuff. Usually it’s
more stuff.
demographics are not as powerfull as you think.
1 Einstein will always be worth 1 Trillion Others
True the numbers compell you to fear the mob however
power resides in wealth created per person. Creativity is stifiled in a society that is screaming because of overpopulation every view wants to be heard and the most valued ones are ignored because of the strain to feed mob.
1 Einstein still needs farmers to produce his food. To mine iron ore and refine steel for his bicycle. To provide the chalk for his writings. To provide the drugs and medications for his physical problems as he gets older. To provide oil or natural gas to heat his home. To manufacture the CPU in his computer or the memory on the motherboard or the motherglass in his LCD display.
If power resides in the wealth created per person, then Paulson and Bernanke are the most powerful in the world. That’s a scary thought. That chart of GS looks mighty toppy. Except for the candlestick pattern.
What do you do when you have an aging population and you need to bring in foreigners to handle the tasks that the population doesn’t want to do? Well, it’s happening in Europe right now. Get some popcorn and pull up a seat.
Bill post ” Yep, I resemble that remark. Excuse me but some of us self-centered high earners are doing the world a favor by not bringing more polluters into the world. Resources are more scarce. Fresh air and fresh water. Along with that, people with a proper moral upbringing are very scarce these days. Many of us self-centered narcissists are paying a lot of taxes and hope the $ we spend on educating your kids are not wasted on them. But usually it’s the case. Many of us self-centered ones are very responsible people. More power to us! ”
I think you topped txchick…. reread that sef-serving tripe! Why don’t you add altrurist then you can just shoot yourself and truly be a saint…. lessen you burden to mankind. LOL LOL
Hey Howdy Doody, what does “sef-serving” mean? What is “altrurist?” And “lesson you burden?” Have you been imbibing too much of the schnapps this evening? Hint: you are not supposed to drink that stuff from a regular 10 ounce glass.
Dear billy
thank you for the advice. But you still have it wrong. I really don’t care if you have kids or not. Atleast not having them will not drive you to the evils of “old john barlycorn”….LOL…. off topic and closed.
right. but, you are not doing your share of having your progeny *endure* the problems of the future like those of ours! i think we are just as responsible, in a different way.
What social safety nets are in place to allow families a hospitable place to live? I say community starts with wise leadership. What are the leaders doing right now?
I think I kind of agree,but the situation is complex. Here in Ashland, OR, where retiring CA boomers have nuking the affordability for families. I am a father and currently the sole wage earner, but own a tiny house. Most families would want more space.
Funny thing is all recent development seems to be targeted towards the super rich, not priced-out couples. Funny, the retiring folks who should be downsizing are buying the 5000 sf McMansions.
Yea, that’s a good observation. I don’t get that trend either. What does a 60 year old in their sunset years need with over 2500 sqft. I don’t get it.
For all my whining about CA boomers ruining Ashland, it is largely because they have not displaced families and big money has led to loss of what affordable building space there is left. As a whole, the boomers are generous and community oriented. Ironically, Ashland always passes school support bonds, but we no longer have enough students left to fill the schools!
“have displace” not “have not displaced”
[blush]
A lot of people in other parts of the world live in much smaller quarters than what is considered “normal” in the states.
We live in what would be considered small for the states but it would be considered huge in various asian countries.
My Japanese wife and I are quite happy in our 1918-built Craftsman home of 963 sq. ft. I never needed a large house and, after 5 trips to Japan, truly understand why she is content. Thank God I didn’t marry an average American woman with average American values! -
“Thank God I didn’t marry an average American woman with average American values!”
Out of sheer curiousity what is the average American values of an average American women. I ask from sheer curiosity nothing else.
Overpopulated by whom?
Save? When you are being eaten alive by real inflation rate of 8% and your revenues are stagnating and going nowhere ? The only gimmick that the FED and the rest of the crooks from Goldman Sach can offer you, is even more debts to compensate the lack of real wages and true buying power.
You are right. The govt’s inflation numbers must be pulled out of someones @ss. I made a mistake but saving my money and not buying a house 5 years ago.The govt is just printing money at an alarming rate.They are also selling a lot of bonds to raise cash. Something has got to give here. When other emerging countries start produceing better products and technology than us watch out.
Dude, forget RE 5 years ago. You should have started buying Gold! At least you can dollar cost average into gold and if you get tired of it sell it to a dealer at market prices minus a small comission fee. You’d be stuck trying to sell an overinflated house now.
i am not sure if this as been posted before.
how your dollar bills are perceived outside of this country.
http://www.signonsandiego.com/uniontrib/20061106/news_1n6dollar.html
“When you are being eaten alive by real inflation rate of 8% and your revenues are stagnating and going nowhere”
That’s the tricky part. Sold out and put most of the proceeds into CDs, so as to buy a house for cash. The trick is to watch my CD money erode at a real net of 2.5% or so (and likely to worsen), while I watch the prices of the type housing I want erode at 15+%. When those two “lines” begin to converge, it will be time to buy, whether or not prices have bottomed out. My guess is about a year from now.
I would like to see bloggers reponse on how much money you should make to afford a home that costs:…
I’m a firm believer in the traditional affordability guidelines:
1. Total mortgage no more than 3x annual gross family income
2. Total monthly outlays for mortgage, taxes and insurance no more than 40% of take-home pay
3. Down payment of at least 20%
So, assuming no massive monthly revolving credit bills, you need $40K income for the $150K home and $80K income for the $300K home.
yes I agree this sounds like a good formula, however I can remember using some similar guideline to buy a new car. The prices were out of my affordability range, just as housing is now. Saving money seemed like the only way . They were oversupplying the market,and surely the prices would fall. They didnt. Even increasing my savings only resulted in being able to buy a cardboard box on wheels. I could still buy with the no down , cashback, bad credit no problem. Sound familiar to housing? it looked like I would never own my dream car. The prices still havent crashed, but I do have my car, although it isnt comfortable or have any quality in it. enabled to do so by a lease.(close to owning, as Im still resposible for maintenance) and yes the dealer considers it sold …at least temporarily…so therefore i must own it. Maybe I wont be able to sell my house at these ridiculous prices,but could I lease it to make it affordable. It so far has worked for the big 3 to move cars without dropping prices. Comments?
It so far has worked for the big 3 to move cars without dropping prices. Comments?
My only comment: I haven’t bought a Big Three car since the P.O.S. Oldsmobile I bought new in 1980. Once you go Japanese, you never go back.
Crap is still crap, even when it comes wrapped in a low-finance package.
I agree , also have a toyota, but my second point is…does leasing= ownership or feeling of ownership. Everone here now lease. does ownership really matter when no one can tell wether you lease or own,you can appear to be above the Jones
1989 Toyota. Paid in full 14 years ago. Getting close to 200K miles and still runs like a sewing machine. I will never buy anything else; and if I’m lucky and it lasts, I will never have to buy anything at all.
Does it matter if you lease because nobody can tell the difference? Are you kidding me?
I can’t even imagine leasing a car. I bought my gently-used Subaru for cash and plan to drive it until the wheels fall off, then I’ll buy another outright. Lease a car? Ha, that’s a good one.
Much as I have a problem with buying an overpriced house, I don’t have a problem with leasing a car. You see, at the end of your lease they take your car back. It gives you the same freedom that renting a house does. You are not stuck with selling your depreciated wheels at the end of the lease. You paid less money to drive a new car for three or four years and then you are free of it. The car I have now is my third lease, and it suits me fine. We just had to sell my husband’s car, which was paid off, and it was a hassle…
I don’t really care what the Jones drive.
I want something cheap, safe, reliable
and that will last a long time. Bought
current Toyota for cash many years ago.
It’s got 125K and refuses to break so I
don’t really have an excuse to replace it.
Lease a car for 1% of the sticker price, per month, with no upfront “cap cost reduction” (hidden extra cost) and a 12K mileage allowance, and you’ve got about as good a deal as you’re likely to find.
Renting a house is the same as leasing a car. Virtually no one on this blog leases for less than a year at the outset. It is possible, though unwise, to lease a car for a year. Net is same-same. The ridiculous extreme example would be comparing lease-to-buy for a $300,000 Bentley convertible while you own a $100,000 crappy little house. Stupid to most people, but possible.
With a lease, you depreciate heavily in
the first few years but then turn the car
in and then depreciate heavily again. If
you buy, and maintain for the long-term,
then you only have the heavy depreciation once.
We have a property tax on cars in my
state. It used to be $30/$1000 but it
went down to about $24/$1000 due to
rising house prices. As houses decline
in value, the relative value of a car will rise compared to houses so that our car taxes will go up.
The difference between a new car and
a used car can be 10 to 1 in taxes.
My previous two cars had 225K and 180K miles on them when I got rid of them. So my opinion of cars is that you can get
a lot out of them if you maintain them well.
“Comments?”
You don’t have your dream car, do you? Good for you, and I mean that. It is good to dream. It is also prudent to be realistic. You were realistic, and leased a POS you don’t really “like”, but could definitely “afford”.
Why do so many think they are “entitled” to their dream house (i.e McMansion) when it costs 10x their income? I don’t get it.
I rented until I was well into my 30’s figuring out what I wanted out of life, did so, and took a big pay cut to move from high price big city (Boston) to low price medium area (Richmond, VA) because I couldn’t afford it, bought a house in my new town and made myself happy.
Happiness is not what you have or where you live; it is who you are.
To all you who live in CA, NY, FL or wherever and can not afford it. MOVE! These places do not owe you, the market does not owe you, you owe yourself. Make your happiness and fortune elsewhere. If everyone who could not afford CA moved out (95% by last statistic in many areas), what do you think would happen?
Yes, that’s right, CA would become affordable again.
no i dont have my dream car , it is not made anymore, I am quite happy driving my toyota. It fulfills my need, and it wasnt new when I leased it.
As long as there is still one out there, you have your dream. One day, you may have it.
Life is completely and utterly different, on average, every five years.
And all the places those Californians would be moving to will become less affordable as we have seen over the past few years.
Here we go again. Californians are responsible for the downfall of civilization!
This is an great string, however I would add that inflation isn’t running that high (8%) if you factor out house price appreciation, as BLS does and frankly I don’t look at buying home as a manditory expense, I guess home ownership is a privledge, however the housing bubble has screwed everything up!
I sincerly hope that the bubble breaks, and breaks hard. It is natural justice for middle-income and young families, that they should sometime in there lives be able to afford a decent place in a decent neighborhood.
I blame many who profitted and perpetuated this unfortunate (disasterous) situation, but the real culprid is the American consumer, there unquenchable greed and silliness has fed, watered and nourished this insanely stupid situation. And, it is that same moronic consumer whose “chickens’ are coming home to roost”, very soon, very soon…..in fact I believe the hammer will come after Christmas, one last orgy of consumerism………..I wonder what Jesus would make of the Malls this time of year……Feliz Navidad……
You could be right about that and speaking of malls. Went out yesterday in the South Bay and there was very marginal traffic. I was able to get in and out of a toy store in less then 15 minutes. Unheard of this time of year.
mrimcome. it is “different” here in nyc as far as shopping goes
the stores are all packed wall to wall shoppers.
in the queens mall macy’s has been open sice thursday 6am and will stay open round the clock until 6pm x-mas eve
everyone is rich! well at least until the cc bill comes
It’s usually like that out here but I’ve been able to move around pretty good all week, short lines and easy parking.
Orange County, CA malls packed. We got gift cards early! -
I noticed the malls were packed… but unusually short lines at the register. Heck, in one store the staff cared so little my fiancee and I walked out and we’ll be writting a letter. That was sad, I was there to buy a wedding present for my best friend and was willing to spend an obscene amount… We were willing to pay a premium for convienience, now we’ll hit a discount shop post Christmas. Cest la vie.
Ok, back to wrapping gifts.
Neil
In San Diego (North County) and LA (San Fernando Valley — at MIL’s for Christmas), the malls are packed. Not sure how people are paying for it. Maybe that’s what all the recent refi activity was all about (joking, I hope!).
“This is an great string, however I would add that inflation isn’t running that high (8%) if you factor out house price appreciation, as BLS does and frankly I don’t look at buying home as a manditory expense, I guess home ownership is a privledge, however the housing bubble has screwed everything up!”
The average family has four main outlays in life: housing, transportation, higher education and healthcare. The cost to participate in each of the four sectors has steadily outpaced the rate of inflation resulting in a negative family savings rate. Some of the basic facts are worth assigning to non-volatile memory.
“My income is currently very high, about $200,000, and I figure the 2 and a half times that would be $500,000 house. However my income can greatly vary. I could go back to a $90,000 annual rate in a couple weeks.”
I actually new of a couple of salesman in software industry that made $200K in Commission + 80K in Salary… Then the bust happened, which left them with a flat salary for couple of years and very little in Commission .
Right. I’m no salesman, just an engineer with great negotiating skills and a contract-w2 title that means no bennies and short (one year) contracts but high pay coast to coast. Nothing good lasts forever, IMO. I’m just a realist and am amazed I lasted this long (45 months) into my current contract. They said it would last 3 months at the beginning. I would not trade this uncertainty for a cozy direct salaried job any day though. Since I became a contractor, I learned quite a lot of useful skills on the job that I probably would not learn at that large defense company I worked for. I feel as though my career has blossomed and become hyper interesting since I left salaries and benefits behind.
Vermonter,
I think its true that more in Vt can do the single income thing, but a lot of the local news in Vt (Chittenden county anyway) is about how unaffordable housing has become to local vermonters. We go there every holiday and although it not crazy likle brooklyn, there are a lot of spec houses around, a lot of farm subdivisions with 10+ acre lots offered at well over $100k. I can understand a very high quality of life up there if you work in the colleges/Hospitals/small tech community, but most of the jobs seem to be in tourism and a lot of these people are living off their inherited land, or they are doing 2 or 3 jobs to stay afloat.
Vermont would be a great place to live. I would consider it only after I convert my traditional IRA to a Roth and go full into municipal bonds. It’s the state of Howard Dean and elected Socialist Party members. The next door neighbor is New Hampshire. If I buy a summer home there, I would not worry about income taxes but only fed taxes. So I’d still be into roth IRAs but also buy the Vanguard federal tax exempt bond fund. Back about Vermont: One thing that liberals do is profess integration but send their children to private white only schools. It’s no wonder that all the liberal meccas have very few people of color. Rent control keeps out the riff raff, causes shortages of apartments, raises the prices of existing real estate. More parks means fewer houses, again raising prices. Examples: Santa Monica, Berserkely, Liberal meccas in Wisconsin, Manhattan, and so on.