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Thursday, February 26, 2009
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56 comments:
Bad news for Prime Jumbo ARMs:
http://tinyurl.com/df8hkj
No surprise there.
To help pay for health care . . .
Administration officials said Mr. Obama would propose to reduce the value of itemized tax deductions for everyone in the top income tax bracket, 35 percent, and many of those in the 33 percent bracket — roughly speaking, starting at $250,000 in annual income for a married couple.
Under existing law, the tax benefit of itemizing deductions rises with a taxpayer’s marginal tax bracket (the bracket that applies to the last dollar of income). For example, $10,000 in itemized deductions reduces tax liability by $3,500 for someone in the 35 percent bracket.
Mr. Obama would allow a saving of only $2,800 — as if the person were in the 28 percent bracket.
The White House says it is unfair for high-income people to get a bigger tax break than middle-income people for claiming the same deductions or making the same charitable contributions.
http://tinyurl.com/djxfol
Can't be good for high end housing. In fact, this proposal will likely push the whole housing market down as top end properties become cheaper.
If anyone hasn't been keeping up with Calculated Risk, there's a lot of important posts there in the last day and a half.
including what the "stress test" scenarios are:
CR stress test housing scenarios
and in case you're losing track here's his summary of the day post with links to find the individual posts:
CR summary post
and there's of course the unemployment numbers out today.
CR doesn't like that they're using the composite 10 rather than the national numbers for the stress test, but as the 10 include the biggest bubble areas where the greatest losses have been/will be, I think it's okay.
zerodown: I was just thinking the other day that the tax code was needlessly too simple and straightforward and that we could really use some more tweaks to make it harder to figure out who owes what.
Yeah that should add about $1200 a month to a 1M mortgage. That should drop the high end of the market by 20%.
Thats probably going to drop a lot of places under the new conforming limit of 737k or whatever, so thats where the bottom will likely form for the high end stuff.
...and if you have a more modest house on the market for $737k, you won't be able to compete with the high-end houses that have dropped down into your price range.
i like this logic: it is not fair to high-income people to receive higher deduction, but it is fair for them to pay higher taxes. brilliant!
i think tax accounting (e.g. tax avoidance) will become rather lucrative occupation in the coming years.
Doug, how do you get the $1200 increase?
annual interest on $1mil at 6% is 60k, at 28% you get back $16800, at 35% you get back $21000, difference is $4200 per year or $350 per month.
Konstatin: I think that he is assuming that jumbo rates are higher. For example, the average jumbo is now 6.87%, whereas the average conventional is 5.26%.
http://www.bankrate.com/brm/updates/ybir/ybir_state.asp?prodInit=M&produid=4
A lot of good discussion yesterday afternoon and I wanted to comment on a few items:
Cara - the seller's net on the SFH I am contemplating buying is approx. 9.8% above the 09 assessed value. My net is 12% above the 09 assessed value, and I am not paying closing (thus aside from my 20% down, the 12% above 09 assessment is financed over 30 years).
Prior to 09 assessment, I was planning on pricing my TH to net me 9% under the 08 assessment. If I price it the same number right now, I will be 19% over the 09 assessment. Personally, I may be fine with starting the house right there, but I am not 100% sure. Like many here have said, and many I have spoken with "in the biz", assessments mean little, it's all about market value/appraisal. In addition, no one knows yet what the ratio of market value to assessed value will be, as nothing has been tested. As DC2 mentioned yesterday:
Assessments have never consistently reflected the market value of a home. If they did, it was just a coincidence. I have watched assessments of homes since 1999, and these never matched the market value
I think many on this site are driven by "what is the assessed value", in part because Franklymls makes it such an easy job to find that information out and the list price % of assessed value. This does a great job to spot foreclosures, short sales, or "bargain buys". But for the majority of regular sales, that are in great condition, my experience has been if a house was priced below 08 assessed value on a regular sale, it is priced that way for a reason. Mainly due to location, condition of house (lived in hard), and "newness" of key components of the house. Which will lead me into my next post....
The White House says it is unfair for high-income people to get a bigger tax break than middle-income people for claiming the same deductions or making the same charitable contributions
Right...it's all about "fairness," not about getting more revenue to pay for this health care initiative. What irks me about this is that the categorization of "the wealthy" automatically starts at $250K here, regardless of whether you're in Manhattan, DC, Plano, TX, or Nome, AK. If you're going to go on fairness, you have to adjust for cost of living. But hey, that's too complicated, so screw it.
If you really want to tax "the rich" and don't want to adjust for cost of living, why not add another far-higher threshold tax bracket, maybe starting at $750K-$1M?
Regarding "upgrades" I mentioned yesterday, perhaps I should not have said "upgrades" but "updates".
As both a seller and a buyer, I may have a unique insight into this, but my opinion is no better than anyone else's here, and everyone is entitled to their own opinion. But I will share my experience:
Having made offers on several foreclosures, having walked through nearly 35 SFH houses in the last 3 months, and having studied listings daily with great interest for the same period, I will state the obvious:
Typically, you get what you pay for.
Kingmer said: Roofs, floors, carpets, windows, sidding….you can’t add anything for those, every house requires them- you upgraded to nicer ones because it was your personal preference not the buyers. Take the emotion out of it, it is a buisness transaction.
Personally, I could not disagree more. First, I do not have an emotional attachment to my sale property, just like I don't have an emotional attachment to the purchase property. What I can say is this:
Many of the homes I have looked at were built in the early 80s and still have original windows. They are now 29 years old, and quite drafty in some instances. If I were to buy that home and move in there with my family, I would be a fool not to think that I would not be replacing those windows quite soon. That is a future cost, and something I would probably do in the very near future. It is also one of the most expensive items on a house. Same holds for siding and roof. Siding being more expensive than the roof.
But if a house was built in 1980 and has old alum siding that is looking bad, and has wood soffits and trim/wrap around the windows that may/may not have moisture damage and needs painted and maintained, and another house has a relatively new vinyl siding and vinyl wraps around all windows/edges of the house which will never need to be painted and will require less maintenance and look better, that item is worth something in my mind.
The other thing is that many of these homes have extremely old and worn carpeting. Dirty and outright stained in some instances. Depending on the condition, there were many houses I looked at where I said immediately: "I will have to get new carpeting before I move in". That is an immediate expense.
With one house I put an offer on, I will give you the gist:
It was a late 80s foreclosure that had some issues I won't get into fully. It needed a lot of repairs and upgrades. To use even numbers, let's say I could buy this house for $450k, but I would have to put $40k into it immediately for repairs and to get it into a condition in which it is livable.
I studied different break even scenarios for buying a house that would need less than $5k in repairs/upgrades during the time I lived there. In other words, if I live in a property for 10 years and go to sell, there were a number of things that would definitely need to be in good condition for me to sell that house in 10 years. Plus, a number of items I would want in good order while I lived there. If I don't have to put in new windows, if I won't need new siding, roof, or any of the big dollar exterior items either while living there or prior to selling in 10 years, that is a huge deal to me.
What I determined was that if I bought a house that was 100k more which required no work, the break even point would be just over 6 years. If I actually invested the 40k over those 6 years using very conservative numbers, I would make 10k on it, which makes the actual break even point almost 8 years.
Thus, I would have to live in the foreclosed house for 8 years just to break even rather than live in the 100k more expensive house that had all the repairs/updated/upgraded items done. And that 40k did not take into account upgrading items like granite or tiled bathrooms, I am talking basics, like wood rot, windows, roof, leaks, some carpeting, furnace, and on and on...
The point I am trying to make is this: from a buyers perspective, I do find it to be a good thing (and something I am willing to pay more for so long as it is not excessive) to buy a house that has new windows and all the other "basic" updated items replaced recently.
I am not talking about granite countertops, home theaters, or tiled bathrooms. I am talking the basics that Kingmer mentioned above. Again, I am in a unique situation of being a seller and a buyer, but this is my mindset as a buyer.
Sure, if you can find 2 similarly priced houses and 1 has all those items updated, you can take the bargain deal. And not everyone will agree with me, but I just found it surprising that King would not "add" anything to a house with new windows, roof, siding over a house that does not have them and whose items are near or at the end of their useful life, and you would have to pay to have them done. Of course, if you can do them for $20k and the guy is selling them to you for $40k in the total price, that is different.
t,
this may or may not be what king meant, but I think the difference between what you to are saying may be semantic. In order to get the full price for the house it needs to be well-maintained in a timely fashion. Thus, if you haven't done those things, they get subtracted from the purchase price in order to account for them as a buyer. And you're right, these will be financed differently, whether those updates are made in cash or in HELOC, they won't be the same as your base mortgage.
On another note. In my area, Kingstowne, there's a "town" web site that gives neighborhood by neighborhood sales data. One thing I've noticed is that the first low sale is generally followed by 2 or 3 others, 10 to 15% higher. So, there is a problem in pricing which is that, if sales have actually stagnated, then in order to find new buyers, the first intrepid home-seller will invariably undershoot before some buyer steps up. And since no one really knows at that point what the price should because there are no recent comps, that first sale often will be a bargain. So, what you need to decide, is whether you think you can still be the last of the sales near the 08 values, or if you would rather be the 2nd or 3rd sale after the buyer pool has been located. But, what you don't want to be, is the guy who undersold his house.
Does anyone else have input on the pricing at this micro-neighborhood level?
Thanks for giving the percentages on your TH, those require more thought before I can usefully comment.
Have a new "discount" for you, Harriet:
104 EVANS St
MANASSAS PARK, VA 20111
Price: $53,900
Last Sale: $305,000 5/18/06
Discount: 82%
Quick question for anyone else who gets daily updates:
Used to be that all "updates" consisted of price drops. Now 3 out of 4 updates are for listings going "contingent." Very sharp increase, very recent. Many more places going under contract quickly. Will be quite interested in February numbers.
If Congress wanted to increase tax revenue, it could also lower the estate tax exemption amount, which is currently $3.5M.
"The White House says it is unfair for high-income people to get a bigger tax break than middle-income people for claiming the same deductions or making the same charitable contributions."
Yeah, but it is perfectly "fair" for them to pay a greater percentage of their earnings isn't it?
I am not arguing for or against "progressive" taxation, but lets not pretend it has anything to do with fair.
Sorry, that's strange, the end of my last post didn't show up:
I just wondered if anyone else had noticed similar trends, or if this was just my corner of PWC: contracts happening faster/more often?
Tabitha - I can tell you this for FFXCTY (at least the areas I have been looking) - the good ones were getting snapped up very quickly. With the very low interest rates and spring being here, the buyers seem to be out in full force. Even homes that had sat on the market for months that I was interested in seemed to go due to the tax rates and spring being here.
Of course, not everything is moving along quickly, the overpriced/poor condition homes are still out there. But there were several homes that showed up on Frankly as "active" that I was interested in, but a call to the agent revealed it just went under contract.
From my field knowledge, I do think the nice and respectably priced homes are moving faster than they did, say in December or January, for sure.
Yesterday, DC2 said:
I have been watching real estate for a long, long time. I knew prices were already deflating for Fairfax County in the summer of 2005, when nobody knew it. I know what I am talking about.
I am wondering what you think of the current market and any "forecast" you might have for us who are not nearly as experienced as you.
At a home inspection yesterday, I was talking to the home inspector who thought with rates what they are and with "opportunities" out there and the government assisting future foreclosure problems from becoming foreclosures, that the housing values may go up sooner rather than later.
Personally, my ignorant view is we will see a slight decline (nothing drastic or sharp) for several months but I have no idea if it levels off after that and remains steady, or if it begins to increase (or, really, how much further could things drop?). Again, I am uneducated when it comes to this thing, so I am just wondering what anyone's opinion may be on the matter.
Tabitha-
A lot of what I have "been watching" in Loudoun is suddenly under contract as well.
My question will be how many of them will actually close ( only about 50%, right) and what the actual Sales prices will be ??
I think some of the sellers that have been on the Market for 9 or more Months maybe throwing in the towel & "giving them away".
They may fear that as the Spring Market continues & more & more homes come on the Market (REO's re-lists & new lists), their chances for a sale greatly diminish.
Had dinner with my Title Co. pal & a Reator pal - both said there was "no Spring Market", just re-fi's & REO/shorts are the ONLY thing selling
T,
if there is less foreclosures, prices will definitely won't go down as fast as if a lot of foreclosures are on the market. at the same time unless price to income ratios start improving no way that prices will go up.
my personal view: more job losses this year, more distressed sales, more significant price declines.
Another delusional seller - house has been for sale at $1.150 mill for months; just raised the price to $1.239 mill:
http://www.redfin.com/VA/Arlington/6206-12th-Rd-N-22205/home/11240202
This house is surrounded by $600K homes.
What is he smoking?
The IRS has implemented the home buyer credit and a new form is available for the new version:
http://www.irs.gov/pub/irs-pdf/f5405.pdf
You can claim your 2009 purchase on your 2008 taxes. It doesn't appear to preclude ammending the 2008 for this purpose if you purchase after filing. So, if we do buy this year, we will have to weigh the pain of amending versus taking a lessened one in 2009 due to the phase-out.
There you have it folks, from the horses mouth.
Is it just my line of thinking, or could this "first time homebuyer credit" be the kick in the pants for individuals who would be first time homebuyers and who have not filed their 08 returns to buy that house and close prior to April 15? Any thoughts?
T
That's what ammended returns are for. No worries. Unless you are in the cusp situation of having income under $150k for couples in 08 and over $170k for couples in 2009, then if you really don't want to do your taxes twice in order to get this money, then you can file for it in April 2010. However, the whole idea behind it being applicable on 2008 returns was so that buyers could close in October and immediately file an amended return to get that money back sooner.
cara,
the fact that you're making $170K+ yet looking at houses in the low $300Ks gives me a new perspective of my own house hunting.
i really need to step back and think this whole thing through...
T,
My prediction, the Case-Schiller index for DC will come down to 2000 levels by 2011.
However, on a tranche by tranche level, in the particular area I'm looking, my predictions need to be more subtle.
In Kingstowne/Springfield/Franconia, 2 bdr condos, good or ill, will come down to $140k-- $160k (currently 160k -- 300k list), 2 bedroom THs $160-180k, (currently 190k-309k) These will both happen by October. 3 bedroom THs will reach $220k-$280k depending on size, location, quality and garage. (currently $210k -- $380k) This will happen by April 2010. 4 bedroom TH's and other luxury TH products will reach $325--$380k. (currently off my radar...)
SFH's: crappy ones that are already at $200k or less? will come down to $80k and be bought by developers and turned into much needed retail as appropriate for junky areas next to 95/395. With nicer locations but still old and tiny? $230k. Reasonable sized, but old and un-updated? $260k-$350k. Modern, well-designed ones with good bones? $350k--$500k. Bubble-built guady-junk? Heck if I know.
The higher priced echalons will take longer. But I think the area near F/S metro will be done with the downturn and into the stagnation phase by mid 2010.
What am I basing this on? A combination of the rents in the area, the local median household income ($90k), and knowledge of by what percentage each of these tranches went up in the first place which is based mainly on the CS tranches, but confirmed by the nieghborhood by neighborhood Kingstowne data.
But honestly, these are based mostly on the prices I feel I could stomach paying for these places. My gut was incredibly accurate last spring. We looked at a few condos and said, what would we pay for them if they suited our needs (which they didn't), and gosh golly, those prices have already arrived at least for individual units in those complexes.
mm,
are you planning on starting a family while keeping up both incomes? Daycare = rent on a 1 bedroom apartment.
It's that simple. If we waited until after having kids, and after they got to full-day school, we'd be looking at a higher price range (probably). As it is, we need to be able to afford the house on one salary, just in case. (it doesn't ahve to be easy on one salary, just possible)
MM,
same here, same here.
i was prepared to shell out about 3.5 of my annual income in 2005 for a home and could not find anything reasonable (i.e. a place that i would like to live in for 5+ years, not to flip in 2). now i think that my income changed a little bit and prices went down a bit, i start to believe 2.5*income is probably a better idea, and for a sfh in a nice area, not for a condo. i'm going to count two of our family incomes though, i'm not as risk-averse as Cara is, even though been thru grad school TA experience as well.
konstantin,
Anyone _more_ risk adverse than me would need to get their head examined. But my point was you need to calculate in your known large expenses just like you would your debts. The WaPo affordability calculator lets you do this. It's the back-end ratio that hits us, not the front end. Even with both incomes if we include expected day-care costs we get a max house price of $330k. So, our target range of $250k isn't that far off.
(If we lose one income I'm assuming we won't have to pay daycare, otherwise I'd be looking at like $50k houses...)
Ugh, another asymmetrical house!
Link
I think I have some degree of OCD that causes me to prefer symmetry because these places drive me nuts! It does seem to be a recent development though, I don't see many older houses that exhibit it. Is the internal structure of this house so important that they couldn't put the front door in the middle?
"Cara said...
My prediction, the Case-Schiller index for DC will come down to 2000 levels by 2011."
Cara - is that nominal (i.e. we will drop from the 170s to 100) or inflation adjusted (i.e. we will drop from the 170s to about 140)?
If you are talking nominal, we are far less than 1/2 way to the bottom, meaning the rate of loss would have to accelerate quite a bit to get us there by 2011. If so I take the over on that bet!!!
Cara,
daycare cost definitely has to be counted. but still, if your taxes are optimized and you are not putting like 30% of your income in retirement, after you cross 150k usually you can afford a little bit for your house (probably a mentality people acquired during the bubble). 250k house with 20% down payment means that you pay at most 1400 PITI at current interest rates, plus you get the
$250 tax break. even after day care expenses for 2 kids you'll have some money left for your life. it is disposable time that you'll be lacking (from my experience).
Jeff B: I swear that some builders around here must start building without any architectural drawings.
Jeff B,
I think it's more of a problem with it being almost symmetrical, but not quite. You have the symmetrical sides, a round window in the center, and then an offset door and large window. If the offset door was a necessity, they probably could have had an architect come up with a front facade design that was non-symmetric but still nice - or even done it themselves with some cheap CAD program. There are lots of very nice houses around that aren't symmetric, or even close to symmetric.
On the other hand, this would be an ugly house even if it were perfectly symmetric. Maybe not quite so disturbing, but still ugly. It's going to sell to someone who buys it for its utility, not its beauty.
>> Administration officials said Mr. Obama would propose to reduce the value of itemized tax deductions for everyone in the top income tax bracket, 35 percent <<
Comrades,
Higher taxes is the path to a worker's paradise.
House Faces Tuesday Vote on Bankruptcy Cramdowns
The House of Representatives will on Tuesday consider a sweeping homeowner assistance legislative package that would allow bankruptcy judges to modify mortgage debt on a borrower’s principal residence. The bill, HR 1106, or the Helping Families Save Their Homes Act, contains the controversial “cramdown” measure originally passed by the House Judiciary Committee in early January. The bill had potentially been slated for possible vote today, but various media reports as well as sources that spoke with HousingWire have suggested that negotiations over the hot-button issue are yet continuing. Read the full legislation.
“To allow time for more discussion, I expect to complete consideration and vote on the bill likely Tuesday of next week,” House majority leader Steny Hoyer (D-MD) told MarketWatch Thursday.
http://tinyurl.com/cxbhjy
Regarding Assessments:
Perhaps I did not explain it very well yesterday.
Assessments are not a good measure of market value.
When you find two similar houses with a difference in assessment of over $400,000, you know that this is hardly a correct figure in the ballpark.
Stats for two houses on the same street in the Town of Vienna:
Built in 2008
5 bdrooms, 4 and 1/2 baths
3,938 sq. feet
half an acre land
Sold in 2008 for $1.275 million
Assessed at $1.2 million in 2009
Built in 2007 by owner
6 bdrooms, 4 baths
3,660 square feet
half an acre
Assessed at $788,000 in 2009
How can you explain a difference of over $400,000 in assessment. The second house is actually nicer than the first one sold for $1.27 million.
As a buyer, what do you do with this information. It is not representative of its market value.
This is just an example. I am sure there a many others all around the region.
Assessments really mean nothing. They are just a way of collecting taxes.
So one should not get too excited about properties with very low assessments because that does not necessarily translate into market value. Check the comps.
Comrades,
Higher taxes is the path to a worker's paradise.
Another way to look at it is: Obama is getting rid of Bush's irresponsible tax cuts. Heck, Barack "The Commie" Obama is turning out to be more economically conservative than Bush ever was.
T,
This is my guess. On average, prices should continue to go down this year. However, there are areas where prices may have reached bottom, particularly when you can buy a property for less than you can rent it in some areas of Prince William County.
This is also a matter of supply and demand. As long as we have high inventories, prices should not go up, and may continue to go down.
My forecast was for the area to lose 37 percent of its value in median home price. We are already there. In 2005 the median price for a home in the Greater Washington DC area was $500,000. Today it is $309,000 and counting. I do not think this median is going to go much lower.
However that does not mean that homes in certain jurisdictions and subdivisions will not go down. I believe that the high number of foreclosures in the area pulled down this median price ahead of time.
I have seeing charts for Alt As, and other subprime loans. Most of these have already reset, but for 2009 there are still a lot of Alt As that need to reset.
For some counties, such as Arlington: As long as there are enough people willing to pay $200,000 to $300,000 more for a similar home that they can purchase in Vienna for example, just to be closer in to DC, prices will remain stable in that county. I think at some point even the rich will think that it is crazy to pay such a premium and will start buying in other desirable but less pricey areas. However, I cannot predict human behavior. Not everyone necessarily thinks like me.
In general, I think prices will continue going down. Montgomery County will probably lose more value than Fairfax County this year.
I would not be in any hurry to buy a home today, unless you are buying a foreclosed property at a firesale price. I think at best prices will remain about the same for the nex five years, so what is the hurry.
T,
I should have also said that higher end homes (where there are large inventories) will probably go down by a larger percentage that starter homes which have suffered much of the price pressures so far.
My thinking was that for most of Faifax County average household income is about $100,000, therefore an average median of $350,000 would be about right. We are already below that number in Fairfax County per the latest MRIS statistics which showed a median of $309k.
But then again when it comes to judging the price for a particular house, look at the history of prices in that subdivision.
If you want to be super safe add a 6 percent increase in price for every year from 1998 to 2009. That is certainly below the bottom because prices stagnated for the 10years before 1998. Houses were underpriced in 1998. I doubt it will go down to that price level. I think the bottom will be more like 2003/2004 prices for any specific home and depending on the area.
T,
I also agree with you regarding the cost of upgrades that should be reflected in the home price.
This is also what I was trying to explain yesterday when I compared a newer Townhome to an older not updated home. These are not the same even if they have similar pricing. The SFH requires additional $$$ to make it comfortable to the level of a newer townhome.
Absolutely a home with upgrades should cost more than the same home with no upgrades. Those are real expenses that you have to make to live in a comfortable house. Many of these older homes also have insulation and draft problems, expenxive problems to fix.
I think your analysis makes a lot of sense and if I were you I would be also looking at the best house you can buy for your money.
Otherwise I would be looking at a tear down for the lowest price possible, with the idea of building a new home on the lot.
dc2--
I have to assure you that prices in PWC are already well below the steady 6% appreciation from 1998 to 2009 that you said was "super safe." Maybe for the areas you are looking into, but not out here.
And honestly, does anyone think steady 6% appreciation for housing values is remotely reasonable?
Tabitha,
I am not looking at Prince William County, only Fairfax and Arlington.
Foreclosed properties are not normally priced and should not be considered when you are looking at this 6 percent appreciation in Fairfax and Arlington. I believe foreclosed properties particularly in areas where there are not too many will see a nice appreciation in the next 2-5 years.
If you get a foreclosed property, congratulations!
T: I'll give you my opinion on the upgraded/maintained TH vs the one that needs work. I'd base my starting price on the comps and then subtract from there anything that wasn't done yet (carpet, windows, etc). I'd actually prefer the run-down house for the run-down house price because I know when I fix everything I'll do it right. I've seen too many of those "Flip this House" shows and the crap they do to cover up problems to just assume any work done really was of high quality.
Probably not the answer you're hoping for, but that's just how it is these days. The price matters a lot more than the finishing touches - not like during the bubble.
"Another way to look at it is: Obama is getting rid of Bush's irresponsible tax cuts. Heck, Barack "The Commie" Obama is turning out to be more economically conservative than Bush ever was."
Economically conservative?
You have to be out of your mind.
Bush was bad, but on his worst day he wasn't throwing around money like Obama has in his first few weeks.
"Doug, how do you get the $1200 increase?
annual interest on $1mil at 6% is 60k, at 28% you get back $16800, at 35% you get back $21000, difference is $4200 per year or $350 per month."
1M mortgage at 6% is a $60,000 deduction from your taxable income, not 21,000.
Obama is proposing limiting that deduction to 44,000.
Anon,
Inflation adjusted, but keeping in mind that current inflation is flat.
dc2
where are you looking?????
6% every year consistently since 1998??? crack-rock.
Incomes have not risen at that rate. Didn't you get the memo? Since 2000 incomes have stagnated (relative to inflation). Therefore at most you can get 5% for the first 2 years and 3% thereafter.
Furthermore, it all depends on the tranche. 80% or more of the listing under $350k in Franconia/Springfield right next to the freaking metro are foreclosures or short sales. REO is the market, it's the only market. Any segment that doesn't have REO's? Isn't moving.
Konstantin,
I'm confused, my math agrees exactly with your math, which is why I'm looking at $250k.... I'm also basically doing 3x income for the smaller of the two incomes for the mortgage amount. Granted, if the job picture weren't so uncertain, and we weren't risking so much potential loss by buying too soon, then we'd be looking at $300k, i.e. a $240k mortgage. But for that we need to wait another year to flesh out the $60k and to let the market sort itself out.
Oh, and Tabitha,
Yup, I've been seeing a lot more contingencies, it started in January here.
Cara,
piti=1100 (after interest tax deduction)
add 2 day cares for kids =2000 a month (unless you want to go high-end there).
3k a month for food/clothes/transportation and some vacation savings is ok, more or less.
6k a month --- that's what you get from 100k salary if you are married.
so it is not much of a risk to buy more house for you. but here is the problem --- if people get rid of their bubble mentality in this area it may very well become a norm to spend smaller percentage of their income on housing, especially when owning a property. and with your frugal approach in the worst case scenario you'll have to take a minimal loss on your first property an move to a larger one while not paying much more for it. sounds good to me.
Doug, from what i remember a deduction from taxable income is not a tax credit, right?
If you deduct 60k and you are in 35% tax bracket you used to get back 21k of your taxes, while now you'll be able to get back only at 28% level, not 35%, so you get back 16.8k.
konstantin,
6.5k a month is our take home from 150k, not 100k. You're missing something... retirement at 6% pre-tax income, life insurance, pension, employee's portion of health insurance (550/month). Did you include all income taxes, including SS/Medicare and VA state? At the moment, our possible itemized deductions still don't add up to our standard deduction. And at 150k you're in another bracket than if you're at 100k...
It's possible that with the 2 dependents, and itemized deductions we will get to keep more of that income, but not that much more...
Of course we haven't done this year's taxes yet, so maybe we've been withholding way too much this year, but I've done estimated taxes for enough years that I kind of doubt it. We'll see. I could be extremely pleasantly surprised.
Oh, and we still have 2.5 years left on a 4 year car loan, and student loan debt ($140/month) these things add up.
yeah, was counting deductions for kids, assumed dependent care tax-saver spending account is in place (it helps!) and much better terms for medical insurance.
was just looking at my paycheck from 4 years back when my wife was in grad school.
i agree that your tax burden increases a lot when you do not have kids and your income crosses 150k, that's true (then you need an accountant, it also helps --- if he is experienced!). was just discussing worst-case scenario when you have 2 kids (that still go to daycare!) and only one job.
Leroy, Bush was, but he didn't tell you about it. The Iraq and Afgh. wars were not included in The Budget but treated as separate HUGE items so that his admin. could avoid telling the public the true size of the deficits he was creating. And the admin. followed policies that paid of no bid contracts; forbade Medicare from negotiating fair drug price rates (e.g., the same lower rates enjoyed everyone else in the western world), driving up Medicare costs (and deficits) enormously; enabled the Wall Street types to package those complex derivatives and inflate their value to sell them to others around the world, leaving all of us sorting out the mess as the 401ks and savings accounts came tumbling down in value and forcing huge government investment to prevent total collapse. As for being a deficit spender/creater, Bush is in a league all by himself. Obama is like the new homeowner coming in to clean up the disaster left behind by the foreclosed prior owner and counting up the ginormous costs to get the house in shape again.
"Leroy, Bush was, but he didn't tell you about it. The Iraq and Afgh. wars were not included in The Budget but treated as separate HUGE items so that his admin. could avoid telling the public the true size of the deficits he was creating."
I am sorry, but although it is true Bush played games with his budgets, he didn't come close to spending the amount of money Obama has.
You don't have to like Bush, I certainly don't, but facts are facts. Obama is proposing a level of deficit spending that is unprecedented in the post-war period.
While we are on the subject, he is playing his own games with his budget projects. Different, but no less deceptive.
The first and most obvious is in talking about halving the deficit in 10 years, years after he would have left office if he got a second term. What he should propose is a budget through the end of his first term and perhaps through the end of a hypothetical second term, so that he has some goals to meet in a meaningful time-frame.
Second off, his projections rely on an extremely optimistic economic scenario playing out, raising tax revenues. Hoping for an economic boom is no way to budget for the future.
Third, his "baseline" includes the Iraq war spending and massive "stimulus" package. He claims that he added the war costs back into the budget in order to improve its honesty, which it does, but it also allows him to claim that as money "saved" as the war winds down.
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