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How Many Years of Life Does That House Cost?

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Re: How Many Years of Life Does That House Cost?

#341

Post by nwah1 »

cestith wrote: post #148
JKCalhoun wrote: post #110

Earlier quoted context omitted.

He mentions a county in Texas as the most affordable — and yet Texas has relatively high property taxes (higher than California). So there's that. And the more expensive homes will also be an income tap when you retire and sell the house (hint: anyone in the magenta can retire, sell and live out their lives anywhere in the green).

Texas also has no state income tax, though. And property taxes are based on the value of the home, so lower values means lower property taxes.

And land values are based on expected net income attainable from the location (whether imputed rent or actual rent). Higher property taxes thus reduce land values, making homes more affordable upfront.

Re: How Many Years of Life Does That House Cost?

#342

Post by cestith »

Joof wrote: post #210
cestith wrote: post #148

Earlier quoted context omitted.

Texas also has no state income tax, though. And property taxes are based on the value of the home, so lower values means lower property taxes.

My understanding is that state income tax can be deducted from federal income tax. Retirement income is usually pretty low as well.

Very few things are directly deductible from federal income tax. Most deductions are from the taxable income.

So if you pay X in state income taxes, you'd deduct X from your overall federally taxed income. You end up only saving your federal tax rate times X, not X in federal taxes. So if you're taxed at 13% state and 35% federally, you'd pay 13% to the state. Then you'd still pay (barring other deductions) your federal taxes on 87% of your income.

Federal taxes don't work as a bare percentage, though. You pay a lower percentage on everything up to some number, then progressively higher percentages on brackets of your income up to your maximum tax rate. https://taxfoundation.org/2017-tax-brackets/

Re: How Many Years of Life Does That House Cost?

#343

Post by dlwdlw »

sbenitoj wrote: post #29
lpolovets wrote: post #18

I liked the visualization and data, but I don't think it makes sense to compare home prices to wages w/o considering alternatives to home ownership. Home prices don't exit in a vacuum. That is, if a home is 10x the median salary, you can't really say "well, if I didn't buy a home I could work 10 years less." That's because the alternative to buying is renting, which is also expensive. So sure, a mortgage in SF is $6k…

You also have to factor in the opportunity cost of what you could've done with that down payment (e.g. What would a $100k downpayment invested for 30 years in the stock market be worth vs how much is that worth in your home in 30 years?) The NYT has a buy vs rent calculator that helps make some of these decisions: https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...

There's also leverage. Banks are willing to loan you a million dollars to buy a house but not for investing in the stock market. (Barring catastrophe, over 30 years, there are usually gains.)

Re: How Many Years of Life Does That House Cost?

#345

Post by pcsanwald »

losteric wrote: post #25
pjc50 wrote: post #10

Earlier quoted context omitted.

> bought a house big enough for a family to live comfortably that I could reasonably afford in my late 20s. Well, we'd all love to do that, but where? (That was a rhetorical question, I personally moved to Edinburgh and bought an affordable family house in my late 30s) I remember a website tracking London affordability that pointed out that in some years price appreciation made it literally impossible to save for a h…

Nowhere! If you're in SF, move out to the east bay Besides that, hope residents use legislation to balance out the market... progressive taxes in aesthetically pleasing areas, education/public transportation in economically competitive areas, condos/up-zoning in popular urban areas.

Rental prices in the Excelsior district seem comparable to many neighborhoods in Oakland.

Re: How Many Years of Life Does That House Cost?

#346

Post by readhn »

icedchai wrote: post #229
deathanatos wrote: post #181

Earlier quoted context omitted.

My friend bought a townhouse; ~10x my salary. This is part of what the graphic is trying to demonstrate: there is a significant and material difference in trying to purchase a home between your market, and the one I'm in.

Have you considered moving somewhere more affordable?

if you can find a well paying / interesting job in your field in the area where real estate is "cheap" - go for it!

in my field most interesting (!) and well paying jobs are concentrated in major metropolis areas around major university hubs ... where real estate costs are some of the highest in the country.

Re: How Many Years of Life Does That House Cost?

#347

Post by exclusiv »

delazeur wrote: post #306
legulere wrote: post #261

Earlier quoted context omitted.

As a counterpoint Arab traders did very well for hundreds of years without interest (until Europeans came). Interestingly they are probably where our free market ideas come from: there should be no worldly market interference, the market is shaped by the invisible hand which means the rules given by god. Interest based credit is important for capitalism (use money to make more money), but certainly not for market eco…

Islamic banks are issuing loans without interest to this day. They have a clever fee schedule though, and I'm not sure it works out any differently for the borrower at the end of the day.

There was a Planet Money episode [1] where a bank setup a no-interest loan to a Muslim family because Islamic law prohibits charging interest.

In the end it was basically just a workaround that was effectively the same as charging interest and that same Muslim family ended up taking a conventional loan when they moved instead of an "Islamic-compliant" mortgage because it was a lot easier.

[1] http://www.npr.org/sections/money/2016/05/13/477956675/episo...

Re: How Many Years of Life Does That House Cost?

#348

Post by exclusiv »

IanCal wrote: post #263
PoachedSausage wrote: post #140

Earlier quoted context omitted.

I'm in my thirties and work for a government funded research organisation doing work on a particle accelerator. I don't expect or want to retire, but then 'retirement' means different things. I would definitely want to retire if I worked as a brick layer. Pensions are a Ponzi scheme, don't fall for it. http://www.bbc.co.uk/news/business-41204209

> Pensions are a Ponzi scheme, don't fall for it. Pensions are mostly just highly tax advantaged wrappers for investments now. They are most definitely not ponzi schemes. Your link is for a defined benefit pension, which is not typical anymore.

It may not be typical anymore but CalPERS is a defined benefit plan and the largest public pension fund in the US. [1]

The problem is they bump up those benefits when their fund is doing well but when it isn't doing well there's little or no adjustment. It's so big it's fund is influential in the market and also in politics.

[1] https://en.wikipedia.org/wiki/CalPERS

Re: How Many Years of Life Does That House Cost?

#349

Post by programmingperl »

WalterBright wrote: post #166
njarboe wrote: post #102

Earlier quoted context omitted.

There are most certainly many things deeply wrong. Most people have negative savings every year. They have more debt. If one has bought a house, then it is very easy to go into more debt every year, when house prices are rising. Then they fall. Since the beginning of written history (the first written records are records of debts) there are stories and parables about the evil of debt and the need for debt jubilees. A…

Easy access to credit is an important component to a free market. Making borrowing illegal just leads to all sorts of inefficient contortions to do it another way. For example, businesses often need to borrow money in order to get started. For another, "bridge" loans and "revolving lines of credit" allow a business to operate when the timing of receiving payments does not line up with the timing of when bills are due…

We no longer have a free market. Central banks print and buy stocks, bonds, and mortgage backed securities. China prints and their citizens buy homes in foreign countries.

Re: How Many Years of Life Does That House Cost?

#350

Post by crackered »

steven777400 wrote: post #31
AustinG08 wrote: post #21

Earlier quoted context omitted.

It is honestly worth your while to pay off your mortgage as soon as humanly possible.

This is an oversimplification. The average household has several kinds of debt, and generally debt should be paid down in descending order of interest rate. More significantly, investment income opportunities need to have their interest rate (or equivalent) assessed. For example, in the past 12 months, the DIA has risen 18%. Thus, if 12 months ago I had money to spare, it would have been better to put the money into…

Further, because of the amortization schedule, applying that extra principal payment only shaves off the last month of the amortization schedule, which is the smallest fraction of interest of all payments.

One would still be better off investing that money in something until that last month, then apply the payment to save the very small amount of interest.

This assumes the mortgage is like most (all?) mortgages out there that follow an amortization schedule -- which are unlike credit cards or student loans, where early payments have a big benefit.

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