Bubble bust and changing landscape

[peterb]

Deck chairs on the Titanic…. very important that they be arranged correctly, from what I’ve been told.

[BGinRB]

[quote=esmith]Ok, if you insist, let’s do everything accurately.

Assumptions:
130,000 gross income, married, 2 kids, single income (mom stays at home with children), 10,000 into 401k

Purchase price $650,000 with 20% down, 6.25% for 30 years, property tax + MR 1.7%, HOA $100/month, insurance $600/year

Scenario 1. Buying a 4S Ranch McMansion

Expenses(monthly):
Interest $2,708.33
Principal $493.40
Insurance $50.00
Property tax $920.83
HOA $100.00
— Housing 4272.56

Income:
Gross $130,000
401k contribution $10,000
Social security tax $6,324
Medicare tax $1,885
State tax paid $2,720
Federal tax paid $8,216
— Net income $8405/month

Cash left after paying off housing: $4132
Contributed towards principal (forced savings): $493

Scenario 2. Renting a house in 4S Ranch. The cheapest detached I see is $2700.

Expenses (monthly):
Rent $2700
— Housing $2700

Income:
Gross $130,000
401k contribution $10,000
Social security tax $6,324
Medicare tax $1,885
State tax paid $6,770
Federal tax paid $19,037
— Net income $7165

Cash left after paying off housing: $4465

As you can see, there’s not much cash-flow difference between buying and renting. Surely you wouldn’t make an argument that it’s very risky to rent in San Diego if you have a $130,000 salary.

Ultimately, what matters is whether you have the down payment and whether you can qualify for a mortgage. If you qualify at 40% gross DTI, you will be able to pay off your mortgage without stressing too much (unless you lose your job). [/quote]

Your numbers are off.
According to H&R Block 2007 Tax estimator, $120K AGI for married filling jointly and two dependents will yield $15,273 in federal tax.
So, the difference between renting and buying is larger than what you say.

Regardless, the original claim was that $130K/year engineering type, married, with two dependents, can afford $650K unit with 20% down @ 6.25% fixed for 30years.
I make the case that $130K/year does not suffice, unless you give up building up your depleted financial reserves. I can support my case with my monthly expense report.

[BGinRB]

[quote=esmith]Ok, if you insist, let’s do everything accurately.

Assumptions:
130,000 gross income, married, 2 kids, single income (mom stays at home with children), 10,000 into 401k

Purchase price $650,000 with 20% down, 6.25% for 30 years, property tax + MR 1.7%, HOA $100/month, insurance $600/year

Scenario 1. Buying a 4S Ranch McMansion

Expenses(monthly):
Interest $2,708.33
Principal $493.40
Insurance $50.00
Property tax $920.83
HOA $100.00
— Housing 4272.56

Income:
Gross $130,000
401k contribution $10,000
Social security tax $6,324
Medicare tax $1,885
State tax paid $2,720
Federal tax paid $8,216
— Net income $8405/month

Cash left after paying off housing: $4132
Contributed towards principal (forced savings): $493

Scenario 2. Renting a house in 4S Ranch. The cheapest detached I see is $2700.

Expenses (monthly):
Rent $2700
— Housing $2700

Income:
Gross $130,000
401k contribution $10,000
Social security tax $6,324
Medicare tax $1,885
State tax paid $6,770
Federal tax paid $19,037
— Net income $7165

Cash left after paying off housing: $4465

As you can see, there’s not much cash-flow difference between buying and renting. Surely you wouldn’t make an argument that it’s very risky to rent in San Diego if you have a $130,000 salary.

Ultimately, what matters is whether you have the down payment and whether you can qualify for a mortgage. If you qualify at 40% gross DTI, you will be able to pay off your mortgage without stressing too much (unless you lose your job). [/quote]

Your numbers are off.
According to H&R Block 2007 Tax estimator, $120K AGI for married filling jointly and two dependents will yield $15,273 in federal tax.
So, the difference between renting and buying is larger than what you say.

Regardless, the original claim was that $130K/year engineering type, married, with two dependents, can afford $650K unit with 20% down @ 6.25% fixed for 30years.
I make the case that $130K/year does not suffice, unless you give up building up your depleted financial reserves. I can support my case with my monthly expense report.

[BGinRB]

[quote=esmith]Ok, if you insist, let’s do everything accurately.

Assumptions:
130,000 gross income, married, 2 kids, single income (mom stays at home with children), 10,000 into 401k

Purchase price $650,000 with 20% down, 6.25% for 30 years, property tax + MR 1.7%, HOA $100/month, insurance $600/year

Scenario 1. Buying a 4S Ranch McMansion

Expenses(monthly):
Interest $2,708.33
Principal $493.40
Insurance $50.00
Property tax $920.83
HOA $100.00
— Housing 4272.56

Income:
Gross $130,000
401k contribution $10,000
Social security tax $6,324
Medicare tax $1,885
State tax paid $2,720
Federal tax paid $8,216
— Net income $8405/month

Cash left after paying off housing: $4132
Contributed towards principal (forced savings): $493

Scenario 2. Renting a house in 4S Ranch. The cheapest detached I see is $2700.

Expenses (monthly):
Rent $2700
— Housing $2700

Income:
Gross $130,000
401k contribution $10,000
Social security tax $6,324
Medicare tax $1,885
State tax paid $6,770
Federal tax paid $19,037
— Net income $7165

Cash left after paying off housing: $4465

As you can see, there’s not much cash-flow difference between buying and renting. Surely you wouldn’t make an argument that it’s very risky to rent in San Diego if you have a $130,000 salary.

Ultimately, what matters is whether you have the down payment and whether you can qualify for a mortgage. If you qualify at 40% gross DTI, you will be able to pay off your mortgage without stressing too much (unless you lose your job). [/quote]

Your numbers are off.
According to H&R Block 2007 Tax estimator, $120K AGI for married filling jointly and two dependents will yield $15,273 in federal tax.
So, the difference between renting and buying is larger than what you say.

Regardless, the original claim was that $130K/year engineering type, married, with two dependents, can afford $650K unit with 20% down @ 6.25% fixed for 30years.
I make the case that $130K/year does not suffice, unless you give up building up your depleted financial reserves. I can support my case with my monthly expense report.

[BGinRB]

[quote=esmith]Ok, if you insist, let’s do everything accurately.

Assumptions:
130,000 gross income, married, 2 kids, single income (mom stays at home with children), 10,000 into 401k

Purchase price $650,000 with 20% down, 6.25% for 30 years, property tax + MR 1.7%, HOA $100/month, insurance $600/year

Scenario 1. Buying a 4S Ranch McMansion

Expenses(monthly):
Interest $2,708.33
Principal $493.40
Insurance $50.00
Property tax $920.83
HOA $100.00
— Housing 4272.56

Income:
Gross $130,000
401k contribution $10,000
Social security tax $6,324
Medicare tax $1,885
State tax paid $2,720
Federal tax paid $8,216
— Net income $8405/month

Cash left after paying off housing: $4132
Contributed towards principal (forced savings): $493

Scenario 2. Renting a house in 4S Ranch. The cheapest detached I see is $2700.

Expenses (monthly):
Rent $2700
— Housing $2700

Income:
Gross $130,000
401k contribution $10,000
Social security tax $6,324
Medicare tax $1,885
State tax paid $6,770
Federal tax paid $19,037
— Net income $7165

Cash left after paying off housing: $4465

As you can see, there’s not much cash-flow difference between buying and renting. Surely you wouldn’t make an argument that it’s very risky to rent in San Diego if you have a $130,000 salary.

Ultimately, what matters is whether you have the down payment and whether you can qualify for a mortgage. If you qualify at 40% gross DTI, you will be able to pay off your mortgage without stressing too much (unless you lose your job). [/quote]

Your numbers are off.
According to H&R Block 2007 Tax estimator, $120K AGI for married filling jointly and two dependents will yield $15,273 in federal tax.
So, the difference between renting and buying is larger than what you say.

Regardless, the original claim was that $130K/year engineering type, married, with two dependents, can afford $650K unit with 20% down @ 6.25% fixed for 30years.
I make the case that $130K/year does not suffice, unless you give up building up your depleted financial reserves. I can support my case with my monthly expense report.

[BGinRB]

[quote=esmith]Ok, if you insist, let’s do everything accurately.

Assumptions:
130,000 gross income, married, 2 kids, single income (mom stays at home with children), 10,000 into 401k

Purchase price $650,000 with 20% down, 6.25% for 30 years, property tax + MR 1.7%, HOA $100/month, insurance $600/year

Scenario 1. Buying a 4S Ranch McMansion

Expenses(monthly):
Interest $2,708.33
Principal $493.40
Insurance $50.00
Property tax $920.83
HOA $100.00
— Housing 4272.56

Income:
Gross $130,000
401k contribution $10,000
Social security tax $6,324
Medicare tax $1,885
State tax paid $2,720
Federal tax paid $8,216
— Net income $8405/month

Cash left after paying off housing: $4132
Contributed towards principal (forced savings): $493

Scenario 2. Renting a house in 4S Ranch. The cheapest detached I see is $2700.

Expenses (monthly):
Rent $2700
— Housing $2700

Income:
Gross $130,000
401k contribution $10,000
Social security tax $6,324
Medicare tax $1,885
State tax paid $6,770
Federal tax paid $19,037
— Net income $7165

Cash left after paying off housing: $4465

As you can see, there’s not much cash-flow difference between buying and renting. Surely you wouldn’t make an argument that it’s very risky to rent in San Diego if you have a $130,000 salary.

Ultimately, what matters is whether you have the down payment and whether you can qualify for a mortgage. If you qualify at 40% gross DTI, you will be able to pay off your mortgage without stressing too much (unless you lose your job). [/quote]

Your numbers are off.
According to H&R Block 2007 Tax estimator, $120K AGI for married filling jointly and two dependents will yield $15,273 in federal tax.
So, the difference between renting and buying is larger than what you say.

Regardless, the original claim was that $130K/year engineering type, married, with two dependents, can afford $650K unit with 20% down @ 6.25% fixed for 30years.
I make the case that $130K/year does not suffice, unless you give up building up your depleted financial reserves. I can support my case with my monthly expense report.

[urbanrealtor]

If some of this was covered in previous posts on this thread, I apologize. I did not read all of them.

To Esmith.
National City’s hispanic component is generally regarded as Chicano (as I technically am) and not Mexican. In other words, people whose grandparents and great-grandparents came over the border. Alternatively, some saw the border change and so therefore the country they lived in. Those areas generally do not have a high percentage of illegals. It is always hard to tell when you have a group that is averse to being identified so numbers are always slippery but this is why Oceanside probably has more illegals than East Los Angeles.

As a professional, I have seen only a few buyers that appeared to be using a relatives papers for purchasing. Even then it was structured as the legal resident purchasing and showing up to fill out forms. Usually, they referred to the relative without papers as their “advisor” or “assistant” so the real arrangement was unclear. I speak Spanish (which my clients don’t realize) and there was never open discussion about it. My point here is that I doubt there were huge effects on itinerant illegals but maybe someone else has better information?

[urbanrealtor]

If some of this was covered in previous posts on this thread, I apologize. I did not read all of them.

To Esmith.
National City’s hispanic component is generally regarded as Chicano (as I technically am) and not Mexican. In other words, people whose grandparents and great-grandparents came over the border. Alternatively, some saw the border change and so therefore the country they lived in. Those areas generally do not have a high percentage of illegals. It is always hard to tell when you have a group that is averse to being identified so numbers are always slippery but this is why Oceanside probably has more illegals than East Los Angeles.

As a professional, I have seen only a few buyers that appeared to be using a relatives papers for purchasing. Even then it was structured as the legal resident purchasing and showing up to fill out forms. Usually, they referred to the relative without papers as their “advisor” or “assistant” so the real arrangement was unclear. I speak Spanish (which my clients don’t realize) and there was never open discussion about it. My point here is that I doubt there were huge effects on itinerant illegals but maybe someone else has better information?

[urbanrealtor]

If some of this was covered in previous posts on this thread, I apologize. I did not read all of them.

To Esmith.
National City’s hispanic component is generally regarded as Chicano (as I technically am) and not Mexican. In other words, people whose grandparents and great-grandparents came over the border. Alternatively, some saw the border change and so therefore the country they lived in. Those areas generally do not have a high percentage of illegals. It is always hard to tell when you have a group that is averse to being identified so numbers are always slippery but this is why Oceanside probably has more illegals than East Los Angeles.

As a professional, I have seen only a few buyers that appeared to be using a relatives papers for purchasing. Even then it was structured as the legal resident purchasing and showing up to fill out forms. Usually, they referred to the relative without papers as their “advisor” or “assistant” so the real arrangement was unclear. I speak Spanish (which my clients don’t realize) and there was never open discussion about it. My point here is that I doubt there were huge effects on itinerant illegals but maybe someone else has better information?

[urbanrealtor]

If some of this was covered in previous posts on this thread, I apologize. I did not read all of them.

To Esmith.
National City’s hispanic component is generally regarded as Chicano (as I technically am) and not Mexican. In other words, people whose grandparents and great-grandparents came over the border. Alternatively, some saw the border change and so therefore the country they lived in. Those areas generally do not have a high percentage of illegals. It is always hard to tell when you have a group that is averse to being identified so numbers are always slippery but this is why Oceanside probably has more illegals than East Los Angeles.

As a professional, I have seen only a few buyers that appeared to be using a relatives papers for purchasing. Even then it was structured as the legal resident purchasing and showing up to fill out forms. Usually, they referred to the relative without papers as their “advisor” or “assistant” so the real arrangement was unclear. I speak Spanish (which my clients don’t realize) and there was never open discussion about it. My point here is that I doubt there were huge effects on itinerant illegals but maybe someone else has better information?

[urbanrealtor]

If some of this was covered in previous posts on this thread, I apologize. I did not read all of them.

To Esmith.
National City’s hispanic component is generally regarded as Chicano (as I technically am) and not Mexican. In other words, people whose grandparents and great-grandparents came over the border. Alternatively, some saw the border change and so therefore the country they lived in. Those areas generally do not have a high percentage of illegals. It is always hard to tell when you have a group that is averse to being identified so numbers are always slippery but this is why Oceanside probably has more illegals than East Los Angeles.

As a professional, I have seen only a few buyers that appeared to be using a relatives papers for purchasing. Even then it was structured as the legal resident purchasing and showing up to fill out forms. Usually, they referred to the relative without papers as their “advisor” or “assistant” so the real arrangement was unclear. I speak Spanish (which my clients don’t realize) and there was never open discussion about it. My point here is that I doubt there were huge effects on itinerant illegals but maybe someone else has better information?

[Eugene]

Ok, there was a small error in my calculations (I was computing federal tax based on 130K AGI), and I did not include child tax credit because it’s the same in both cases. I also used 2008 tax tables. Using 120K AGI and taking child tax credit into account, I get $15,037 federal tax when renting and $5,217 federal tax when owning. The difference is lower by $80/month.

I do not doubt that you will be able to spend all money that’s left after paying your mortgage. My point is that owning a 650k house does not put you under more financial stress than renting for $2700/month.

[Eugene]

Ok, there was a small error in my calculations (I was computing federal tax based on 130K AGI), and I did not include child tax credit because it’s the same in both cases. I also used 2008 tax tables. Using 120K AGI and taking child tax credit into account, I get $15,037 federal tax when renting and $5,217 federal tax when owning. The difference is lower by $80/month.

I do not doubt that you will be able to spend all money that’s left after paying your mortgage. My point is that owning a 650k house does not put you under more financial stress than renting for $2700/month.

[Eugene]

Ok, there was a small error in my calculations (I was computing federal tax based on 130K AGI), and I did not include child tax credit because it’s the same in both cases. I also used 2008 tax tables. Using 120K AGI and taking child tax credit into account, I get $15,037 federal tax when renting and $5,217 federal tax when owning. The difference is lower by $80/month.

I do not doubt that you will be able to spend all money that’s left after paying your mortgage. My point is that owning a 650k house does not put you under more financial stress than renting for $2700/month.

[Eugene]

Ok, there was a small error in my calculations (I was computing federal tax based on 130K AGI), and I did not include child tax credit because it’s the same in both cases. I also used 2008 tax tables. Using 120K AGI and taking child tax credit into account, I get $15,037 federal tax when renting and $5,217 federal tax when owning. The difference is lower by $80/month.

I do not doubt that you will be able to spend all money that’s left after paying your mortgage. My point is that owning a 650k house does not put you under more financial stress than renting for $2700/month.

[Author]

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