Forum Replies Created
-
AuthorPosts
-
(former)FormerSanDiegan
Participant[quote=Rt.66]
I’ll beat your $165k challenge. Hows about we start at $150k in SD?
Right now today I have 52 homes for $150k or less in SD to choose from. And that’s excluding condos! Sure at this point they are not the cream of the crop obviously. And I really should not have to explain that SD will have that crazy averages thing happening, so yes coastal SD will be higher than inland, duh.
To assume I meant La Jolla or Carlsbad would have a median of $165k when I say “SD will have a median of $165k” is just more RE Bear word games.
[/quote]
52 homes for 150K or less is a long way from a median of 165K.
About 7,000 homes away in fact.Emotional ? Provocative ? Passionate ?
Yes.Correct ?
MaybeAnalytically precise ?
No.Participant[quote=SDEngineer][quote=Rt.66]
So a proven 100 year old housing affordability ratio (price x average wages) is no longer accurate because we have a new dynamic called renters and low earners to contend with?
If you chop off the bottom 1/3 won’t you logically chop off the top 1/3 as well? SD especially has lots of millionaires and even billionaires that throw the average way up.
Millionaires and billionaires are not players in the housing reality we live in but their houses and incomes are included in ratios.
Those apartment dwellers and renters are future first time buyers, a group housing cannot survive without. You can’t move up if others below are not moving up. So they most certainly are to be considered in housing affordability.
So Cal has gotten around historical affordability ratios with housing bubbles. No more though.
2.5-3 times earnings is a historically proven AFFORDABILITY gage. Meaning people can actually make their payments at those ratios.SD average wage of $61k is probably high and even if not; wage deflation will probably bring it into the $50ks. Even 3x earnings at $55k aver. earnings is $165k for SD housing. So the HIGH end of affordability will probably be $165k.
Unbelievable? In 2006 how people would have thought you could buy a 2500 sq’ house in Temecula for $220k in 2009? Not many, and most would have thought the idea completely absurd. That rushed cut in prices was just the quick fall to “regular” prices. Now the discounts begin.
[/quote]
The 2.5-3x median household income to median price is a national average and has NEVER been true in So Cal (at least not since the WW II era) – and it’s not because of bubbles – it’s because this is one of the most desirable areas in the U.S. to live.
It’s also the reason why there are so many renters in So Cal – and always have been – this isn’t a new trend, this is a multidecade trend again going back as long as records continue. It’s EXPENSIVE to buy in So Cal and always has been – bubble years or not. Instead of only about 2/3 of people being able to affordably buy a house (like in much of the U.S.), historically only a little over 55% of the people in So Cal can afford to buy a house. Only Hawaii and New York have a lower homeownership rate compared to California. Check this table out:
http://www.census.gov/hhes/www/housing/census/historic/owner.html
The HIGHEST homeownership percentage ever reached in CA was at 58%, in the 1960 Census. And this is for all of CA.
It’s simply a case of supply and demand – all other things being equal, more people would want to live here than in, say, Louisville. So all other things aren’t equal – the desirability of So Cal pushes the prices up. Detroit suffers from the exact opposite – relatively few people would consider Detroit a desirable city to live in, and so their ratio is much LOWER than the national average.
[/quote]
Rt. 66 seems to be ignoring all the historical data that Rich produced to initiate this Blog.
For those who haven’t been around here too long, check out the primer :Participant[quote=SDEngineer][quote=Rt.66]
So a proven 100 year old housing affordability ratio (price x average wages) is no longer accurate because we have a new dynamic called renters and low earners to contend with?
If you chop off the bottom 1/3 won’t you logically chop off the top 1/3 as well? SD especially has lots of millionaires and even billionaires that throw the average way up.
Millionaires and billionaires are not players in the housing reality we live in but their houses and incomes are included in ratios.
Those apartment dwellers and renters are future first time buyers, a group housing cannot survive without. You can’t move up if others below are not moving up. So they most certainly are to be considered in housing affordability.
So Cal has gotten around historical affordability ratios with housing bubbles. No more though.
2.5-3 times earnings is a historically proven AFFORDABILITY gage. Meaning people can actually make their payments at those ratios.SD average wage of $61k is probably high and even if not; wage deflation will probably bring it into the $50ks. Even 3x earnings at $55k aver. earnings is $165k for SD housing. So the HIGH end of affordability will probably be $165k.
Unbelievable? In 2006 how people would have thought you could buy a 2500 sq’ house in Temecula for $220k in 2009? Not many, and most would have thought the idea completely absurd. That rushed cut in prices was just the quick fall to “regular” prices. Now the discounts begin.
[/quote]
The 2.5-3x median household income to median price is a national average and has NEVER been true in So Cal (at least not since the WW II era) – and it’s not because of bubbles – it’s because this is one of the most desirable areas in the U.S. to live.
It’s also the reason why there are so many renters in So Cal – and always have been – this isn’t a new trend, this is a multidecade trend again going back as long as records continue. It’s EXPENSIVE to buy in So Cal and always has been – bubble years or not. Instead of only about 2/3 of people being able to affordably buy a house (like in much of the U.S.), historically only a little over 55% of the people in So Cal can afford to buy a house. Only Hawaii and New York have a lower homeownership rate compared to California. Check this table out:
http://www.census.gov/hhes/www/housing/census/historic/owner.html
The HIGHEST homeownership percentage ever reached in CA was at 58%, in the 1960 Census. And this is for all of CA.
It’s simply a case of supply and demand – all other things being equal, more people would want to live here than in, say, Louisville. So all other things aren’t equal – the desirability of So Cal pushes the prices up. Detroit suffers from the exact opposite – relatively few people would consider Detroit a desirable city to live in, and so their ratio is much LOWER than the national average.
[/quote]
Rt. 66 seems to be ignoring all the historical data that Rich produced to initiate this Blog.
For those who haven’t been around here too long, check out the primer :Participant[quote=SDEngineer][quote=Rt.66]
So a proven 100 year old housing affordability ratio (price x average wages) is no longer accurate because we have a new dynamic called renters and low earners to contend with?
If you chop off the bottom 1/3 won’t you logically chop off the top 1/3 as well? SD especially has lots of millionaires and even billionaires that throw the average way up.
Millionaires and billionaires are not players in the housing reality we live in but their houses and incomes are included in ratios.
Those apartment dwellers and renters are future first time buyers, a group housing cannot survive without. You can’t move up if others below are not moving up. So they most certainly are to be considered in housing affordability.
So Cal has gotten around historical affordability ratios with housing bubbles. No more though.
2.5-3 times earnings is a historically proven AFFORDABILITY gage. Meaning people can actually make their payments at those ratios.SD average wage of $61k is probably high and even if not; wage deflation will probably bring it into the $50ks. Even 3x earnings at $55k aver. earnings is $165k for SD housing. So the HIGH end of affordability will probably be $165k.
Unbelievable? In 2006 how people would have thought you could buy a 2500 sq’ house in Temecula for $220k in 2009? Not many, and most would have thought the idea completely absurd. That rushed cut in prices was just the quick fall to “regular” prices. Now the discounts begin.
[/quote]
The 2.5-3x median household income to median price is a national average and has NEVER been true in So Cal (at least not since the WW II era) – and it’s not because of bubbles – it’s because this is one of the most desirable areas in the U.S. to live.
It’s also the reason why there are so many renters in So Cal – and always have been – this isn’t a new trend, this is a multidecade trend again going back as long as records continue. It’s EXPENSIVE to buy in So Cal and always has been – bubble years or not. Instead of only about 2/3 of people being able to affordably buy a house (like in much of the U.S.), historically only a little over 55% of the people in So Cal can afford to buy a house. Only Hawaii and New York have a lower homeownership rate compared to California. Check this table out:
http://www.census.gov/hhes/www/housing/census/historic/owner.html
The HIGHEST homeownership percentage ever reached in CA was at 58%, in the 1960 Census. And this is for all of CA.
It’s simply a case of supply and demand – all other things being equal, more people would want to live here than in, say, Louisville. So all other things aren’t equal – the desirability of So Cal pushes the prices up. Detroit suffers from the exact opposite – relatively few people would consider Detroit a desirable city to live in, and so their ratio is much LOWER than the national average.
[/quote]
Rt. 66 seems to be ignoring all the historical data that Rich produced to initiate this Blog.
For those who haven’t been around here too long, check out the primer :Participant[quote=SDEngineer][quote=Rt.66]
So a proven 100 year old housing affordability ratio (price x average wages) is no longer accurate because we have a new dynamic called renters and low earners to contend with?
If you chop off the bottom 1/3 won’t you logically chop off the top 1/3 as well? SD especially has lots of millionaires and even billionaires that throw the average way up.
Millionaires and billionaires are not players in the housing reality we live in but their houses and incomes are included in ratios.
Those apartment dwellers and renters are future first time buyers, a group housing cannot survive without. You can’t move up if others below are not moving up. So they most certainly are to be considered in housing affordability.
So Cal has gotten around historical affordability ratios with housing bubbles. No more though.
2.5-3 times earnings is a historically proven AFFORDABILITY gage. Meaning people can actually make their payments at those ratios.SD average wage of $61k is probably high and even if not; wage deflation will probably bring it into the $50ks. Even 3x earnings at $55k aver. earnings is $165k for SD housing. So the HIGH end of affordability will probably be $165k.
Unbelievable? In 2006 how people would have thought you could buy a 2500 sq’ house in Temecula for $220k in 2009? Not many, and most would have thought the idea completely absurd. That rushed cut in prices was just the quick fall to “regular” prices. Now the discounts begin.
[/quote]
The 2.5-3x median household income to median price is a national average and has NEVER been true in So Cal (at least not since the WW II era) – and it’s not because of bubbles – it’s because this is one of the most desirable areas in the U.S. to live.
It’s also the reason why there are so many renters in So Cal – and always have been – this isn’t a new trend, this is a multidecade trend again going back as long as records continue. It’s EXPENSIVE to buy in So Cal and always has been – bubble years or not. Instead of only about 2/3 of people being able to affordably buy a house (like in much of the U.S.), historically only a little over 55% of the people in So Cal can afford to buy a house. Only Hawaii and New York have a lower homeownership rate compared to California. Check this table out:
http://www.census.gov/hhes/www/housing/census/historic/owner.html
The HIGHEST homeownership percentage ever reached in CA was at 58%, in the 1960 Census. And this is for all of CA.
It’s simply a case of supply and demand – all other things being equal, more people would want to live here than in, say, Louisville. So all other things aren’t equal – the desirability of So Cal pushes the prices up. Detroit suffers from the exact opposite – relatively few people would consider Detroit a desirable city to live in, and so their ratio is much LOWER than the national average.
[/quote]
Rt. 66 seems to be ignoring all the historical data that Rich produced to initiate this Blog.
For those who haven’t been around here too long, check out the primer :Participant[quote=SDEngineer][quote=Rt.66]
So a proven 100 year old housing affordability ratio (price x average wages) is no longer accurate because we have a new dynamic called renters and low earners to contend with?
If you chop off the bottom 1/3 won’t you logically chop off the top 1/3 as well? SD especially has lots of millionaires and even billionaires that throw the average way up.
Millionaires and billionaires are not players in the housing reality we live in but their houses and incomes are included in ratios.
Those apartment dwellers and renters are future first time buyers, a group housing cannot survive without. You can’t move up if others below are not moving up. So they most certainly are to be considered in housing affordability.
So Cal has gotten around historical affordability ratios with housing bubbles. No more though.
2.5-3 times earnings is a historically proven AFFORDABILITY gage. Meaning people can actually make their payments at those ratios.SD average wage of $61k is probably high and even if not; wage deflation will probably bring it into the $50ks. Even 3x earnings at $55k aver. earnings is $165k for SD housing. So the HIGH end of affordability will probably be $165k.
Unbelievable? In 2006 how people would have thought you could buy a 2500 sq’ house in Temecula for $220k in 2009? Not many, and most would have thought the idea completely absurd. That rushed cut in prices was just the quick fall to “regular” prices. Now the discounts begin.
[/quote]
The 2.5-3x median household income to median price is a national average and has NEVER been true in So Cal (at least not since the WW II era) – and it’s not because of bubbles – it’s because this is one of the most desirable areas in the U.S. to live.
It’s also the reason why there are so many renters in So Cal – and always have been – this isn’t a new trend, this is a multidecade trend again going back as long as records continue. It’s EXPENSIVE to buy in So Cal and always has been – bubble years or not. Instead of only about 2/3 of people being able to affordably buy a house (like in much of the U.S.), historically only a little over 55% of the people in So Cal can afford to buy a house. Only Hawaii and New York have a lower homeownership rate compared to California. Check this table out:
http://www.census.gov/hhes/www/housing/census/historic/owner.html
The HIGHEST homeownership percentage ever reached in CA was at 58%, in the 1960 Census. And this is for all of CA.
It’s simply a case of supply and demand – all other things being equal, more people would want to live here than in, say, Louisville. So all other things aren’t equal – the desirability of So Cal pushes the prices up. Detroit suffers from the exact opposite – relatively few people would consider Detroit a desirable city to live in, and so their ratio is much LOWER than the national average.
[/quote]
Rt. 66 seems to be ignoring all the historical data that Rich produced to initiate this Blog.
For those who haven’t been around here too long, check out the primer :Participant[quote=flu][quote=FormerSanDiegan]The #1 legal tax break is write-off of interest of your first mortgage. Of course, getting that requires you to leverage real estate which has been a losing proposition the last few years.
[/quote]
Unfortunately, this itemized deduction I believe also starts getting reduced above certain income levels…
Also, there is a point in which you end up paying AMT….and some itemized deductions won’t count toward AMT (property tax and income tax deductions aren’t part of AMT calculation, for instance).
Ironically, experimenting with my tax software, I think mortgage interest payments are still deductions when computing AMT…..
[/quote]Yes, mortgage interest is still deductible under AMT. Property tax and state income tax are not deductible under AMT, but remember there is a large exemption under AMT, so the extent that this impacts someone will depend on their income and total deductions.
Yes, deduction phase outs do start occurring at higher income levels, but these tend to have a smaller impact than AMT for most normal people (making less than 300K)
There seems to be a sweet spot for optimal use of mortgage deduction while falling just below AMT and not impacted by phase outs. Punch in a joint income of 225-250K or so, assume mortgage of 700K-850K into your tax software and see what happens.
Participant[quote=flu][quote=FormerSanDiegan]The #1 legal tax break is write-off of interest of your first mortgage. Of course, getting that requires you to leverage real estate which has been a losing proposition the last few years.
[/quote]
Unfortunately, this itemized deduction I believe also starts getting reduced above certain income levels…
Also, there is a point in which you end up paying AMT….and some itemized deductions won’t count toward AMT (property tax and income tax deductions aren’t part of AMT calculation, for instance).
Ironically, experimenting with my tax software, I think mortgage interest payments are still deductions when computing AMT…..
[/quote]Yes, mortgage interest is still deductible under AMT. Property tax and state income tax are not deductible under AMT, but remember there is a large exemption under AMT, so the extent that this impacts someone will depend on their income and total deductions.
Yes, deduction phase outs do start occurring at higher income levels, but these tend to have a smaller impact than AMT for most normal people (making less than 300K)
There seems to be a sweet spot for optimal use of mortgage deduction while falling just below AMT and not impacted by phase outs. Punch in a joint income of 225-250K or so, assume mortgage of 700K-850K into your tax software and see what happens.
Participant[quote=flu][quote=FormerSanDiegan]The #1 legal tax break is write-off of interest of your first mortgage. Of course, getting that requires you to leverage real estate which has been a losing proposition the last few years.
[/quote]
Unfortunately, this itemized deduction I believe also starts getting reduced above certain income levels…
Also, there is a point in which you end up paying AMT….and some itemized deductions won’t count toward AMT (property tax and income tax deductions aren’t part of AMT calculation, for instance).
Ironically, experimenting with my tax software, I think mortgage interest payments are still deductions when computing AMT…..
[/quote]Yes, mortgage interest is still deductible under AMT. Property tax and state income tax are not deductible under AMT, but remember there is a large exemption under AMT, so the extent that this impacts someone will depend on their income and total deductions.
Yes, deduction phase outs do start occurring at higher income levels, but these tend to have a smaller impact than AMT for most normal people (making less than 300K)
There seems to be a sweet spot for optimal use of mortgage deduction while falling just below AMT and not impacted by phase outs. Punch in a joint income of 225-250K or so, assume mortgage of 700K-850K into your tax software and see what happens.
Participant[quote=flu][quote=FormerSanDiegan]The #1 legal tax break is write-off of interest of your first mortgage. Of course, getting that requires you to leverage real estate which has been a losing proposition the last few years.
[/quote]
Unfortunately, this itemized deduction I believe also starts getting reduced above certain income levels…
Also, there is a point in which you end up paying AMT….and some itemized deductions won’t count toward AMT (property tax and income tax deductions aren’t part of AMT calculation, for instance).
Ironically, experimenting with my tax software, I think mortgage interest payments are still deductions when computing AMT…..
[/quote]Yes, mortgage interest is still deductible under AMT. Property tax and state income tax are not deductible under AMT, but remember there is a large exemption under AMT, so the extent that this impacts someone will depend on their income and total deductions.
Yes, deduction phase outs do start occurring at higher income levels, but these tend to have a smaller impact than AMT for most normal people (making less than 300K)
There seems to be a sweet spot for optimal use of mortgage deduction while falling just below AMT and not impacted by phase outs. Punch in a joint income of 225-250K or so, assume mortgage of 700K-850K into your tax software and see what happens.
Participant[quote=flu][quote=FormerSanDiegan]The #1 legal tax break is write-off of interest of your first mortgage. Of course, getting that requires you to leverage real estate which has been a losing proposition the last few years.
[/quote]
Unfortunately, this itemized deduction I believe also starts getting reduced above certain income levels…
Also, there is a point in which you end up paying AMT….and some itemized deductions won’t count toward AMT (property tax and income tax deductions aren’t part of AMT calculation, for instance).
Ironically, experimenting with my tax software, I think mortgage interest payments are still deductions when computing AMT…..
[/quote]Yes, mortgage interest is still deductible under AMT. Property tax and state income tax are not deductible under AMT, but remember there is a large exemption under AMT, so the extent that this impacts someone will depend on their income and total deductions.
Yes, deduction phase outs do start occurring at higher income levels, but these tend to have a smaller impact than AMT for most normal people (making less than 300K)
There seems to be a sweet spot for optimal use of mortgage deduction while falling just below AMT and not impacted by phase outs. Punch in a joint income of 225-250K or so, assume mortgage of 700K-850K into your tax software and see what happens.
ParticipantThe #1 legal tax break is write-off of interest of your first mortgage. Of course, getting that requires you to leverage real estate which has been a losing proposition the last few years.
Regarding rental property …
You can use any amount of rental property loss against passive (e.g. rental) income. However, there are limits when applying it towards regular (e.g. wage or investment) income.
Unless you are a real estate professional, the tax loss on rental property is limited to 25K per year taken against ordinary income. Once you make above 100K this amount is reduced $1 for every $2 you make and is thus eliminated at 150K (as waitingforbottom said).
If you make over this amount the tax loss is carried forward (tax loss carryover) until you either count it against rental property income or sell the property and count it against capital gains.Tax loss on rental property has two components:
1. Actual losses (which are bad because this is negative cash flow).
2. Losses due to depreciation (Generally better since this is a “phantom” loss valued at about 3.6% of the value of your structure each year).I would not buy rental property for the tax benefits. Buy for cash flow, appreciation or principal pay down (renter pays for your house over time). Consider the tax benefits a bonus. For example, if you make over 150K you can build up a large carryover loss in the early years. As the property seasons and cash flows better in the future (assuming rents increase at some point or the property is paid off) the income stream can be tax-free, because the carried-over tax loss can be counted against rental income *
* Disclaimer – I am not a lawyer or an accountant, but have prepared my own taxes for rental property owned over the past decade.
ParticipantThe #1 legal tax break is write-off of interest of your first mortgage. Of course, getting that requires you to leverage real estate which has been a losing proposition the last few years.
Regarding rental property …
You can use any amount of rental property loss against passive (e.g. rental) income. However, there are limits when applying it towards regular (e.g. wage or investment) income.
Unless you are a real estate professional, the tax loss on rental property is limited to 25K per year taken against ordinary income. Once you make above 100K this amount is reduced $1 for every $2 you make and is thus eliminated at 150K (as waitingforbottom said).
If you make over this amount the tax loss is carried forward (tax loss carryover) until you either count it against rental property income or sell the property and count it against capital gains.Tax loss on rental property has two components:
1. Actual losses (which are bad because this is negative cash flow).
2. Losses due to depreciation (Generally better since this is a “phantom” loss valued at about 3.6% of the value of your structure each year).I would not buy rental property for the tax benefits. Buy for cash flow, appreciation or principal pay down (renter pays for your house over time). Consider the tax benefits a bonus. For example, if you make over 150K you can build up a large carryover loss in the early years. As the property seasons and cash flows better in the future (assuming rents increase at some point or the property is paid off) the income stream can be tax-free, because the carried-over tax loss can be counted against rental income *
* Disclaimer – I am not a lawyer or an accountant, but have prepared my own taxes for rental property owned over the past decade.
ParticipantThe #1 legal tax break is write-off of interest of your first mortgage. Of course, getting that requires you to leverage real estate which has been a losing proposition the last few years.
Regarding rental property …
You can use any amount of rental property loss against passive (e.g. rental) income. However, there are limits when applying it towards regular (e.g. wage or investment) income.
Unless you are a real estate professional, the tax loss on rental property is limited to 25K per year taken against ordinary income. Once you make above 100K this amount is reduced $1 for every $2 you make and is thus eliminated at 150K (as waitingforbottom said).
If you make over this amount the tax loss is carried forward (tax loss carryover) until you either count it against rental property income or sell the property and count it against capital gains.Tax loss on rental property has two components:
1. Actual losses (which are bad because this is negative cash flow).
2. Losses due to depreciation (Generally better since this is a “phantom” loss valued at about 3.6% of the value of your structure each year).I would not buy rental property for the tax benefits. Buy for cash flow, appreciation or principal pay down (renter pays for your house over time). Consider the tax benefits a bonus. For example, if you make over 150K you can build up a large carryover loss in the early years. As the property seasons and cash flows better in the future (assuming rents increase at some point or the property is paid off) the income stream can be tax-free, because the carried-over tax loss can be counted against rental income *
* Disclaimer – I am not a lawyer or an accountant, but have prepared my own taxes for rental property owned over the past decade.
-
AuthorPosts
