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Author: Purpelnoon One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127473  
Subject: How are People Affording? Date: 9/12/2005 5:10 PM
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I live in NY and I am in my early 30s in age. Next year I am hoping to buy a home, albeit a small, starter one! I've always felt I had a pretty good job but I feel like the world is passing me by in terms of real estate costs and property taxes.

When I look through real estate catalogs, just about every geographical area, the majority of houses, in somewhat decent areas are in the range of $500,000 to a couple of million and up. Property taxes below $6000 are very rare, and higher numbers do not even guarantee a half decent school district.

The question that bothers me and is on my mind daily is:

How the heck are people able to afford a house in NY? Where are people getting this type of money? Oh, and everyone is driving a brand new luxury car to decorate eh driveway. Is 80% of the NY population that loaded? I am boggled and I hope someone can provide me some insight! Thanks!
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Author: brewer12345 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90288 of 127473
Subject: Re: How are People Affording? Date: 9/12/2005 5:13 PM
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Simple: They move to Jersey to afford a house.

Seriously, lower priced homes go fast, so they don't need to be advertised, unlike very expensive homes. Dig around more carefully and you will find less expensive homes.

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Author: ibarz Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90289 of 127473
Subject: Re: How are People Affording? Date: 9/12/2005 5:16 PM
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Seriously, lower priced homes go fast, so they don't need to be advertised, unlike very expensive homes. Dig around more carefully and you will find less expensive homes.

I don't think you answered his question. Re-read and try again.

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Author: brewer12345 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90291 of 127473
Subject: Re: How are People Affording? Date: 9/12/2005 5:39 PM
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I don't think you answered his question. Re-read and try again.
*************************

An unnecessarily snarky response will get you...nowhere (holding back real thoughts).

From the OP:

"When I look through real estate catalogs, just about every geographical area, the majority of houses, in somewhat decent areas are in the range of $500,000 to a couple of million and up. Property taxes below $6000 are very rare, and higher numbers do not even guarantee a half decent school district."

I read that the OP was reading "real estate catalogs". In the NYC area, at least, the houses featured in the catalogs (glossy, expensive to produce) are the more expensive houses that require extra effort to sell. I think that the OP needs to look more carefully at the market to see what is out there, not just page through a catalog filled with creampuffs.


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Author: ibarz Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90292 of 127473
Subject: Re: How are People Affording? Date: 9/12/2005 6:32 PM
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Sorry if that seemed abrupt. No offence intended.

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Author: Purpelnoon One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90294 of 127473
Subject: Re: How are People Affording? Date: 9/12/2005 8:05 PM
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I think that is a very good point about not relying on what I see in catalogs. That certainly gives me more confidence in looking for a home, and boy can I use that extra confidence. I guess I'll have to be smart about finding places in areas I like. Thank you! =)

Its still eating me inside thought that there are so many houses going for ridiculous sums. So where are so many people getting so much money for all of this? Even young kids are driving around in suburbia with Mercedes etc.

Can someone shed some light? =)

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Author: dprobert Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90296 of 127473
Subject: Re: How are People Affording? Date: 9/12/2005 8:47 PM
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Purpelnoon,

It depends on which area of NY are you talking about. If you mean the NYC metro area, then you are talking about the counties which surround New York--Westchester, Nassau and Suffolk. They are among the wealthiest counties in the country, with very high income levels and huge annual bonuses. These people are all Wall Street bankers, corporate lawyers, doctors, etc who make loads of dough. Hence, kids in 'Benzes.

You also have a lot of DINKS. (Double Income No Kids) who can afford a high mortgage payment. Many people are also fortunate enough to have bought before the hugh upturn, so they took the profit from their first house and rolled it into their next one.

Finally, you have to factor in the variety of mortgage options now available. Many people here are now buying with little or no money down.

Yes, I am still amazed when I see a 1500 sq ft 3BR 1.5BA house on a 50' x 100' lot in Scarsdale going for $900,000. And the taxes on that would be around $16,000!

In Westchester there are four or five areas now where the median house price now exceeds $1,000,000. If you are considering buying, you may want to look into a condo or coop to start with.

Good luck!

Dan

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Author: YouAreNumberSix Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90297 of 127473
Subject: Re: How are People Affording? Date: 9/12/2005 9:12 PM
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How the heck are people able to afford a house in NY? Where are people getting this type of money?


This same question is being asked all around the country these days. I often wondered about this myself.

Most of the people that buy those expensive homes are doing it on the strength of two incomes, not one. In addition, they mortgage themselves to the hilt.

Let's run some numbers. Let's say that with a college education and a few years experience, one can make $75,000 in annual salary in NYC. A husband and wife team bring in $150,000. This is roughly $12,500 gross monthly income. With the lending practices being a lot more elastic then they used to be, lenders today will approve a mortgage even if the cost of PITI is approaching 50% of gross monthly income. That gives us $6000 to play with for PITI (Principal, Interest, Taxes and Insurance.)

Assuming a 5-year ARM at 5% and a downpayment of 10%, you can buy a house for $900,000. Or, you can go no-money-down and buy a house for $800,000.

And I didn't even explore the interest-only territory. I bet you if we pulled all the stops financially, we could qualify a couple making $150K for a mortgage approaching $1M.



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Author: dsemmler Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90303 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 7:32 AM
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So where are so many people getting so much money for all of this? Even young kids are driving around in suburbia with Mercedes etc.

Keep in mind that just because people have these things does not mean that they can actually afford them. It seems a good number of people are in large amounts of debt in order to maintain a particular image.

dt

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Author: Purpelnoon One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90304 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 7:46 AM
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Thank you all for the input. Much of what I suspected is true. It looks like there are certainly the high income couples but I guess also nowadays that many people stretch themselves very far financially. I have read many times about the increase in special mortgages. I wonder if in a few years we will be seeing more foreclosures.

It seems like a great idea to have a realtor send me matches via email and so on. I'm looking to afford something in the $300k to $400k max in either Lower Westchester County or in Western Nassau/Queens. I sincerely hope I can find something in that range! =)

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Author: brewer12345 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90306 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 8:18 AM
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It seems like a great idea to have a realtor send me matches via email and so on. I'm looking to afford something in the $300k to $400k max in either Lower Westchester County or in Western Nassau/Queens. I sincerely hope I can find something in that range! =)
*************************

Depends on wht you are looking for. If you insist on a house, you'd better start checking out New Jersey. That's what we did 3 years ago.

If you are open to a condo, there should be places available in your price range in Queens, for sure. The 2BR condos like the one we sold 3 years ago in Astoria/Upper Ditmars seem to be going for $325 or so, for example. I'm not so sure about Westchester; maybe in White Plains or New Rochelle you could find something.

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Author: Purpelnoon One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90307 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 8:35 AM
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There are some new condos in New Rochelle going for $350k and up but I don't feel its worth it paying that much for a condo. They are trying to revitalize New Rochelle but it remains to be seen if it will work.

I'm trying to stay close to NYC so I can be near my aging mother in case she needs me. I'm not sure I want to move to NJ. If I can do Nassau, and the price is higher, I'll just put more money down I guess. I'll just have the rip-off $9 toll to deal with. Thanks!

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Author: brewer12345 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90308 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 9:01 AM
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Is there some reason you woudn't just rent? Might prove to be cheaper.

FWIW, there are plenty of places in NJ that are no further away from NYC than Nassau County.

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Author: Purpelnoon One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90309 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 9:04 AM
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Its funny you mention renting. I was watching something on TV recently where a couple figured by renting, they could have a much better ongoing quality of life and do more with their money. That does make sense.

On the other hand, I would like to put money into something that I will eventually own and potentially will increase in value.

I've always dimissed NJ but maybe I should take a look to make comparisons. Thanks for that idea.

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Author: jjkdc One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90310 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 9:29 AM
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"How the heck are people able to afford a house in NY? Where are people getting this type of money?"

"This same question is being asked all around the country these days. I often wondered about this myself."

---I find this discussion fascinating. In 1991, I moved to the DC area straight out of grad school at age 29, with about $3 to my name. I looked around at all the big beautiful homes selling for $300K and often asked the same question: Where are people getting this type of money?

Fourteen years later, I own a 1/bdrm+den co-op unit worth about $300K, and those big beautiful homes are now selling for a million bucks or more. And while I'm not as obsessed with the question as I once was, I still find myself asking: Where are people getting this type of money?

I'm not sure what my point is, expect that these things are a matter of perspective to some extent.

My advice: Be patient. Enjoy life (easy to do where you live!), but make stashing money away into savings a major priority. Living in NYC, you probably have no need for a car - but if you do, don't buy one for the "status" you think it will signify. As a proud owner of a series of cheap but reliable Toyotas, I'm entitled to lecture you on this :-)

It sounds like you're single. Who knows...maybe in a few years you'll be attached at the hip to a rich lawyer/banker. That will certainly change YOUR perspective.

Good luck. -jeff

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Author: Purpelnoon One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90311 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 9:45 AM
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I'm glad I'm not the only one asking this question! It certainly does seem that real estate has outrun people's salaries here. I actually live in an outer borough, not Manhattan, which is another story altogether(meaning Manhattan is ultra non-affordable!)

I couldn't agree with you more about the car. Sure its great having a nice, new one but thats the biggest thing you can own that really depreciates! My girlfriend has a 1985 Toyota Tercel that won't die, so I can really relate with youon the Toyota. =) She will need a replacement eventually, and I figure a used car will do just fine.

What you say about quality of life and saving is something I try to remind myself everyday. I'm doing ok but I need to do better!

I may get engaged soon, and my GF doesn't make the same salary I do but I think she's got future potential to make more, so we'll have to see!

Since where I live now isn't such a great area, if I move to a less than pristine part of the suburbs, its still an improvement for me, and I don't have to worry about children for at least 5 years. I guess if I build some equity, I can then worry about buying a nicer home in the future.

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Author: mew5280 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90316 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 12:53 PM
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I am ALWAYS asking myself this question! I live in Denver. I drive a 1997 Jeep Cherokee with no front bumper, paid for. I live in a "starter home" that is worth $210k and is 750sf. I look around daily at the huge new SUV's, BMW's, Mercedes. I have been in my house for 6 years and ready to move but I'm still in the starter home price range. My husband and I make $100K total and we cannot afford a new home or new car. I am paying off some CC debt, our monthly living expenses are about 3500 and that is with no car payment, insuring older cars, $1000 mortgage. If we cut back anymore, I'll feel like a student again! I guess I thought things would improve as I got older but no one really knows what will happen to the economy year to year.

People also tell me "a lot of those people have big debt car/home."

BTW, my best friend and her husband just purchased a home on Long Island. They were looking at houses between 600-800K, this is their first house, they just married. They bought one that was $600K I think. I know they had to do some kind of loan that split up the down payment because they didn't have 20%. I don't know how they did it. It's the house they will stay in forever, according to them. Neither of them come from wealth, both work in IT, they did all the saving on their own. Whew.

NY is very expensive, so are both coasts, NE and California. I have considered a move south, to N. Carolina, where cost of living is much less.



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Author: MaestroCindi Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90317 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 1:00 PM
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Some get help from family members. A couple I was friends with moved from NYC to the Poughkeepsie area. They had $100,000 from a gift from the husband's grandmother for a downpayment. This was in early 2001. They both made good incomes. Even with that kind of money for a downpayment, real estate agents practically laughed at them when they originally wanted something in lower Westchester County. I think in pricerier areas, a lot of people are doing interest-only loans (at least that seems to be the commmon thread in the DC-Metor area of anyone I know who's bought a house recently).

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Author: Purpelnoon One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90318 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 1:17 PM
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If they bought a $600k house, their taxes must be quite high too! I really wish I had money to buy a house a few years ago. Buying a house now is bad news! If I ever have children, I really don't know how they will be able to live in NY. If I pay for their college, I will have no money for my own retirement I'm sure.

Many of my friends from college have moved to PA or SC or GA. They are all professionals and they just can't cut it here. In NY we keep paying more and we just get less and less -traffic, 9 dollar tolls, etc. Its crazy!

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Author: Purpelnoon One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90319 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 1:21 PM
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It would be great to get a gift from a family member, as this will certainly help buy a house but to KEEP it is the hard part, considering taxes alone will cost you another $900 to $1000 a month.

Interest only loans would seem to make sense for people with money to spare or for those who will surely make more in the future. I heard in CA, lots of people have to do that to even own a house. It might have worked out for people in the last few years, as they could have made such a nice profit over that time and then sell when the higher interest rate began. With home prices plateauing, people might end of losing their homes after a few years, with no chance of making much of a profit.

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Author: brewer12345 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90320 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 1:47 PM
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I've always dimissed NJ but maybe I should take a look to make comparisons. Thanks for that idea.

**********************

We never considered NJ until it was time to buy a house. Looking around Queens, Nassau, Westchester, CT, we really couldn't have managed to buy a house. Then we got out the NJ Transit map (commuting to Manhattan) and started investigating communities until we found an affordable place that wasn't too far away and was a pleasant place to live.

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Author: Purpelnoon One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90321 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 1:58 PM
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Based on what you saw, in todays dollars, do you think we could manage Nassau/Queens/Westchester at a combined income of $120k?

I haven't looked around yet so I haven't done the math yet.

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Author: brewer12345 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90323 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 3:06 PM
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Depends on what you are comfy with and how large a downpayment you are prepared to make. Assuming a 20% downpayment and a 6% 30 year mortgage, low (Queens, not Nassau or Westchester) RE taxes, and modest property insurance, you could swing roughly a $500k property and stay within 28% PITI as a % of gross income. You might find a modest house in an area like Auburndale in your price range. But its gonna be a smallish house and you would be hard pressed to keep up the payments if one of you were out of work/stayed home with kids. You'd also be dumping a six figure downpayment into the house (even before doing any work on it). I can't speak to Westchester or Nassau, but property taxes are a LOT higher than they are in Queens, so that would definately sap your purchasing power.

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Author: MarcBrooks Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90324 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 3:12 PM
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Based on what you saw, in todays dollars, do you think we could manage Nassau/Queens/Westchester at a combined income of $120k?

I think that is something that you should answer yourself. I think a person buying their own house should really have a solid understanding how much they can afford. By this, I don't mean what the bank or what your realtor says you can afford. I mean the amount that you can easily put aside a month for the mortgage, property taxes, and the other expenses that come with home ownership. You know your income and your spending habits best. If you don't know those, then you are really the only one who can figure it out. Once you know that amount, you can start getting a good feel for what areas are affordable and within the areas you would like to live. Yeah, there are rules of thumb about buying 2-3 times your annual income, but to me, those "rules" are really useless when your talking about your specific situation. Figure out what you would feel comfortable with and that answers the question for you. Just my $.02.

Regards,
Marc

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Author: Purpelnoon One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90325 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 3:15 PM
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Hi Brewer,

Thanks for the helpful reply. I was thinking along the lines of $350 to $400k. A smallish house will do for teh time being I guess -as a starter house and then I'll look to something bigger in a few years. If I can get a finished basement, maybe I will even try for a small rental to help me out. =)

I'll keep my fingers crossed!

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Author: Purpelnoon One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90326 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 3:25 PM
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Hi Marc,

I understand exactly what you mean and that is really smart thinking. Since I've gotten a dose of reality as far as real estate and general living costs, I realize a used car and a small home are something I will have to do. Spending less rather than more initially will help me realize what I can do in the future. I won't have the attitude that I deserve a big fancy house and a new car.

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Author: mackh Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90327 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 3:35 PM
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How the heck are people able to afford a house in NY? Where are people getting this type of money? Oh, and everyone is driving a brand new luxury car to decorate eh driveway. Is 80% of the NY population that loaded? I am boggled and I hope someone can provide me some insight! Thanks!

I don't have any insight on the market in NY, but as a resident of San Diego I can understand the frustration with insane real estate pricing. I agree with other posters in that I believe that current loan products (like interest only) seem to be giving people the oppertunity to buy more house than they can really afford. Another poster mentioned the DINK affect and I think that is also a factor.

Personally, my wife and I are currently purchasing a home in a price range that I never thought we would be able to afford (at least in the near future). One of the things making this purchase possible is the fact that we are selling a condo which has more than doubled in value over the past 6 years. We had hoped to be able to keep the condo as a rental property but it soon became clear that it just didn't make sense. What's interesting is that the financial pinch we felt initially when we purchased the condo is about the same that we're going to be feeling with the new place. I thought we were overextending our finances when we bought the condo, but as our means slowly grew and our lifestyle remained frugal it became easier. I guess I'm counting on the same thing to happen with the new place, but considering that we're both fairly young and still have mobility in our jobs I don't think it unreasonable.

-Mack

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Author: Purpelnoon One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90328 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 3:58 PM
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I hear you about not being able to rent the condo. I was thinking of getting a condo first then rent it later on but the rent cannot even come close to paying a mortgage on a condo(here in NY) of $300k to $350k unfortunately. =(

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Author: mew5280 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90332 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 5:02 PM
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Their taxes made me faint. Taxes on my house are about $1800 a year here in Colorado. Can't remember what theirs will be, but it's much higher, like 6-7000, you may know better than I. It was actually on the real estate listing online.

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Author: brewer12345 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90333 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 5:12 PM
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Their taxes made me faint. Taxes on my house are about $1800 a year here in Colorado. Can't remember what theirs will be, but it's much higher, like 6-7000, you may know better than I. It was actually on the real estate listing online

***************************

Heh, my RE taxes are ~$6k (for a modest house) and I am in what is considered a *low* tax town.

I heard a story recently about a guy who bought a nice piece of land in a nearby town intending to build a house. He did some preliminary site preparation and had an architect draw up plans. It was a larger home (3000 Sq ft), but not outlandish by today's standards. He brought the plans to the town for permit approval and they told it was just fine. Oh, by the way, they said, RE taxes will be about $22k. On his way back from the meeting, he put the "for sale" sign back on the land.

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Author: Purpelnoon One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90334 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 5:19 PM
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Yeah, $6-7k a year is not too bad. I've known people that had to sell because their PT went through the roof in only a few years!

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Author: Purpelnoon One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90335 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 5:23 PM
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One of the things that really kills me is how much the gov. charges for property taxes and meanwhile they give funds so that "unfortunates" can live it up in expensive, high-quality apartments.

For example, there is a town in Lower Westchester in which is in the process of being "rebuilt" or so it seems. There is a luxury rental building that went up a couple of years ago. They have had difficulty filling it and I was told that they are accepting government subsidy. Maybe I should quit my job, get a job off the books like I'm sure these people are doing, and live free in luxury apartments?

I know I've oversimplified this, but it is the reality and it is a bummer. =(

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Author: bogwan Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90336 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 5:26 PM
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Top ten NYC ways of affording a house

Grandparents

Parents

Bought in '91 for $100k from crackhead.

Not having kids ever

In NYC you do not need a car, your kids need one even less

If you live in NYC you save on vacation travel to NYC

No interest, no principle mortgage

Work extra hrs saved by not commuting

Share house with those 50 Bangeladeshi construction workers you told INS are related to you.

What your living in NYC and your not rich?

BTW if your kid is halfway intelligent they will get into a specialized/magnet school. All schools in NYC have special gifted classes that will segregate your kid from the hoodlums. Your kid might even have a better chance at college if they are from a crummier school, Think top 5% of class easy.


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Author: MaestroCindi Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90337 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 5:31 PM
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If I pay for their college, I will have no money for my own retirement I'm sure.

Not if you sell the house (if you own it by retirement) and move to a much cheaper area.

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Author: Purpelnoon One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90338 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 5:33 PM
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I hear what you are saying but by then the cheaper house will probably be $800k! lol

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Author: ibarz Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90340 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 8:09 PM
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think that is something that you should answer yourself. I think a person buying their own house should really have a solid understanding how much they can afford.

I can't agree with this more. It truly is very simple, get a calculator and plug in the numbers. Make sure you buy one that you can truly afford, even if times gets tough.

Of all the years we've had this bullish attitude in the RE market, I have to say there is real fear out there. You won't hear it from realtors, unless they are your close friend. I just finished talking to my realtor friend who is seeing almost a stand still in the market (Northern CA).





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Author: Purpelnoon One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90341 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 8:45 PM
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That makes sense. I think here in NY, some houses are staying on the market longer. I'm not going to overextend myself and hopefully I will be able to own a house.

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Author: jjkdc One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90343 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 10:17 PM
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One of the things that really kills me is how much the gov. charges for property taxes and meanwhile they give funds so that "unfortunates" can live it up in expensive, high-quality apartments.

I know I've oversimplified this, but it is the reality and it is a bummer.

---That's right, you have oversimplified it and generally speaking it is NOT the reality. I seriously doubt you'd be happy living in the "high-quality" apartments inhabited by most people receiving housing subsidies.

-jeff



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Author: Purpelnoon One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90344 of 127473
Subject: Re: How are People Affording? Date: 9/13/2005 10:26 PM
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I hear you, its just tough hearing that while we are being taxed through the gills!

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Author: MaestroCindi Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90351 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 9:55 AM
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I hear what you are saying but by then the cheaper house will probably be $800k! lol

There's always options like retiring to Mexico.

Some people I know bought a house and had 1 or 2 roommates the first few years they lived in it; this can be a big help as a way for a single person to afford in more expensive areas, since it can be hard to afford a house in some areas on one income. It hadn't been mentioned yet, so I thought I'd throw it out there.

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Author: MarcBrooks Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90352 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 10:05 AM
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I hear you, its just tough hearing that while we are being taxed through the gills!

Huh? The US is one of the least tax happy countries in the developed West. It's hard for me to fathom when people say we are being overtaxed.

Marc

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Author: brewer12345 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90353 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 10:24 AM
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Huh? The US is one of the least tax happy countries in the developed West. It's hard for me to fathom when people say we are being overtaxed.

*************************

Thta is true. However, NYC taxpayers pay marginal rates similar to those in some Western European countries.

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Author: Watty56 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90354 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 11:50 AM
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Just my two cents worth,

I didn't see any mention about the low interest rates being a major factor in people being able to afford these types of places. I don't image that the house prices will hold up very well if interest rates go back up to say 7.5%, which isn't unrealistic.

Greg


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Author: mew5280 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90355 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 12:12 PM
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[i]---That's right, you have oversimplified it and generally speaking it is NOT the reality. I seriously doubt you'd be happy living in the "high-quality" apartments inhabited by most people receiving housing subsidies.[/i]

I live in Colorado near a new town created where the old airport used to be. It's a huge urban redevelopment. I've been pricing houses there for the 2 years it's been open. The development brags that they have housing available for everyone, including subsidized housing for low-income qualified applicants. If you are married, your combined income cannot be over 40K to quality for this, I can't remember what it is for a single person. These are gorgeous condos, brand new, well-built, a little small but they have these balconies that my husband and I love and can't find in other housing. They are in a nice neighborhood where single family homes start in the high 200's.

Not sure if that's the same as the govt subsidized housing you're speaking of. ALSO, on the street behind ours is a HUD owned home that has been unoccupied for over a year!!!!!!!!!!!!!!!! Give me a break. Like there are no qualified families to live there? My neighborhood is hot real-estate wise, 8-10% increase a year in value over the past 6 years.



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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90359 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 2:12 PM
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Hi Marc,

It's hard for me to fathom when people say we are being overtaxed.

It *might* be because you might not be in a position to incur such taxation.

It matters little what "other countries" do, or do not do... when it typically takes an average middle-class American between 3-6 months each year merely to "break even" on the government take from their productive pay.

At some point, there's simply not enough justification for the amount of blood being drained. Those who don't squawk are usually on the receiving end... or merely not actually being bled.

Cheers,
Dave

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Author: MarcBrooks Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90360 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 2:25 PM
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It *might* be because you might not be in a position to incur such taxation.

Heh.. Putting my personal situation aside, I still stand by that it's hard for me to fathom when be people say they are being overtaxed.

when it typically takes an average middle-class American between 3-6 months each year merely to "break even" on the government take from their productive pay.

What does that mean? I really can't fathom what you mean in that statement. For income tax we are taxed on the margin of our income, so there is no way for someone to start off in the hole, as you seem to imply with your statement. For property taxes, we are clearly in the situation of having a tax obligation without the accrual of income, but I don't think that's what you are talking about.

Marc

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Author: ibarz Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90361 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 2:27 PM
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Hi Dave,

In the topic of taxation, if I bought a house in CA for say $100K where I was being taxed $1250K a year. I then refinance this loan and during the refinancing it got reappraised at $200K, does this mean my property tax would change to this new reappraised value (est. $2500)?

Thanks,

Ibarz

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Author: xtn Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90362 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 2:59 PM
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My husband and I make $100K total and we cannot afford a new home or new car. I am paying off some CC debt, our monthly living expenses are about 3500 and that is with no car payment, insuring older cars, $1000 mortgage. If we cut back anymore, I'll feel like a student again!

$3500 a month is $42K per year. Where is the other %58K going?

xtn

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Author: UncleGit Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90363 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 3:03 PM
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$25-30k ish is probably going to Uncle Sam in one form or another....

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Author: averagjoe Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90364 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 3:19 PM
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"if I bought a house in CA for say $100K where I was being taxed $1250K a year. I then refinance this loan and during the refinancing it got reappraised at $200K, does this mean my property tax would change to this new reappraised value?"

No, it does not. I've done what you describe with two CA properties and my property taxes remained the same. CA taxes properties based on market value, ie: the price paid for it the last time there was an ownership change. Refinancing, and the accompanying bank appraised value does not constitute ownership change.

~aj

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90365 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 3:36 PM
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averagjoe:

<<<<"if I bought a house in CA for say $100K where I was being taxed $1250K a year. I then refinance this loan and during the refinancing it got reappraised at $200K, does this mean my property tax would change to this new reappraised value?">>>>

"No, it does not. I've done what you describe with two CA properties and my property taxes remained the same. CA taxes properties based on market value, ie: the price paid for it the last time there was an ownership change. Refinancing, and the accompanying bank appraised value does not constitute ownership change."

In California, you have Proposition 13 to thank for that scenario. As I understand it, most states revalue (actually most states allow or perment, and most local jurisdictions revalue) on some periodic basis.

In houston, for example, the value can change every year (with a 10%/year cap on valuation for residential homestead), and it is truly reasesses every 2-3 years.

Prop. 13 is also why you have two people owning equally valuable properties and one paying 4x (or more) in real estate taxes than the other (which makes no sense to me as a matter of policy).

Regards, JAFO



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Author: jjkdc One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90366 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 3:46 PM
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"At some point, there's simply not enough justification for the amount of blood being drained. Those who don't squawk are usually on the receiving end... or merely not actually being bled."

--Many of us who don't squawk recognize that the American people demand many, many things from its government (drug benefits for elderly, public education, a big enough military to wage war, to name just three) that cost an ENORMOUS amount of money - much more money than the cost of providing housing subsidies to low-income folks.

And by way, we're ALL on the "receiving end" in one way or another (in theory, the huge military protects all of us, right?). And we're probably all being bled in one way or another as well.



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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90367 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 4:06 PM
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...I still stand by that it's hard for me to fathom when be people say they are being overtaxed.

Not all places are taxed equally. Some cities have a local tax on top of the state and federal tax, with Philadelphia's being somewhere in the area of 4%. For us, it makes more sense for me to work very part time if at all. The income I earn would otherwise tip us over to a higher bracket, if not into AMT, rendering my income essentially a negative income, particularly when you factor in child care, clothing and transportation as well.

I won't be working full time or anything even begining to approach that until DH quits work. The tax laws have made it irrational for me to do so. In the meantime, I'll learn my new trade a few hours eacj week. Not much of a way to encourage productivity IMO.

IP,
ex-research chemist


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Author: Mctripat One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90369 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 4:31 PM
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Well I don't know about NY specifically but besides getting help from relatives, interest only mortgages, an inheritance, equity sharing(parents co-signing) and ideas others have mentioned


a lot of people from about age 28 to 45 or so may end up living in NY, Boston, San Francisco or other places with high prices in homes friends wonder how they can afford the homes; even if they are professionals in demand industries with good salaries

They built up equity through job transfers from other states to the area and may have $200,000 to $500,000 equity in their houses. or maybe they have always lived in whatever city you are talking about and have been shrewd investors who bought low, sold high and kept rolling over the money.

Where I live we have a lot of low income persons. You can only have so many professionals in a given area yet a lot of the new homes are 400,000 to 600,000 starting price. If they are not making $150,000 to $300,000 per year chances are they have a hefty down payment composed of equity built up through job transfers. We have an airforce base and a lot of technical and government jobs associated with it. Yes some of these people make as much as some CPA's, attorneys etc. Sometimes there is an overabundance of attorneys or whatever in an area driving prices down...

We also have starter homes for around $100,000 in new areas of town. The problem is shopping is yet to be developed near these subdivisions. I mean grocery stores, video rental stores, dry cleaners, health food stores, etc etc not major malls . Also few restaurants fast food or other chains are near by yet. Also the commute into the major employment areas is maybe 10 miles or so longer. You pay less for your house but you are stuck in rush hour traffic for a longer time...

Trish

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Author: Purpelnoon One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90370 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 4:32 PM
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Are you from NY or CA though? I mean I can't compare to other countried because I don't know about them but I'm comparing how things have gone up. $9 tolls, $.25 to park for 10 minutes, $115 parking tickets, thousands for real estate taxes,and so on.



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Author: Purpelnoon One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90371 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 4:42 PM
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In other words, I've seen the cost of living in NY skyrocket so high, while what we receive is less and less. The future of NY will be only extremely wealthy people and very poor, and thats it. =(

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Author: averagjoe Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90372 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 4:49 PM
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JAFO:

"Prop. 13 is also why you have two people owning equally valuable properties and one paying 4x (or more) in real estate taxes than the other (which makes no sense to me as a matter of policy)."

An example of the above rule: My property taxes on a 2800SF beach house I owned for rental purposes was $8,840. When I sold it last year, the new owners' tax jumped to $22,889/yr. On my own residence, bought in 1993, my taxes were $2105. The new owner's tax bill: $6,916.

Unfair? Maybe so, but what Prop. 13 did was to ensure that people who've owned their properties for many years don't have to pay the same high taxes as new owners. Imagine an elderly person who paid 20,000 for a home in 1960 that is now valued at 750K. His annual tax bill would be 1/3 of
what he originally paid for the property, and being now retired would be unable to afford it - making him in effect homeless. Prop 13 may be viewed as unfair, but as is the case with all laws, not everyone benefits equally.

~aj

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90373 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 5:14 PM
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averagjoe:

JAFO: <<<<"Prop. 13 is also why you have two people owning equally valuable properties and one paying 4x (or more) in real estate taxes than the other (which makes no sense to me as a matter of policy).">>>>

"An example of the above rule: My property taxes on a 2800SF beach house I owned for rental purposes was $8,840. When I sold it last year, the new owners' tax jumped to $22,889/yr. On my own residence, bought in 1993, my taxes were $2105. The new owner's tax bill: $6,916."

2.59x and 3.29x increases.

"Unfair? Maybe so, but what Prop. 13 did was to ensure that people who've owned their properties for many years don't have to pay the same high taxes as new owners."

And why is that fair. It sounds more like I got mine, and to hll with you?

And WRT to Prop. 13, there aer exceptions, including transfers within the family (meaning that the person who owned for many years is not the beneficiary of the reduced taxes).

"Imagine an elderly person who paid 20,000 for a home in 1960 that is now valued at 750K. His annual tax bill would be 1/3 of
what he originally paid for the property, and being now retired would be unable to afford it - making him in effect homeless."


If he is homeless with 750k, net of selling expenses, then he is homeless by choice. If you cannot pay the taxes on the property, you cannot afford it; time to sell and move. I also doubt that the oldtimers are satisfied with services funded at the old-time level.
Why should the newcomers have to subsidize the oldtimers? Current taxes are to pay current bills, so unless the oldtimers are willing to live with services funded on a dollar budget equivalent to when they bought, they are free-riding on the backs of the new owners.

As noted above, then you should at least support the elimination of

"Prop 13 may be viewed as unfair, but as is the case with all laws, not everyone benefits equally."

So.

The how do you justify Propositions 58 and 193???

"They provide property tax relief by preventing reassessment when real property transfers between parents and children (Proposition 58) and from grandparents to grandchildren (Proposition 193)."

http://www.lacountyassessor.com/extranet/guides/prop58.aspx

The children or grandchildren did not acquire years ago, and while the parents or grandparents may wish to make gifts to them (by transfers at less than FMV), why should the other taxpayers also have to make gifts to them (by subsidizing their taxes), too?

Regards, JAFO






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Author: Purpelnoon One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90374 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 5:30 PM
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Wow, thats interesting. I wonder if a house that is sold and bought many times would have a tendency to have higher RE taxes than one held for a long time, as it would not have had so many increases?

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Author: Watty56 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90375 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 5:32 PM
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Current taxes are to pay current bills,....

Usually a large part of current taxes are to pay off government bonds that were passed years ago. A sweet deal if you are protected from tax increases.

Greg


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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90376 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 5:37 PM
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Hi Ibarz,

I then refinance this loan and during the refinancing it got reappraised at $200K, does this mean my property tax would change to this new reappraised value (est. $2500)?

The answer ENTIRELY depends on what triggers your county &/or state (or, in NY, about a dozen other taxing agencies) to decide to re-asses your proerty value and/or tax rate.

This USUALLY has nothing to do with your mortgage financing.

Cheers,
Dave Donhoff
National Mortgage Banker/Broker

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Author: averagjoe Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90377 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 5:40 PM
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JAFO:

Please not that I'm not RealtorsRock, and prefer to refrain from knock-down, drag-out cyber duels over trivial differences in viewpoints, which, regardless of who prevails, will not change the way the world operates.

Peace,

~aj

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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90378 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 5:48 PM
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Hi Marc,

I said;
when it typically takes an average middle-class American between 3-6 months each year merely to "break even" on the government take from their productive pay.
You asked;
What does that mean? I really can't fathom what you mean in that statement.

Pretty simple, actually. Most folks of the working class are directly and indirectly taxed from 25% to 50% plus of their gross income. Thus, on a straight calendar basis, they are working 3-6 months before they net a dime for themselves & family.

Many believe that what these families are receiving is a "bargain" however usually the "bargain appreciators" aren't the ones paying anywhere near what the enburdened classes are paying.

Cheers,
Dave

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Author: IndecisiveFool Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90379 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 5:52 PM
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Unfair? Maybe so, but what Prop. 13 did was to ensure that people who've owned their properties for many years don't have to pay the same high taxes as new owners. Imagine an elderly person who paid 20,000 for a home in 1960 that is now valued at 750K. His annual tax bill would be 1/3 of
what he originally paid for the property, and being now retired would be unable to afford it - making him in effect homeless. Prop 13 may be viewed as unfair, but as is the case with all laws, not everyone benefits equally.


The elderly person is robbing the bank. He/she took part of huge appreciation in housing prices and passed the cost of government spending on newer residents. What a great deal.

I like our system much better. Every piece of property is reappraised every few years. Changes in overall tax rate must be revenue-neutral. This means the local government can't adjust the tax rate to raise additional revenue. If the total value of property in the county goes up, then the tax rate goes down. Some people will pay more and some people will pay less because appreciation is not identical over all properties in the county. The system is fair since everyone pays based on property value and there are no huge property tax changes to chase the elderly out.

IF


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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90380 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 5:54 PM
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averagjoe: "Please not that I'm not RealtorsRock, and prefer to refrain from knock-down, drag-out cyber duels over trivial differences in viewpoints, which, regardless of who prevails, will not change the way the world operates.

Peace,"


I respectfully disagree that the differences are trivial, but understand your position, so right back at you.

JAFO - V



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Author: ToddTruby Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90381 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 6:26 PM
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The income I earn would otherwise tip us over to a higher bracket,

Not all dollars are taxed at the higher bracket rate, only the dollars above the marginal rate level.

for example

4% tax on $0-$10k
6% tax on $10,001-20k

For someone with $11k in taxable income, the tax would be:

$400 + $60 =$460 (($10k*4%)+($1k*6%))

NOT $660 ($11k*6%)

I only mention this because there is a very big misconception in tax bracktet, not that it would affect your specific situation.



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Author: makasha Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90382 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 7:38 PM
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In the topic of taxation, if I bought a house in CA for say $100K where I was being taxed $1250K a year. I then refinance this loan and during the refinancing it got reappraised at $200K, does this mean my property tax would change to this new reappraised value (est. $2500)?

No. In CA, there was a referendum passed long ago that went by Prop. 13. It says that your property taxes cannot be increased by more than 2% per year.* I do refinances for some people (very few, I'll grant you, but some do exist) who bought their homes 25 years ago and they still pay only about $1300/year in property taxes. Their homes may now be worth $550,000 or more, and if their neighbor just bought a house for that, his or her property taxes would be approximately $6875/yr [1.25% of the purchase price, since the assessed value is very close to purchase price].

Kasha


*unless you add on to the square footage of the home, which triggers a re-assessment. A new appraisal, for example for a refinance, does NOT trigger a re-assessment

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Author: makasha Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90383 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 7:45 PM
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Sometimes there is an overabundance of attorneys or whatever in an area driving prices down...

Forgive me, but how can an overabundance of a well-paid profession cause prices to go down? In CA, granted, we are weird here, but in CA, that situation simply results in properties being bid up to drastic prices above asking price or list price.

Unless you live in an area with a huge over-supply of housing, the situation you described should result in the opposite outcome; the one I described, where people over-bid on any listed property.

Kasha

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90384 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 7:45 PM
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Why should the newcomers have to subsidize the oldtimers?

That's only part of the story. IMNSHO, the real story is the transfer of property taxation from businesses to individuals.

Business real estate gets the same property tax limitation as individuals. The property is taxed based on the most recent sale, plus 2% annual inflation.

But business real estate is not sold nearly as often as residences. So there has been a significant transfer of property taxation onto individuals since Prop 13 passed. I can't find the article at the moment, but I'm sure I've seen some reliable statistics that show the percentage of property taxes paid by homeowners compared to businesses has increased significantly since Prop 13 passed.

--Peter

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Author: Aranknitter Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90385 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 7:47 PM
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IMNSHO, the real story is the transfer of property taxation from businesses to individuals.

Businesses do not pay taxes. People do. Specifically, in this case, the customers who buy from the businesses are paying the property taxes of the businesses. The cost of the taxes is built into the purchase price of the goods/services.

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Author: makasha Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90386 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 7:56 PM
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The income I earn would otherwise tip us over to a higher bracket,

Not all dollars are taxed at the higher bracket rate, only the dollars above the marginal rate level.

for example

4% tax on $0-$10k
6% tax on $10,001-20k

For someone with $11k in taxable income, the tax would be:

$400 + $60 =$460 (($10k*4%)+($1k*6%))

NOT $660 ($11k*6%)

I only mention this because there is a very big misconception in tax bracktet, not that it would affect your specific situation.


But that is what inparadise is saying: her (sorry...inparadise is a "her" right?) spouse makes a certain amount of $$. If she earned just a bit more than she does, it would tip them into a higher bracket. Her income does not start out being taxed at 4% for the first $10,000, etc., because her spouse has already made the money that gets taxed in the lower brackets. The money she makes would be added on to the top of his income, placing them into a higher bracket.

So why pay child care, commuting costs, dry cleaning for work clothes, etc. etc, to earn more money that will probably be taxed at a rate of [possibly] 25% or 28% or 33%? If you have to pay most of the remaining 67% you take home just to have another car, and to have daycare for your kids, why do it?

She's saying the money spent for her to work more hours works out to so little after taxes and the other involved expenses of working that it makes more sense to stay home.

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90387 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 8:05 PM
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ptheland:

<<<<Why should the newcomers have to subsidize the oldtimers?>>>>

"That's only part of the story. IMNSHO, the real story is the transfer of property taxation from businesses to individuals.

Business real estate gets the same property tax limitation as individuals. The property is taxed based on the most recent sale, plus 2% annual inflation."


I forgot about that.

Your post reminded of an issue that was, IIRC, still unsettled about 18 years ago, with respect to tiered transfers -- Company transfers property to a subsidiary (no reappraisal), Company then sells shares of stock of subsidiary. Does the sale of the stock of the subsidiary trigger a reappraisal? On its face, the property is still owned by the same company. Do you know how this issue resolved itself?

Curiously, JAFO





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Author: Mars106 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90388 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 8:05 PM
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I know a family, the guy does not have a job, wife is a nurse. They saved downpayment money and bought their first home for $275K in an upcoming community. Then they sold it and moved to a larger home, again in an upcoming community for $500 - $600 K range. Recently they sold this home and moved to a much larger one in $850 - $900 K range.

All this happened in the last 6-8 years. They don't park expensive cars in their driveway though.

So basically this guy just builds equity and moves on.

Another strategy some use to afford high priced homes.

Ramifications: There are enough rams who has ram'd this topic here and will give you more ramifications.

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Author: ToddTruby Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90389 of 127473
Subject: Re: How are People Affording? Date: 9/14/2005 9:12 PM
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The money she makes would be added on to the top of his income, placing them into a higher bracket.


No, only her dollars would be taxed at the higher rate. Taxes on the income they currently generate would not be affected at all other than possible AMT which she mentioned or putting them out of eligibility for certain credits or ROTH IRA contributions.

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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90390 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 6:49 AM
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Not all dollars are taxed at the higher bracket rate, only the dollars above the marginal rate level.

I understand. As anal as I am as a chemist, magnify that by thousands in DH who is a chemical engineer. Can you say spreadsheets? I don't think we chose a new brand of soap without his running one. ;-)

Additionally, while we are not tax professionals, my understanding of AMT is that it's consequences are from dollar one in that you lose many of your "normal" tax deductions. The spreadsheet wasn't pretty.

None the less, your reminder is an excellent one.

IP


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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90391 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 6:59 AM
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Wow, property taxes in CA are only 1.25% of the purchase price!!! Does that include school taxes as well? Ours here near Philadelphia are much more than that. In our township it's much closer to 1.7% based on our actual numbers, (though I confess that might be skewed a tad to the higher side since we got a decent purchase price,) and our township charges a much lower tax base than neighboring towns with comprable decent school systems. While we only pay about $7,500 in property taxes each year, a similar house in a neighboring district would have resulted in a $10-12,000 annual tax bill. Mind you, we have no pool or other extras that would tack things on and are talking about a solidly middle class neighborhood.

I'll never again be able to keep a straight face when someone from CA bitches about property taxes.

IP

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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90392 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 7:07 AM
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She's saying the money spent for her to work more hours works out to so little after taxes and the other involved expenses of working that it makes more sense to stay home.

Bingo. Thank you for the clarification.

I have finally found a job that has very few hours, lots of flexibility, and is rather interesting to me at this time. I started doing conveyances this week and am amazed at all the things that have to be done to get from the negotiated real estate contract to the successfully completed settlement of the deal. Learning something new is compensation in it's own right.

You would think that realtors would pay these steps more attention given how they can make the deal fall through, but it's amazing just how much info has to be chased down that was supposed to be provided for us by the realtor.

IP,
who will now stop changing the topic


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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90393 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 7:38 AM
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No, only her dollars would be taxed at the higher rate.

But Todd, that is the point. My much smaller income would be effectively taxed at a much higher rate. The taxes actively discourage those who do not have to work to put food on the table from working for pay. One year, I took a highly necessary and underpaid job of teaching middle school math, the untaxed salary for which you needed to be financially independent to consider. By the time taxes were taken out, ignoring any child care ramifications, and factoring in all the hours I put in outside of school, I earned less than minimum wage. I could not possibly justify the stress that job put on my family for that insultingly small amount of income.

Granted, the compensation was not the driving factor in my taking the job in the first place...I'd actually always wanted to teach but was not able to afford to do so until then...but what was left after taxes was not nearly enough to justify my staying on a second year. Only a stupid person or a saint would continue working for these pennies, and I've never claimed to be either one. Again, how does this increase productivity?

InParadise,
who actually doesn't mind paying taxes when they make sense, legally pays them even when they don't, but takes steps to minimize as much idiocy as possible

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Author: MarcBrooks Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90394 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 10:50 AM
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Pretty simple, actually. Most folks of the working class are directly and indirectly taxed from 25% to 50% plus of their gross income. Thus, on a straight calendar basis, they are working 3-6 months before they net a dime for themselves & family.

Huh? That is some nice number dancing, but it doesn't make any sense. You pay taxes at the end of the year, and you are applying the taxes at the beginning as a debt, when those taxes haven't accrued until you actually earn the money. It's nice inflammatory imagery of people toiling away for 3-6 months before they have a net plus, but it's just rhetoric.

Marc

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Author: Mctripat One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90395 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 11:08 AM
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Kasha

I meant driving prices down for attorneys, CPA's or whatever profession there is an over abundance of not housing prices.

Trish

you are right about bidding wars and people paying more than list price

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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90400 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 11:52 AM
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It's nice inflammatory imagery of people toiling away for 3-6 months before they have a net plus, but it's just rhetoric.

Marc,

Have you never heard of Tax Freedom Day, the day after which you get to keep what you make instead of earmarking it for end of year taxes? Doesn't that happen in May or June? I don't remember. It is a gross over simplification and certainly is not reality given that one is supposed to pay their taxes minimally on a quarterly basis, but it is indeed a nice visual to understand just how much time you have to work simply to pay taxes.

I suspect that what Dave is referring to re tax rate is how on a percentage basis the poor pay much more of their income on taxes such as sales tax and fuel tax. Though someone who earns more probably spends more and thus incurs more actual sales tax, what the poor spends on sales tax tends to be a larger percentage of their total income precisely because of their smaller income.

FWIW,

IP

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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90401 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 12:34 PM
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Hi Marc,

Huh? That is some nice number dancing, but it doesn't make any sense.

Sure it does, Marc... it's not really too complicated to understand. InParadaise understands it, and she's neither a saint nor stupid ;~)

If you're obligated to "volunteer" from 25% to 50% and more of your gross income to taxes, it really makes no difference how you squeeze the balloon to try to hide the fact... the numbers are plain and naked for anyone caring to look.

Saying it's "slivered off at little intervals along the way" is merely playing on the general public's financial naivete... not a "F"oolish way of being at all.

You pay taxes at the end of the year,

I looked at your profile, and it says you live here & enjoy London... but in neither the U.S. not in England are taxes collected only after an entire year of taxless freedom.

In the U.S. if you are an employee the government forces your employer to be their tax collector and indoctrinate you to focus on after-tax "take home pay" as your labor's actual market worth, rather than what you are truly being paid and then having extracted prior to your awareness.

If you are self-employed, or an employer, you are required to pay taxes quarterly.

Indirect taxes are extracted from you on an everyday basis in many and various forms.

and you are applying the taxes at the beginning as a debt, when those taxes haven't accrued until you actually earn the money.

I'm not clear whether you are projecting this belief upon me in this statement, or generically using the "you" pronoun as a proclamation for all people... either way, you are mistaken.

It's nice inflammatory imagery of people toiling away for 3-6 months before they have a net plus, but it's just rhetoric.

The word "but" is a notifier that whatever follows contradicts what lead the initial statement.

In your sentence, both portions were accurate;
A) People are indeed toiling away for 3-6 months before becoming free of their tax burdens, and,
B) It is "just" rhetoric, indeed... thank you!

Cheers,
Dave Donhoff
National Mortgage Banker/Broker

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Author: MarcBrooks Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90402 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 12:43 PM
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Sure it does, Marc... it's not really too complicated to understand. InParadaise understands it, and she's neither a saint nor stupid ;~)

If you're obligated to "volunteer" from 25% to 50% and more of your gross income to taxes, it really makes no difference how you squeeze the balloon to try to hide the fact... the numbers are plain and naked for anyone caring to look.


Dave,

We clearly disagree about this, but it's really not that big of a deal to me. You seem convinced it's one way, and I just don't agree with your interpretation. Either way, I'm happy to just leave it at that.

Marc

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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90403 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 1:14 PM
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Hi Marc,

We clearly disagree about this, but it's really not that big of a deal to me.

I'm still not sure what it is you are disagreeing with, exactly. Are you of the belief that the tax-paying class of Americans are NOT hit for 25% to 50%+ of their gross income?

You seem convinced it's one way, and I just don't agree with your interpretation.

What is the "other" way that YOU believe it "is." What is it you think I am "interpreting"?

Either way, I'm happy to just leave it at that.

I bear you no animosity whatsoever Marc. Your participation is critical, as without discourse many folks continue on without discovering truth...

MANY would just as soon soothe the working class to slumber with "funny numbers" while the taxman brazenly lifts more and more of their value from them.

As a self-proclaimed "populist," I can hardly accept "leaving it at that." We need some significant overhauling of how we yolk the common man in our system, IMO.

Cheers,
Dave

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Author: HighTax Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90405 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 1:35 PM
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I am 41 and I remember in High School there was discussion that young people would never be able to buy a house due to the prices at the time.

What goes up will come down. Be cagey about it. This market is obviously unsustainable -- don't buy into it. If that does not sit well with you are concerned about being shut out of the real estate market in the future do the following:

Save as much money as you can or partner with somebody like your parents to buy a building Lot or other buildable property in a far deep suburban area -- maybe in a rural community where you have no plans to live. This will get you into the market. (don't go in debt for the Lot). If the market keeps moving up at least you have a piece of property in an upward moving market. If the market crashes (it will crash much worse in the hot markets). You can sell your lot(s) (which will probably have atleast maintained the relative price to the market you really want to buy in) and buy something in a now more affordable market. Three hours west of Chicago you can still find city Lots for $30K.



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Author: 2old4bs Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90406 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 1:51 PM
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How the heck are people able to afford a house in NY? Where are people getting this type of money? Oh, and everyone is driving a brand new luxury car to decorate eh driveway. Is 80% of the NY population that loaded? I am boggled and I hope someone can provide me some insight!

I am as boggled as you. I live in NYC, borough of Queens. I am in a lower->middle-class large co-op development, sandwiched between a NYC housing project and single-family homes. Attached homes are going for ~ $500K, while stand-alone homes are going for ~ $750K and up. The renovated 'McMansions' are going for ~ $1M.

What I really don't understand is that I recently got my free credit report and opted to pay $3.95 for a 'debt comparison' report. This report compares my debt to the average in my zip code, in NYS, and nationwide. It breaks out mortgage debt from personal debt. According to this report, not only is my mortgage of $115,000 higher than the national average, but it's higher than the average mortgage in my zip code--figure that out with houses selling for what they have been over the past 5 years!!! It's a mystery--is everyone using huge cash downpayments?

Cars are also a mystery. I am single and make a decent salary (> $100K) and I drive a 2000 Mazda minivan. Lately I see nothing but new cars showing up in my development, and they're Jaguars, Lexus, Cadillac SUVs, Mercedes, BMWs, etc. It's a mystery to me--do you have to drive a luxury car now to be counted as 'middle-class'?

If you find any answers, I'd sure be glad to hear them.

2old




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Author: knutton One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90407 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 1:51 PM
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Semi-OT personal opinion but....

A close friend that is tapped into the refinancing market recently told me that 22% of current refi's are no-principal loans. These are evidently loans where you are extended additional credit with payments structured to never pay down the principal. He indicates that products like this allow people who are severely overextended to continue running up personal debt. Although some may use the addional credit wisely I suspect most simply can't face reality and cut spending to allow them to live within their means. These products for many turn into institutionalized debt slavery although of course as a society we are brainwashed to not see it this way.

This is going to end badly. My own impression is that this market is operating under a completely distorted risk model. We are currently walking a very fine line with overall US economic performance tied to ridiculous levels of consumption which in the long haul will not be sustainable.

It is possible that obscene levels of federal deficit expansion for rebuilding the gulf coast will keep this "ship of fools" afloat for a few more years but something is going to break sooner or later. When it does real estate prices will collapse and a large percentage of the inflated value that secures the current mortgage pool will evaporate and equilibrium will be restored. This conceivably could collapse the US economy ushering in an era of suffering that has not been seen since the great depression.

Our national economy looks more and more like a shell game to me with simply stunning levels of very sophisticated corruption masquerading as public policy. I truly hope I am wrong but everything I am seeing is so far from the traditional values that I was been raised with that I simply can't understand how a majority of the populace can swallow it.

Oh well, I need to get back to work on my bunker (har, har). Best of luck to all and don't forget "Nature Bats Last".

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Author: FlyingDiver Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90408 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 1:52 PM
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I'm still not sure what it is you are disagreeing with, exactly. Are you of the belief that the tax-paying class of Americans are NOT hit for 25% to 50%+ of their gross income?

I believe Marc is taking argument with the whole "tax freedom day" concept. That you work for some period of time BEFORE you net anything for yourself. That works on a day by day or hour by hour basis (whatever your pay cycle is), but it's misleading to use that concept on a calendar year basis. Say Tax Freedom Day is May 31st (for example). Does that mean that if I work full time until that date, then stop working for the year, I net nothing? Of course not. So trying to put a date on the event is meaningless.

If you want to discuss the overall taxation rates, go ahead. But don't try to put dates on it.

joe


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Author: MarcBrooks Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90410 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 2:02 PM
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I'm still not sure what it is you are disagreeing with, exactly. Are you of the belief that the tax-paying class of Americans are NOT hit for 25% to 50%+ of their gross income?

That is not what I was talking about. You clearly said you thought that you think people are working for 3-6 months to get a net gain for their income. That is not the way it works, since they do take home money during that period. You clealy like to think of that way, and that's fine for you. I just think it is rhetoric to speak to the blight of the overtaxed people in those terms. I also fundamentally believe that Americans are way too quick to say their taxes are too high. Yeah, it's a generalization that many may not agree with, but it's my opinion.

What is the "other" way that YOU believe it "is." What is it you think I am "interpreting"?

You were making the point that people have to work for 3-6 months to come out ahead. That is not true. I work for a month at the beginning of the year, and guess what? I actually take home a good portion of my income. And if I stop working, I don't have a tax debt to pay on the money I didn't earn. I am not stuck working 3-6 months to actually make any income. That is the reason I referred to your language as rhetoric.

As a self-proclaimed "populist," I can hardly accept "leaving it at that." We need some significant overhauling of how we yolk the common man in our system, IMO.

Fair enough. But that is not what I was talking about. I'm just not interested in having that discussion on a board about Buying and Selling a home. My original comment was just me saying I was a bit amazed that people claim that taxes are too high. I don't think they are and was just stating that.

Marc

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Author: 2old4bs Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90411 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 2:04 PM
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If I can do Nassau, and the price is higher, I'll just put more money down I guess.

Nassau County will kill you with RE property tax--they're phenomenally high--You're better off buying within NYC where the prop tax is MUCH lower!

In the past 2 years, NJ has become almost as high as NY. Astoria has now skyrocketed because of its proximity to Manhattan (which almost no one can afford). For a decent neighborhood in Queens you'll have to pay at least $400K for an 'attached' house, but your property tax will probably be 30% of what you'd pay in Nassau County. You can still get 2 BR co-op apartments for about $225K with maintenance of $750-800/mo, which includes prop tax and all utilities.

2old


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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90415 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 3:08 PM
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Hi Marc,

Allow me to further clarify... I believe you'll agree;

You clearly said you thought that you think people are working for 3-6 months to get a net gain for their income.

That is... 3-6 months OUT OF A FULL YEAR!

If you only work a month, then the first 1-2 weeks is how long it will take you before you net anything for yoursefl and family (ASSUMING you are in the primary tax-burdened class.)

Of course... the timeframe is adjustable, but the proportion of time required before your own net revenues accrue to you is the same.

You may argue that "it's just a little here... a little there... nobody really feels it" and for some financially numb, you would absolutely be correct, for sure. hOWEVER, as long as income tax and non-transparent indirect taxes are mandatory, they can validly be placed as an "above the line" expense for the taxed-class.

You were making the point that people have to work for 3-6 months to come out ahead. That is not true.

It is ONLY untrue if you do not work a full year. Adjust to whatever timeframe you prefer... the ratios are the same.

My original comment was just me saying I was a bit amazed that people claim that taxes are too high. I don't think they are and was just stating that.

Would you like to pay more? Can I help you to do so? I have plenty I'd be happy to allow you to carry ;~)

Cheers,
Dave
(would love to be helpful in that aspect...)

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Author: bookaholic Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90423 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 4:51 PM
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But Todd, that is the point. My much smaller income would be effectively taxed at a much higher rate. The taxes actively discourage those who do not have to work to put food on the table from working for pay. One year, I took a highly necessary and underpaid job of teaching middle school math, the untaxed salary for which you needed to be financially independent to consider. By the time taxes were taken out, ignoring any child care ramifications, and factoring in all the hours I put in outside of school, I earned less than minimum wage. I could not possibly justify the stress that job put on my family for that insultingly small amount of income.

Yep, been there, done that that mental process. And now I work part-time from home.

bookaholic


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Author: bookaholic Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90424 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 5:02 PM
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I'm not in NY, but we live in a house that was recently appraised at 615K in the DC suburbs. Here's how we bought it:

Bought a townhouse in 1997 for 200K with a ten percent down payment and a ten percent bridge loan. The mortgage payment was a killer to us at that time, but we're glad we did it because in 2004 we sold it for 405K, cashing out about 220K after costs.

We then put down 100K on a fixer-upper that cost 475K, then sank about 80K more into renovations, bringing the house up to a value comparable to the rest of the neighborhood.

We also paid cash for two used cars so we wouldn't have a car payment. Because mortgage rates are so low, and because we have no other debt, we are able to handle the payments on my husband's salary alone, though my part-time freelancing money does help a bit. We have a 30 year FRM now and if we stay in this house that long, which is entirely possible, we'll have it paid off right about the time my husband retires even if we don't pay ahead on the principal.

So, in short, we did it by buying into the market as early as we possibly could, and stretching ourselves to do it. And by driving used cars (:

bookaholic

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Author: 42rocky2005 Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90432 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 6:13 PM
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I know quite a few people that have interest only loans. All of them are trades people who purchased house that on a nice day you would call fixers.

rocky

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Author: 42rocky2005 Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90434 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 6:34 PM
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Well, it works out to be a little more than 1.25%. But I truly believe that the tax situation is part of what drives the purchase price.

We bought a 1964 1600 ft2 tract house, all orginal kitchen, 2 baths, 4400 ft2 lot for 460K 2 years ago for 460K. Very suburbia, our neighbors are either trades people or IT workers, so so neighborhood, and with our school district Boo will probably end up in private school. The neighborhood isn't bad, especially since the dealer 4 doors down sold his house. We couldn't afford smaller houses north of here that would have been a better commute and school district.

We pay about 6K in taxes, and that I know we have it good because smaller houses in our neighborhood now sell for 650K. I haven't had a raise in 2 years and DH hasn't had one in 4 so the extra 2.4K would kill our budget.

What are you getting for your 7.5K in taxes?

Rocky

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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90435 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 7:02 PM
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What are you getting for your 7.5K in taxes?

Excellent schools, though again due to good planning on the part of our town council we have some light industry/business that help with the load and our taxes are cheap compared to many of the neighboring districts with decent schools but no foresight. Our sewar bill is included in our taxes. We pay for trash pick up and our fire department is volunteer, funded by donations. Roads get cleared of snow, we have a decent amount of open space...though our taxes will be going up another $150/year because of yet another recent purchase. State police is the force that serves our area.

We bought the house about 18 months ago for $450K and have some assurance that it is worth north of $550K now, based on comparable sales in the area. Because a comparable property in neighboring towns would have a tax base of $10-12K/year, our town commands a price premium of about 20%.

In short, nothing exceptional.

IP


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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90436 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 7:16 PM
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Dwdonhoff: "Are you of the belief that the tax-paying class of Americans are NOT hit for 25% to 50%+ of their gross income?"

What constitues the "tax-paying class" by your definition? For purpose of this discussion, I would suggest either the middle 1/2 (those above the bottom quarter of income but below the top quarter) OR the third quartile (those above the median but below the top quarter). Anything the includes the top 10% skews the numbers so much, IMO, that a discussion about average makes no sense.

How are you calculating gross income? For example, too many people diddle the numbers with respect to FICA when, for employees, they call the employee portion a tax for purposes of calculating the numerator, but do not add it to income for purposes of calculating the denominator. Assuming earned income below the cap, then the actual rate is 15.3/1.0765 = 14.213% not 15.3% that many like to claim. That is a difference of more than 1% actual and overstates the rate by 7.648%. Are you calculating the implicit personal use income of owner occupied housing that the US income tax system ignores? If not, why not? Cynical answer: To skew the numbers in favor of your argument. If yes, then would you or would you not calculate a phantom tax thereon? I suggest not because the current system does not tax it.

What taxes are you using and how are you calculating them? If you are talking about more than income taxes (federal) and FICA, then you really need to sart making (and explaining) alot of assumptions about the applications of other taxes.

IOW, I doubt that the number is near 50%+ for either of the two groups I suggested. but might maybe approach that for those in the top 5% --- but for so many in that category, much income is not earned, so it escapes FICA taxes and is often LTCG, which are taxed are more favorable rates, unless someone is diddling the numbers or making a lot of unstated WAG.

Therefore, I ask, what data (if any) do you have to support your proposition? I have seen the FIT data, and no standard group, including the top 1%, pays 30% of income in FIT. IIRC, the largest effective rate for FIT is roughly 27%, and that is of taxable income, not gross income. [Too lazy to search for the citation, but I have posted it before and could eventually repost it again.]

Curiously, JAFO









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Author: GimmeTheGoodLife Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90437 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 7:26 PM
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Similar story here, 1st a a condo, then a house over a period of 8 yrs, netted about 240k. Moved out of CA (too many people), bought a nice place in AZ, and it's value has doubled in the 18 months since it was built ! Our tax rate here is just over 1%, current assessment is just under the purchase price, but not sure how long that will last. My point is, it's all timing. Two things;

1) It sounds like you East Coasters get taxed to death - that will really hurt when you try to retire.

2) As far as 'how do they do it', the people lucky enough to own a home in the right area (coasts, growing areas, etc...) between 1996 - 2005 are now sitting on thousands (or millions) of $$. If you didn't, your probably out of luck trying to make a down payment on something big, at least for the moment. However, a similar situation occurred in stocks from 91-2000, and although it was frustrating, in 2000 I wasn't loading up on stocks like JNPR at $250/shr, I just started looking for other places to put my money to bide my time.

With the current imbalance (at least out west) of rental prices vs. real estate, I'd rent and save my money.

Just my .02


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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90438 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 8:03 PM
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Hi JAFO,

What constitues the "tax-paying class" by your definition?

MY definition? I'd call the tax-paying class those who pay a net tax over what they receive in government provided income.

A VERY vague answer, I'll grant you. Does that itemize & enumerate exactly a proportion of wages representing government subsidies to private enterprises such as agriculture or airlines? No. Would it include it? Sure.

It's a conceptual construct... but clearly understandable & visible at the extremes. The in-between gray is left to discussion...

Therefore, I ask, what data (if any) do you have to support your proposition?

Not a lick. I propose (without any supporting data whatsoever) that;
A) Non-avoidable taxes are an "above the line" real expense to taxpayers.
B) As compulsory expenses, the can be assigned a proportion of the taxpayers' productive and valuable time... whether you measure that in hours, weeks, months, years, or lifetime.

The most commonly used timeframe as a yardstick is the year.

We can now talk about how long it takes to break even on tax burdens over the course of a normal, middle-class taxpayer's fully-employed year.

I'll easily concede that I do not "live in" the data of taxes, and am relying on the heresay I have read of those I consider far more expert in taxation than myself.

How long does it take YOU to break-even on your tax burdens in a fully employed year, I am curious (though not so curious as to be overly personal ;~)?

I'll acknowledge that, as an entrepreneur with a growth-capital devouring small & growing business (even with a very aggressive CPA,) if you factor in the indirect taxes and employer's taxes I pay that many claim are somehow actually my expenses (rather than truly being my employees' expenses,) it probably takes me about 4-5 months (35%+,) at current. Were I executing my same responsiblities on salary on someone else's more seasoned & established enterprise, I'd incur fewer top-end (deductible) costs and undoubtedly be paid far more (so I dream, but accumulate no ownership equity,) and my breakeven, I suspect, would stretch another month or further outward (though my remaining lifeblood may be greater as well.)

Your thoughts?
Dave Donhoff
National Mortgage Banker/Broker

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90439 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 8:20 PM
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Dwdonhoff:

"Hi JAFO"

Howdy

<<<<What constitues the "tax-paying class" by your definition?>>>>

"MY definition? I'd call the tax-paying class those who pay a net tax over what they receive in government provided income."

Ok, most everyone. From a pool that large, I find discussing average to be a waste of time, because of skew from the top 10%.

I know that most people do not understand the FIT data because have previously posted (and will not currently dig for the data), that every group below the top 10% in income pays their share of FIT in a percentage lower than their share of taxable income; and those below the top 5% but above the top 10% pay more or less in proportion.

IOW, 80% of the people who bemoan that the bottom 50% in income pay only 13-14% of FIT would find that their FIT tax bill was larger if they got their wet dream of having income tax liability equal percentage of income. Yes, the 40% of the population earning above the median income but below the top 10% (40%/50% = 80% of those bemoaning the current state) would generally see their FIT taxes rises.

"A VERY vague answer, I'll grant you."

Too vague to interest me in a lengthy discussion.

"It's a conceptual construct... but clearly understandable & visible at the extremes. The in-between gray is left to discussion..."

But the in-between requires real data to make any discussion meaningful

<<<<Therefore, I ask, what data (if any) do you have to support your proposition?>>>>

"Not a lick. I propose (without any supporting data whatsoever) that;
A) Non-avoidable taxes are an "above the line" real expense to taxpayers.
B) As compulsory expenses, the can be assigned a proportion of the taxpayers' productive and valuable time... whether you measure that in hours, weeks, months, years, or lifetime."


I suggest there is no way to realistically assign a meaningful proportion (regardless of the measure of time) unless you have more data.

"The most commonly used timeframe as a yardstick is the year."

Ok.

"We can now talk about how long it takes to break even on tax burdens over the course of a normal, middle-class taxpayer's fully-employed year.

I'll easily concede that I do not "live in" the data of taxes, and am relying on the [hearsay] I have read of those I consider far more expert in taxation than myself.

How long does it take YOU to break-even on your tax burdens in a fully employed year, I am curious (though not so curious as to be overly personal ;~)?"


It is not a number that I have ever calculated (or ballparked) because it would be meaningless to me, in that no behaviour would change. Without any calculation, I would have no reasone to believe that if I were to calculate such a number that it would be below average (whatever that means).

"I'll acknowledge that, as an entrepreneur with a growth-capital devouring small & growing business (even with a very aggressive CPA,) if you factor in the indirect taxes and employer's taxes I pay that many claim are somehow actually my expenses (rather than truly being my employees' expenses,) it probably takes me about 4-5 months (35%+,) at current."

But I am also guessing that are are nowhere near median income, either.

"Were I executing my same responsiblities on salary on someone else's more seasoned & established enterprise, I'd incur fewer top-end (deductible) costs and undoubtedly be paid far more (so I dream, but accumulate no ownership equity,)"

I thought you owned the business, so that you will realize ownership equity upon sale?

Just my $0.02.

Regards, JAFO



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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90441 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 8:31 PM
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Howdy back, JAFO,

It is not a number that I have ever calculated (or ballparked) because it would be meaningless to me, in that no behaviour would change. Without any calculation, I would have no reasone to believe that if I were to calculate such a number that it would be below average (whatever that means).

Nor am I concerned with changing MY behaviour, nor realizing where I may fall among averages or medians.

The function of the exercise is the realization of how much of your life is being spent on government. Whether you find this satisfactory or not is, of course, subjective.

I thought you owned the business, so that you will realize ownership equity upon sale?

Yes, I do own my own business... I was probably confusing in my long, rambling, run-on sentence... my apologies.

What I intended to say was;
Were I to be an employee for someone else, I would likely have a larger "take home" paycheck with less deductions, thus pay a greater proportion of my time toward the government, and likely still wind up with more cash to boot... yet accumulate no ownership equity (as the erstwhile employee.)

I know... you may be asking yourself why anyone would be an entrepreneur in such a case?

Damn good question I have to answer to my S.O. & family frequently, LOL!

Cheers,
Dave Donhoff
National Mortgage Banker/Broker

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90443 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 8:48 PM
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Dwdonhoff:

<<<<It is not a number that I have ever calculated (or ballparked) because it would be meaningless to me, in that no behaviour would change. Without any calculation, I would have no reasone to believe that if I were to calculate such a number that it would be below average (whatever that means).>>>>

"Nor am I concerned with changing MY behaviour, nor realizing where I may fall among averages or medians.

The function of the exercise is the realization of how much of your life is being spent on government. Whether you find this satisfactory or not is, of course, subjective."


I am not anywhere close to a Property Uber Alles Randian, if that is the direction you are headed.

Absent government you likely have anarchy (or potentially Utopia, but with humans involved I personally ascribe zero probability to that result), and with anarchy there is are no private property rights, possession equals ownership.

And IMNSHO, focusing only on taxes but not spending is futile in the global sense, because TANSTAAFL. Government will simply issue more debt (or inflate the currency), and the former avoids personal responsibility by shifting the issue to future generations (e.g., my kids and grandkids) and the latter results in such other huge costs and deleterious effects that I really do not want to live through a repeat of the late 1970s-early 1980s or ever experience true hyperinflation.

As a result, I generally consider those who focus only on tax cuts as selfish because without accompanying spending cuts, because there are real systemic effects that may or may not be experience personally by those who benefit from the tax cuts.

Regards, JAFO





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Author: Purpelnoon One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90444 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 8:59 PM
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I envy those that bought a few years ago. Somoene like myself, who still lives "at home" in NY, is in big trouble. I've made no profit on a former house. I am going right into the fire and it is going to be tough! If I have children, in the future I cannot see how they will be able to stay here.

By the way, since starting this topic, I've learned alot from the responses, especially about Proposition 13. I looked this up but I'm wondering what other states have adopted this, including NY?

If so, it would be nice. If not, it looks like in the future it may be a neccessity, as I've already known a few people who had to sell because they couldn't afford the taxes.

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Author: Purpelnoon One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90445 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 9:04 PM
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Thats exactly it! =)

We are paying more and getting less. A couple of people on my block are trying to rent and all they keep getting calls is from people who are getting government checks (Section 8). A friend in Suffolk County is having the same experience. The working class person is paying ridiculous taxes yet the government is more than happy to pay high rents for people that are "disadvantaged". I know in more than one instance where these "disadvantaged" have two people in the fanily working off the books so they are making nice un-taxrd income while our taxes are paying for them to live nice and sweet! It just doesn't make sense. =(

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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90447 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 9:34 PM
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Hi JAFO,

I am not anywhere close to a Property Uber Alles Randian, if that is the direction you are headed.

I have absolutely no clue... haven't spoken German in several generations ;~)

I could plug it into an online translator... in fact, think I will... hang on;
http://ets.freetranslation.com/
hmmmm...
"Property Uber of all Randian"

Running "Uber Alles" again to see it it will seperately translate;
Uber of all

Guess that's as far as I get in my Father Tongue this afternoon... LOL!

Invoking the "Rand" name gets the idea across you're referring to Ayn, I presume... but acknowledge my podunk American ignorance of my distant native linguistics.

Absent government you likely have anarchy (or potentially Utopia, but with humans involved I personally ascribe zero probability to that result), and with anarchy there is are no private property rights, possession equals ownership.

True 'nuff that... but now it's you taking it into an extreme. I didn't call for no taxes, nor no government. I merely pointed out the very palpable reality of the proportion of our lives spent on government, and proposed the introspection of satisfaction with the results.

I've of the mind that it's time the common man make a far greater stand in getting more value (REAL, recognizable, accountable, and desirable value) relative to his fully acknowledged expenses.


And IMNSHO, focusing only on taxes but not spending is futile in the global sense, because TANSTAAFL.

Ahhh... NOW you're speaking Afrikaans... and I'm even worse in Dutch (let alone it's southern cousin) than I am in German!!!

I'm suspecting I agree with you here, if I am guessing correctly in context. As long as government is Living Above It's Means... well... bnakruptcy (fast or slow) is the inevitable result.

Government will simply issue more debt (or inflate the currency), and the former avoids personal responsibility by shifting the issue to future generations (e.g., my kids and grandkids) and the latter results in such other huge costs and deleterious effects that I really do not want to live through a repeat of the late 1970s-early 1980s or ever experience true hyperinflation.

Hallelujia!!! (sp?) (There I go in Aramaic ;~)

As a result, I generally consider those who focus only on tax cuts as selfish because without accompanying spending cuts, because there are real systemic effects that may or may not be experience personally by those who benefit from the tax cuts.

Agreed profusely!

Cheers,
Dave
(Hablo Espanol bastante bien para obtener algos cervezas frias...)

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Author: FlyingDiver Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90449 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 9:51 PM
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And IMNSHO, focusing only on taxes but not spending is futile in the global sense, because TANSTAAFL.


Ahhh... NOW you're speaking Afrikaans... and I'm even worse in Dutch (let alone it's southern cousin) than I am in German!!!

Actually, he's speaking "Heinlein". There Ain't No Such Thing As A Free Lunch.

From "The Moon is a Harsh Mistress", but Robert A. Heinlein (RIP).

joe


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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90452 of 127473
Subject: Re: How are People Affording? Date: 9/15/2005 9:59 PM
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Joe,

Actually, he's speaking "Heinlein". There Ain't No Such Thing As A Free Lunch.
From "The Moon is a Harsh Mistress", but Robert A. Heinlein (RIP).


DAMN!!!! Stumped in yet ANOTHER native tongue....

;~D

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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90459 of 127473
Subject: Re: How are People Affording? Date: 9/16/2005 7:11 AM
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It sounds like you East Coasters get taxed to death - that will really hurt when you try to retire.

Primarily only the high cost of living north east. We don't intend to remain here in retirement.

IP


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Author: Purpelnoon One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90463 of 127473
Subject: Re: How are People Affording? Date: 9/16/2005 11:04 AM
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Its really a shame because many of us have friends and family who are all taking off and leaving NY. I love being near the coast and my favorite hobby is shore fishing. Looks like I will have to find another place to do it.

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Author: johnmoni Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90467 of 127473
Subject: Re: How are People Affording? Date: 9/16/2005 11:51 AM
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"In the past 2 years, NJ has become almost as high as NY."

I bought our house here in central NJ in 1996, before prices went crazy. On paper, the value has more than doubled from the 1996 purchase price. My wife and I laugh and say that even though our income has gone up over time, we wouldn't be able to afford our house if we were shopping for it today.

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Author: spinning Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90469 of 127473
Subject: Re: How are People Affording? Date: 9/16/2005 12:43 PM
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I'd call the tax-paying class those who pay a net tax over what they receive in government provided income.

Since we as a nation are running a deficit, it is possible that no one in the whole country is in this tax-paying class.

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Author: TheNajdorfDefens Big funky green star, 20000 posts Feste Award Nominee! Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90474 of 127473
Subject: Re: How are People Affording? Date: 9/16/2005 4:51 PM
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You can find many, many, many apts and houses in NYC for sub 500k.
Many people also rent.
Car owners are few, that money goes to the mortgage/renting.
Generally, people in NYC who are professionals get paid more than average.

best,

Naj

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Author: NoGoodReason Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 90512 of 127473
Subject: Re: How are People Affording? Date: 9/18/2005 10:32 PM
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Huh? That is some nice number dancing, but it doesn't make any sense.

Then try on this next statement for size. It's every bit as accurate, but will perhaps be less subject to arguments over semantics.

If you're an average guy, and work a full time job, you'll work 2000 hours in a year, and the wages for >900 of those hours will go toward taxes in all their various forms, meaning you actually get to keep just barely half of all the money you earn.

And they say slavery is dead.

-NGR

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