4 Years Later, New Construction 5 Bedroom Sells in Short Sale: 1845 N. Winchester in Bucktown
We last chattered about this 5-bedroom new construction single family home at 1845 N. Winchester in Bucktown in August 2010.
See our prior chatter here.
Many of you did not think the level of finishes matched the price of the property.
First listed in July 2007 for $1.549 million, it was reduced several times and then recently listed as a short sale.
The listing stated that it was “mostly completed.”
The house finally sold in July 2011 for $1 million.
The kitchen had cherry cabinets and granite counter tops but no appliances.
There were also cherry hardwood floors.
The listing says there was a lower level entertainment room with heated floors.
3 out of the 5 bedrooms were on the second floor with the remaining 2 on the lower level.
Anthony Zaskowski at Property Consultants Realty has the listing. You can still see the interior pictures here.
1845 N. Winchester: 5 bedrooms, 3.5 bathrooms, 2 car garage, 4500 square feet
- Sold in April 2005 for $560,000 (old house)
- Originally listed in July 2007 for $1.549 million
- Off and on the market
- Listed in July 2010 for $1,399,900
- Reduced
- Was listed in August 2010 for $1,339,900
- Reduced
- Was listed as a “short sale” in May 2011 for $1.125 million
- Sold in July 2011 for $1 million
- Taxes of $14,740
- Central Air
- Bedroom #1: 14×17 (second floor)
- Bedroom #2: 11×11 (second floor)
- Bedroom #3: 14×17 (second floor)
- Bedroom #4: 10×13 (lower level)
- Bedroom #5: 16×17 (lower level)
I mean, i don’t know, the finishes look dece, it’s not as modern as I like, but for the square footage and location it seems like a legit deal to me…then again, i’m not very up to date on comps in this neighborhood.
Hard to believe it sold before this other zaskowski special:
http://www.redfin.com/IL/Chicago/1738-N-Winchester-Ave-60622/home/13354962
I am somewhat surprised. There is still quite a bit of new construction activity in this hood. I have seen some brand new SFH’s going up all throughout the last couple years. Seems like this developer was just greedy as they rode the downturn all the way from the peak in 2007.
DZ – Holy hell, what is going on with that cave. Is that the basement?
re: 1738, they actually raised the price since june. what are they thinking.
re: 1738, “YOUR ANTICIPATION IS GETTING READY TO SURGE INTO THE RED ZONE.” What does that mean??
awful. id be somewhat surprised if the new owner would make a penny even if they finish it and try to resell in 7-10 years.
I wouldn’t feel very good today if I’d just plunked down $1 million for a home. The economy seems to be on the verge of recession.
Congratulations to the new buyer. You now posess a home containing some of the finest eastern-european villager craftmanship ever to have fallen from the back of a pickup truck. Take comfort in the fact that you’ll save thousands of dallars in home furnishings, as there’s no amount of expensive furniture/rugs/drapes out there that will *ever* compensate for this massive architectural void that is now your new ONE MILLIOIN DOLLAR home.
at least he wasn’t talking about surging into the cherry zone with this listing… gross
groove.. As for time travelling. I’ve gotten close to solving the riddle not in machine, as a commoner would expect, but in pill form. But until this is solved i just write 1984 on everything, turn my modem down to 300bits/ps on and walk down the street singin Huey Louis and the News songs, demanding my bet on the Philadelphia Stars, as USFL Champion be made good.
Oh and walk around telling people that you saw that Jordan kid put one down vs U of Md, that was unreal, and how you think he might be a starter within 2-3 years.
after lunch i need to fact check you ZE, 1984! LOL
Excuse me. It looks like someone’s condo kitchen broke into this house. $1M for as is and probably no appliances and mediocre finishes… Also, enjoy the view of Lottie’s smoking pen.
Executed Recorded Document Type Amount
07/12/2011 08/01/2011 MORTGAGE $792,000.00
Under 40 dual income household, both involved in finance. See my post on a previous thread about the typical buyers of these sorts of north side $1,000,000 newish construction sfh east of western, south of lawrence. I know what I’m talking about.
Executed Recorded Document Type Amount
07/12/2011 08/01/2011 MORTGAGE $792,000.00
Holy-smoley. $800k mortgage. Hope they have enough leftover to send the kiddos to private school and pay for the lease on the X5.
I’m assuming this non-conforming mortgages are much higher rates than the norm? Are we talking a rate 5-6% for a 30 yr?
low 5% if not 5% exactly
So monthly:
$4250 for the note
+$1200 for the taxes
+$2000 for creme / british / nanny
+$750 for the X5 lease (premium package baby)
= $8200 or ~$100k for the year. Piece of cake. Hope one of them can cook.
Surely a mil gets you better than this. And the last photo of the back of the house might actually be the worst of them all.
A*Man only one car?
They work in finance, so commute downtown together after dropping off their little snowflake at corporate daycare.
Or car #2 is the 3-series stripper @ $399/month, or even better, they’re non-conformist yuppies and go for the Infiniti G37 in eurobeige silver @$299 /month
Very true. With the knowledge that they’re not some young dilettantes, we can upgrade them to to a 5-series and a Range Rover without feeling too bad. The under 40 thing threw me a bit.
“It’s a bit unsettling that you spend your time on this kind of investigation/stalking.”
This kind of time? how much time does it take to look at linkedin? 45 seconds to a minute? You don’t tell me that you have a curiuosity as to what professions today are making enough money to buy million dollar homes in this economy?
Dummy.
“You don’t tell me that you have a curiuosity as to what professions today are making enough money to buy million dollar homes in this economy?
Dummy.”
I really don’t have that same “curiosity” that you have. Jobs/salaries are not really the only thing that dictates whether someone can buy a million dollar home (wealth/allocation of $/other expenses). Sorry. Then again, I don’t pay much attention to people like you that ridiculously overpost on this site. Consider whether your comment adds anything or might be of interest to anybody before you click “Submit Comment”.
And I thought I was the only one here for the intelligent conversations that go on, i.e. pergo vs. linoleum. Great to know someone else here for more noble purposes than people snooping and RILFs.
I thought my friends must have moved for a second because you are describing a couple I know that own a $750k place almost down to a tee, except their only car is a ‘beater’ Lexus. But yes they do drive the kids downtown to daycare in it together!
“~$100k for the year”
Two city workers could swing that:
http://www.chicagonow.com/getting-real/2011/08/2394-city-of-chicago-employees-earn-more-than-100000/
News Flash: Affluent dual-income family works, buys luxury items! So what. I agree with this iteration of homedelete about this. There are plenty of folks like this who live like this and still have a bunch of cash and investments. This wouldn’t be the property for me at this price point, but I can see the appeal of it. No reason to rudely recount public information – it’s true that it’s out there but there’s no need to comment on it.
Regarding the interest rates, if you have assets, income and credit and can put 20% down, the rates are ridiculously low. Since these folks seem to be in finance, I’m sure that they have an ARM, probably a 5/1. The rates are now probably 140 bps apart even for jumbo loans so that’s about $50k in interest savings over five years.
It seemed pretty obvious to me that the market was due for a significant correction.
jon: skip my posts if you don’t want to read them.
Given the number of hours my ass sits in a desk chair all day, the 20 or 30 minutes I post here are the equiv of smoke breaks.
“jon: skip my posts if you don’t want to read them.”
I used to hate hd’s posts. Now they are some of the most informative ones here.
Bob, do the math. Even if they both make $120 (in the middle range you described above) that’s still $12,000, $14,000 a month net, depending on withholdings, insurance, etc., roughly.
These homes are expensive for a number of reasons, first and foremost the cost to build; and secondly, these large homes like this (large, most of the lot, brick, north side, each one is a variation on the same home) exist in only a handful of neighborhoods that are desirable. They aren’t building these in portage park, or dunning or pilsen, etc. They’re in the GZ areas; the developers speculated in west town and UK and this style home is a couple hundred K cheaper in those areas.
My area had tear downs but becaues the lots are larger, they put larger homes, and they are more pleasing looking, generally, but regardless, it’s still the same demo buying these homes.
so when you narrow it down, these large brick homes, in only a handful of neighborhoods, appeal to affluent higher income households.
A similar sized house like this in other affluent areas, like st charles, or geneva, etc, is about one third cheaper but the occupants make the same amount of money.
“Normally your research on professsions sheds some light on how they got their coin (wages vs. inherited) but in this case not.”
Err should’ve read:
“Normally your research on professsions sheds some light on how they got their coin (wages vs. inherited vs. crazy bubble financing) but in this case not.”
“A similar sized house like this in other affluent areas, like st charles, or geneva, etc, is about one third cheaper but the occupants make the same amount of money.”
Have no illusions–you can get estates in the suburbs for this kind of money. Posh suburbs.
“Have no illusions–you can get estates in the suburbs for this kind of money. Posh suburbs.”
uhhh – no u can’t….. look at what is available for 1 million in Hinsdale, Lake Forest, Oak Brook, Winnetka, Kenilworth – basically tear downs in the good areas of these towns and maybe a tiny newer construction in the bad areas. Jesus – even look in Downers Grove, Naperville, Elmhurst – 1 million still won’t buy you anything close to an estate. You basically have to go to Elburn, St. Charles, Wayne to get a run down estate for that money.
“Bob, do the math. Even if they both make $120 (in the middle range you described above) that’s still $12,000, $14,000 a month net, depending on withholdings, insurance, etc., roughly.”
Wait wait wait – HD – do you honestly think a working couple with kids who net 12-14k a month could afford a 1 million dollar house?!! There is no frickin’ way- they could afford, at most a 500k house (and even that is a stretch).
” at most a 500k house (and even that is a stretch).”
Don’t be silly. That is 2-2.5x gross income and is not a stretch for people making $200-240k a year
clio – math msut not be your strong point. a $792,000 mortgage at 2.375% 5/1 ARM is $3,000 a month, plus $1,000 in taxes plus insurance is less than $4,500 a month.
If you’re taking home $12,000, on the low end (Which is probably somewhere just north of teh $200k HH income barrier), $4,500 a month is no stretch of the budget, at all.
A 30y fixed at a higher interest rate adds only $900 per month. there’s no argument that ARMS make it easier to afford larger mortgage payments, and that’s reflected in the fact that a $200k gross household can buy a $1,000,000 home as long as they have the $200k down payment.
Well. You ain’t getting 2.375 on a 5/1. At least not yet…
You guys really don’t know anything about living in a million dollar house.
First of all, the payment is NOT 4500 (like a rental). Sure, the mortgage may be 4500 – but then you have to add in property tax, upkeep (which can add up to 4000/month). Groceries for a family of four are around 800-1000 (and before some of you morons start arguing that they are not – you guys are wrong). Car payments (whether you own outright, finance or lease) will be over 1000/month (for two cars). Then you have entertainment, travel, clothing, toiletries, beauty shop/haircuts, make up, shoes, etc. which can add anywhere from 500-2000/month (on the lower end). Now you have to save at least 1k/month for the children’s education. We are already over 14k and we haven’t even talked about saving money for future renovations, repairs, REAL education costs, retirement, children’s activities, charity etc. and, most importantly , INCREASED COSTS AND TAXES!!
Again, anyone making 250k should NOT be living in a house more than 500k – in fact, I don’t know anyone making this amount who does. That is setting yourself up for a very very stressful life.
Hey Clio, I’ve got an off topic question for you– you still own at 1150 LSD, right? Can you tell me anything about the past special assessments, like how much they were, and if there’ve been any talk about how much the lobby re-do is going to cost?
Joe T, sorry, I sold my unit in 2003. I only owned it for a couple of years. Thinking back on that, I was so disappointed because I bought it for 190 and sold it for 220. I thought that was such a big failure. God, how things have changed……. Sorry, I don’t know anything about the special assessments. The location is good – but the building is really kind of gross and the assessments are extremely high. I really think you would be better off renting – you could definitely get more for your money.
Thanks for the quick reply. Yeah, we’re currently renting an in-town (actually, partially from your advice several months ago) while looking for something more permanent. They’ve redone the building– first hallways, then new windows, laundry room and a new rooftop deck. There’s talk of a special assessment to re-do the lobby, but nothing definitive yet.
Thanks again.
Joe T. – even though 1150 isn’t that great, the Palmolive is a GREAT building for an in-town – very supportive staff, awesome units…..uhhh, in fact, I know of a great 2/2 that I can get you in for under 1 million w/owner financing (if you are interested)……
“Again, anyone making 250k should NOT be living in a house more than 500k – in fact, I don’t know anyone making this amount who does.”
Complete nonsense.
chukdotcom – sorry to burst YOUR bubble, but it is the truth…. I gave you my breakdown of a two-income family of four with two cars. You can’t just say “complete nonsense” without backing it up. Seriously, do the math. Most of my friends are in the 250-1million income – nobody – not one of them that makes less than 400k can truly afford a 1 million dollar house (and even those people are stretching). Do the frickin math.
Clio,
I am pretty much exactly the person you talk about. We net just under 14k per month. My monthly budget is $7500 per month. I track it very carefully, and am within 10% on an average month (and yes, our grocery bill is $1k per month). I do not have a mortgage, but even if I had a 400k mortgage, that would add $2000 to that for a total of $9500. That leaves a savings of 4500-6500 per month (54-78k per year). That is on top of maxing out our 401ks and saving 1500 per month for college. Our vacations, and big purchases are not budgeted, but come out of our savings.
I am trying to post my budget, but for some reason the post keeps getting rejected. I track that $7500 very carefully with mint.com
chukdotcom – you are nothing like the person I talk about. Do you live in a million dollar house? Probably not – because when you live in a million dollar house, you drive 50k cars (at least) – you entertain quite a bit – you decorate it very nicely , etc. How the fuck do you think that you are the person we are talking about when you don’t have a mortgage?!!! Also, do the fucking math, the 400k mortgage is not going to add 2000/month – it will add a bit more (for principal), etc.
but the main problem with your argument is that you have NO FUCKING IDEA what it is like to live in a million dollar house….
Love the Palmolive, but a bit rich for my blood– that’s more than our suburban house. Thanks again.
“Do you live in a million dollar house?”
3/4. Close.
“you drive 50k cars (at least)”
Only if you are a douchebag.
“you entertain quite a bit”
Yes, we have friends over for cookouts a lot. Burgers, dogs and beer.
“you decorate it very nicely , etc. ”
My house is very nicely decorated.
“How the fuck do you think that you are the person we are talking about when you don’t have a mortgage?!!!”
Because I added 2k per month to my costs.
“Also, do the fucking math, the 400k mortgage is not going to add 2000/month – it will add a bit more (for principal), etc.”
I did do the math. You are clueless. 30 year at 4% = 1909 per month. Principal and interest.
“but the main problem with your argument is that you have NO FUCKING IDEA what it is like to live in a million dollar house….”
Really? You sure of that?
chukdotcom, sorry about that passionate response – it hit a nerve. The father of my 2nd ex-wife would always criticize us for our “lavish lifestyle”. He made about 250k, lived in a 500k house in Bartlett, had two toyotas, ok furniture, ok trips, ok entertainment, etc. – but he didn’t realize that the lifestyle is automatically different when you live in a million dollar house in Hinsdale – and before people attack and judge, etc. – you guys really don’t understand that when you move “up” you are moving up to a whole new lifestyle (ie you can’t have “the room place” furniture in a million dollar plus house – sorry, you can’t).
Let’s see if it likes it better all on one line:
Restaurants 350,Kids activities 400, Groceries 1000, Fast Food 100, Coffee shops 50, Alcohol 100, Gas 350, Clothing 400, Personal Care 100, Lawn 100, Misc Bus. Exp 250, Internet 100, Phone 150, Maid 200, Elec 400, Oil 400,Taxes 1000, 529 plan 1500, Misc Expenses 550
That should be $7500 unless I messed up my copy/paste.
““but the main problem with your argument is that you have NO FUCKING IDEA what it is like to live in a million dollar house….”
Really? You sure of that?”
ABSOLUTELY – 100% – because anyone who actually lived in a million plus dollar house in a nice area would understand the costs involved.
Again, we are not talking about someone who has money from an inheritance or outside source who also happens to be making 250k. We are also not talking about someone who bought 20 years ago who now has a house that is worth 750k. We are talking about a couple with 2 young kids, little savings who are looking to buy their first “real” home.
“Lawn 100”
OK – you obviously don’t live in the typical 1million dollar plus home if your landscapers charge you 25/week!!!
“Well. You ain’t getting 2.375 on a 5/1. At least not yet…”
Check out aimloan.com. You can get it today with no fees and only 0.627 points. Also the 30-year is back below 4% at 3.875% with 1.6 points. That’s 12bps higher than the lowest I’ve ever seen it at 3.75% with the same points.
Thing is with the current job outlook, AND with the RE trend not being your friend, it makes no sense to nitpick mortgage bps if the property in question has a good chance of declining a few percent or more.
“OK – you obviously don’t live in the typical 1million dollar plus home if your landscapers charge you 25/week!!!”
I mow my own lawn (I like doing it). I have a service that comes 6 times a summer to fertilize, put down lime, grub control, etc. $50 each time. Then I pay around $900 for 30 yards of mulch. That’s pretty much it. And its really only 4 months of lawn care, so that comes out to about $300 per month or $75 per week.
The Redfin mortgage calc gives a default rate of 2.375 on a 5/1 and 4.250 on a 30 yf. I do not vouch for the availability of these rates.
Clio is also correct. The lifestyle expenses of living in a million dollar house far exceed the cost of the mortgage. What you don’t see is many of these earners also carry credit card debts; or they’re living paycheck to paycheck despite making so much money. People like us, we think about tomorrow and we tend to be fiscally responsible. However, not everyone in the world is like this, and budgetary acumen is not a prerequisite to a high income.
Sabrina spoke at length about the U of C professor who had a HH income in the 200′ or the 300’s and he felt poor, so his idea of cutting back was getting rid of the landscaper. That’s how many of these people live.
http://articles.chicagotribune.com/2010-09-23/business/ct-biz-0924-rich-blog-20100923_1_law-professor-blog-taxes
(i can’t find the original article).
“#chukdotcom on August 4th, 2011 at 8:26 pm
Well. You ain’t getting 2.375 on a 5/1. At least not yet…”
“Lawn 100?
“OK – you obviously don’t live in the typical 1million dollar plus home if your landscapers charge you 25/week!!!”
Umm, did you check out the size of the “lawn” on the subject property?
“Check out aimloan.com. You can get it today with no fees and only 0.627 points.”
Those are mostly bait and switch. No one is giving 2.375 now on a 792k mortgage.
Actually I agree with Clio on this. We make over 200K and just had a baby, but even before that I don’t think it would have been easy to afford a Million dollar place and we have no student loans, our cars are paid off and we have well off parents that can help us if we need help.
But, we like nice clothes, good food and a lot of travel. I am not stupid with money either (ok not according to my husband…lol) and lot of times buy things on sale or bargain shop.
HD – it isn’t so much that we don’t understand about saving, but more that it is almost impossible to do when you live in an expensive house/expensive neighborhood. Honestly, you want to at least blend in with the neighbors (not to show off, but more so that you are not embarrassed). You guys would NOT believe the HUGE difference in related costs when you go from a neighborhood of 400-600k houses to a neighborhood of 1-1.2 million dollar houses. It is WAY more than just the mortgage (and don’t fool yourself into thinking that you can still maintain your old lifestyle in your new house – you won’t).
“We make over 200K and just had a baby, but even before that I don’t think it would have been easy to afford a Million dollar place”
Yes, a million dollar place. But I took issue with him saying that 500k was a stretch. It is not a stretch at all for someone make 200-250k. That’s all. I agree that 1mil is too much for people making 200-250k. But if you are making 400-500k, it is just right.
“of 400-600k houses to a neighborhood of 1-1.2 million dollar houses.”
Well, you are talking about something that costs twice as much. Of course it would require an income that was twice as much as well. I don’t think anyone is seriously arguing that a 200k salary can SUPPORT a 1mil house. But it can certainly support a 400-500k house.
“Those are mostly bait and switch. No one is giving 2.375 now on a 792k mortgage.”
I think the site is but the switch is a slightly higher loan product. (Despite the site advertising 3.75% 30yr fixeds at one point I’ve never read about anyone getting one and people on fatwallet love to brag about their low mortgage rates).
Basically take aimloan’s rates and add 25bps and you should be able to get a mortgage for that from a different lender I’ve found from reading fatwallet. All bets are off for jumbos I don’t really follow that market nor care to.
chuk: it is possible to live in a million (or 3/4 mil) SFH in the city, and keep your expenses low. All of your expenses are reasonable, and quite frankly, are in line with what a family of four making $80,000 a year would spend. it’s nice, average, but not lavish by any stretch of the imagination.
clio: you too are right; chuk hasn’t budgeted for brand new cars for his kids; nor has he budgeted for their spring breaks skiing in breckenridge; nor is there a payment on the acura lease; and his entertaining expenses are non-existent! Shit, a simple four hour night out for a steak/wine and drinks after wards with friends can cost $200, I know because I do it more often than I admit on this board; and double that if you’re paying for your friend!
So basically, you’re both right. Chuk however whether he wants to admit it or not, it NOT the typical homeowner in a 750k home (which btw is not a million new SFH that we are profiling). He’s far more frugal and he keeps his overhead low low low, probably in the bottom quarter of all HH in his income range; he spends like he makes 80 but actually makes $200k. Which is how I live but my HH income is between 80 and 200.
“I don’t think anyone is seriously arguing that a 200k salary can SUPPORT a 1mil house.”
Well, I think HD was saying something like that (at least that $250K would support). Clio took exception, and went overboard, per usual. I don’t think HD was that far off, as long as you were really sure of that income, had contingencies covered, wanted to put more of your money toward housing than other stuff, and could be disciplined about budget.
Not sure where this 1mil is coming from, my only point was this:
Clio –
“Again, anyone making 250k should NOT be living in a house more than 500k – in fact, I don’t know anyone making this amount who does.”
Me –
Complete nonsense.
So, either he doesn’t know anyone that makes 250k, or he is lying. How many people do you know that make 250k that DON’T live in a place worth at least 500k?
” All of your expenses are reasonable, and quite frankly, are in line with what a family of four making $80,000 a year would spend.”
Not even close. My monthly nut is $7500. You’d have to make 130k just to pay that.
clio – my uncle was an anesthesiologist and made a ton of cash in the 1970’s and 1980’s and into the 1990’s during his peak earning years. He and his wife had 5 children in a 5 bedroom house (finished basement with an extra bedroom); They lived in the most upscale subdivion in a nice but not lavish suburb and that house, when they sold it in the late 1990’s and sold it for something in the $400’s; and today it’s probably worth in the $500’s maybe a little more. an old high school gf of mine had an attorney father who was parnter and they lived in a new construction $400k house. My point being that higher end housing was a lot cheaper back in teh days, and because of that it was a lot easier to afford the lifestyle that goes with it. Today it’s completely different, just completely different.
“Elec 400”
Do you have a regular sized house in the city? How in the world do you average (as opposed to hit in peak months) $400 for electric? Heating seems high too but not familiar with oil costs.
Ditto what HD said – I totally agree. My harsh posts are due to serious financial issues I am being faced with (55k/year college tuition, 28k/yr high school tuition) with a rapidly declining income (thanks to our socialist county)!!!! The reason I am disclosing this is so that others don’t make the same mistake I did (ie buying a million plus house and a 950k intown bc I was making nearly 1 million a year) – now that income has been slashed over 60% and all of a sudden, I have no money!!! It is the same story you hear over and over again at all income levels. Of course I am luck and will be fine bc I have a great cushion, but it still is extremely painful (painful enough that I am selling my lambo)!!!! Now, when I drive to work, I look at all the apartment buildings and townhouses/condos with extreme jealousy and think “they are so lucky that their costs are so low”!!!!
“My point being that higher end housing was a lot cheaper back in teh days, and because of that it was a lot easier to afford the lifestyle that goes with it. Today it’s completely different, just completely different.”
Are you getting paid in 1970s nominal salaries? That’s prob the problem right there. Get an adjustment to 2011 salaries and everything will seem better.
chuk: You’re right it is $7,500 but I was looking at household expenses, I should have prefaced it by saying that I don’t consider a 529 an ‘expense’ per say (its a trasfer of an asset from one class to another) And the taxes would be 500 instead of $1000 for a family in a smaller house mkaing $8,000 and I get roughly $6,000 in expenses; so maybe $90k a year instead of $80,000 a year, but let’s not dwell on the figures, the point being that $6,000 is far below what a family of your HH income would normally spend, clio being on the other extreme.
“Do you have a regular sized house in the city? How in the world do you average (as opposed to hit in peak months) $400 for electric? Heating seems high too but not familiar with oil costs.”
Sorry, I had mentioned it in the past but neglected to mention it here. My main house is in CT. My employer is in Chicago which is why I am buying an in-town here. Electricity costs are much higher out East. It’s usually $300 per month in the winter, and around $500 in the summer. And that is actually way down. I installed some new high seer units last year and my costs in the summer dropped from around $800 to $500. And my oil is usually $0 in the summer, and around $900+ per month in the winter. I average them out over 12 months for budgeting purposes.
“Do you have a regular sized house in the city?”
My house is around 4k s
DZ: Hahah!
“Get an adjustment to 2011 salaries and everything will seem better.”
What I’m saying is that doctors today feel the need to buy the $1,000,000+ modern home in bucktown; whereas in times past, those $1,000,000 were far and few between, and even those high income profeesioals felt the need to tone it down a bit and lived in the $500,000 house instead. Few anestologists today would live in a $500,000 house in a leafy suburb, they’d be making $400k a year (probably more) ajnd living in that million dollar house. My uncle and his fellow doctors made the 1970’s equiv of $400k a year and lived in $500k house.
oops, fat fingers. 4k sq ft.
“My uncle and his fellow doctors made the 1970’s equiv of $400k a year and lived in $500k house.”
Yes, the multiplier was definitely lower in the past.
Here’s the bottom line:
Buy a place that is 2x your gross annual income, assuming you have a reasonable expectation that it will continue.
I totally agree with HD as well, the easy mortgages and expectations kept increasing through the years. I think that a good multiplier for house/income would be 2 max.
“My main house is in CT”
Fair enough.
“What I’m saying is that doctors today feel the need to buy the $1,000,000+ modern home in bucktown; whereas in times past, those $1,000,000 were far and few between, and even those high income profeesioals felt the need to tone it down a bit and lived in the $500,000 house instead.”
And my serious point is that the $1MM today, adjusted back to 1975 or whenever, was something like a $250K house. I don’t really know whether e.g. doctors back then lived in a relatively less nice place than they choose to today, though I think I do know that the median house in e.g. winnetka is *very* roughly same in real dollars then as now.
Clio,
At first I thought your 180 was complete shtick as an answer to bizarro-HD, but now it seems you might be at least somewhat sincere. The problem I have is that it was a very sudden and complete reversal. One day people were morons for not buying, the next they were morons for buying. Why the epiphany? I assume the change in your financial condition was not overnight.
I probably have the average HH income for my little neighborhood; and the people who have bought here recently all seem like ‘me’ with my type of job, etc, dual working parents; but there is literally nothing, literally nothing worth buying for twice my household income; everything is between 3-4, closer to 4.
http://cribchatter.com/?p=10305#comment-175908
sorry about the harsh words from an earlier thread; my temper is out of control at times! regardless, the buyer is an attorney at a similiarly sized firm as mine with a similar graduation year. The way people get into these $400,000 homes is to put down 10% and pay $2,500 a month; which is still a small part of the budget, but still, the lower the down payment, the higher the price, because the price isn’t based on the down payment at that point, its based on the buyer’s income, which puts the lower income but higher downpayment buyer at a severe disadvantage.
“#chukdotcom on August 4th, 2011 at 9:53 pm
Here’s the bottom line:
Buy a place that is 2x your gross annual income, assuming you have a reasonable expectation that it will continue.”
DZ – but other costs have gone through the roof (taxes, tuition). In addition, electricity costs have sky-rocketed (not just the rates, but also usage thanks to all the electronics we have). Now, add computer costs, internet, cell phones, and all the added expenses we have now that we didn’t have before (ie nannies, children’s equipment/activities, etc.). People spend more money on their children, pets, entertainment now than they did in the past. In short, life was much cheaper (relatively speaking) in the 70s and 80s than they are now.
And at $455,000 with 90% financing, this is the bottom. There is a seemingly never ending supply of buyers willing to pay $2,500 a month or more for a $400,000 newer home with 10% down, or in other areas, 5% down, especially on the lower end. That’s why I’m calling a bottom. The industry has worked out the supply issues i.e. take forever foreclosing! that keeps prices up and preserves prices.
“My uncle and his fellow doctors made the 1970’s equiv of $400k a year and lived in $500k house.”
Don’t forget- there was very little credit in the 1970s. If you wanted a car you had to buy it (not lease it.) So you needed cash to do so.
There were few credit cards (and most people didn’t have them.) So if you wanted that vacation, you had to pay in cash. If you wanted new furniture- most likely cash again.
So it’s not surprising that you didn’t buy the most expensive house on the block. You needed the cash.
I am sorry about the hardship you are facing Clio, but honestly you’ll bounce back from this. Important thing is that you are all healthy.
“sorry about the harsh words from an earlier thread; my temper is out of control at times!”
No worries. And I don’t think I had any problem with your price prediction on that one. Just that the housing market isn’t a bottomless pit.
Actually I read what Sabrina says and don’t understand why the problems of the country are blamed on socialism. To me the problems stem from unregulated free market economy gone crazy. Not saying the government had no wasteful spending but all these bubbles were partially due to too much credit available and letting the banks and businesses feed on people’s lack of knowledge and greed.
“. Just that the housing market isn’t a bottomless pit.”
It’s a pit, but we’re at that bottom.
WHen and if supply ever increases so will demand for these bottom priced houses.
houses cost what you can afford to pay per month with 10% down, not 20% down; and in some cases 5% down.
“People spend more money on their children, pets, entertainment now than they did in the past. In short, life was much cheaper (relatively speaking) in the 70s and 80s than they are now.”
This is actually NOT correct. We’ve discussed this in other threads before. Academics have done whole studies of this.
Clothes and food cost much, much more in the 1970s. It wasn’t unusual for a family to spend a large chunk of their income on those two items. Remember, working men had to wear suits every day, dress shoes and ties. This all cost more money than clothes people wear to work every day today. Women wore dress clothes to church. Shoes were much more expensive (handmade of leather, many times.) Clothes were not made cheaply in China (unless your mother made them at home.)
These were NOT discretionary items (like cellphones etc.) You had to have food and clothing.
chukdotcom, my financial situation DID turn overnight (when you have expenses of over 40k month and your salary doesn’t cover them, you start panicking REALLY fast). More importantly, when you can’t take any money out of the property you own (many are owned free and clear), you REALLY START PANICKING!!!!!
“Clothes and food cost much, much more in the 1970s.”
I believe this but I think folks back then had more sense and would buy a few nice things than pays loads in small chunks on H&M and for ever 21 type of fad clothing. I have some nice expensive items that I have been wearing for over 10 years, yes a decade, and they still look great.
“houses cost what you can afford to pay per month with 10% down, not 20% down; and in some cases 5% down.”
We are a monthly payment nation, HD. People don’t care what the price of the asset is as long as they can pay the monthly payment.
Although- the housing bust is giving some people a harsh lesson on what that means when they go to sell and find themselves underwater on the asset.
“I believe this but I think folks back then had more sense and would buy a few nice things than pays loads in small chunks on H&M and for ever 21 type of fad clothing.”
When an item is expensive- and you don’t make much money- of course you expect it to last. Many middle class people only had one or two pairs of shoes- even in the 1970s. There was no such thing as H&M and Forever21 type stores.
“I probably have the average HH income for my little neighborhood; and the people who have bought here recently all seem like ‘me’ with my type of job, etc, dual working parents; but there is literally nothing, literally nothing worth buying for twice my household income; everything is between 3-4, closer to 4.”
1) Your neighbors are living above their means
2) You are about to hit your prime earning years. Saving for the next 3-5 years will make a big difference. When I was your age (30ish I think?) I lived in a 170k condo and saved a ton. We probably grossed around 130k then. I am 40 now. A lot happens in those 10 years.
Here is what I noticed the most:
I don’t remember the numbers, but for example, when we brought home 100k, our expenses were probably 90k. So that was 10k surplus per year. Then the next year when we made 10k more, it was like a 100% raise! My expenses were mostly fixed, but I was now saving DOUBLE what I made before. So while it was only a 10% raise, it felt like a lot more. The key is to not scale your expenses up as much as your income.
“More importantly, when you can’t take any money out of the property you own (many are owned free and clear)”
I’m not sure I understand why you are having so much trouble with this. The lending market today is not nearly as constrained as people like to pretend it is. For subprime borrowers, yes it is (as it should be. There should be so such thing as “subprime borrowers”). But if you own these free and clear, you should have no problem tapping some of the equity with a HELOC. Have you been turned down? If so, what was their reason? I realize you have lots of expenses, but for the most part, lenders aren’t going to know those. They are going to look at your debt to income ratio, and it sounds like you have no debt.
chuk: I appreciate the advice. I saved $40,000 in the last 12 months and I had the birth of a child in the last 12 months too. To someone like clio or JMM $40,000 is nothing, it’s a drop in the bucket; but I know plenty of people who can’t save $4,000 in a year; and after 2 years you can save $80,000; three is $120,000; you get the idea of what sort of situation I’m in. Now I’m not going to lie i haven’t been able to do this for years and years on end b/c I’m a young guy, but, i’m not poor by any means. My wife also lives as if it’s the great depression, ok that’s an exaggeration, but, cheap rent, the ability to cook well, daycare instead of a nanny and 2 paid off cars make it a lot easier to save.
My wife has her own money she saved before she we got married, but I don’t count that because it’s not a marital asset.
chukdotcom, the main problem is that I have 4 mortgages (and 1 HELOC). There are strict rules that state that I cannot have another HELOC or mortgage (stupid rule by the government). It doesn’t matter that I still have a few million IN EQUITY in these properties – a rule is a rule and cannot be broken. It is so stupid because while the sale of the lambo will pay for my kid’s education for 1.3 years, if things don’t get better, I may have to sell my paid off in-town at the Palmolive for 700k just to get the money out!!!
“chuk: I appreciate the advice.”
It’s not really advice, it’s just what I experienced. It’s nothing that I’m sure you don’t already know.
“but I know plenty of people who can’t save $4,000 in a year; and after 2 years you can save $80,000; three is $120,000”
Right, and that was my point. I don’t know how variable your income is, but assuming you save the same for 2 more years, that’s 120k down on a 450k place, leaving you a mortgage of 330k. PITI should be under 2k. That would reasonable for someone in your income bracket.
So, some of your neighbors maybe very well be “people like you”, but they may just have a few years on you. The difference between being 30 and being 35 may be the difference in being in over your head, or being able to afford your house.
“chukdotcom, the main problem is that I have 4 mortgages (and 1 HELOC). ”
Oh, didn’t realize that. You can’t even do a cash out refi? I assume rates now are better than what you have anyway.
“I may have to sell my paid off in-town at the Palmolive for 700k just to get the money out!!!”
Good, you should. 700k is too much to tie up for an in-town.
Chuuk buyers are puttigng down 45k on a 450k house. 75% of all transactions are like this in many areas around chicago. Few put 20% down with the exception of really affluent areas like lp or lakeview.
“Chuuk buyers are puttigng down 45k on a 450k house”
Oh, I know. But that doesn’t make it a good idea. But look at your situation. You could do it now too, and it would be a bad idea (too much leverage). But in 2-3 more years of saving, it will probably be just fine for you. People are just too impatient.
HD.. 40 in home equity with 40 in cash is no real diff b/w droppin 80 equity into a prop. 2nd would probably let you sleep.
Bob… Your comment of i vs price… Go dig up that long crap i went through with dz and check my math all u want. Renters are killing it on this downmove in rates, in a position they don’t even realize they have on. Btw there is no special advantage to a 5/1 over a 30yr. And if you don’t use 30 yr rate to do your calcs… Thats not good.
Principal is an asset transfer, and a cash flow issue, but not an expense.
actually bob… The more that rates go down, the more that surface begins to look rediculous. I’ll laugh so hard if u of all people hit the bottom, both ways. That would be awesome. Oh good lord would we have to hear you go on and on as an expert of everything, after that…
“Btw there is no special advantage to a 5/1 over a 30yr. And if you don’t use 30 yr rate to do your calcs… Thats not good.
Principal is an asset transfer, and a cash flow issue, but not an expense.”
For me 5/1 vs. 30yr depends on the price of the place.
That 150k place I’m looking at I’d consider a 5/1 ARM. Because at sub-3% interest that’s an extra k/year to the principal on a place I’d plan to pay off within five years.
For higher amounts I go with 15 or 30yr depending on how long I expect me to pay off the place.
And I’m a lot less worried about an outstanding mortgage balance, say, of 50k having it’s rate rise a point or more vs. a 350k balance. Amounts do matter and affect my calcs even though in finance classes on wipeboards they don’t come into it.
“chuk: I appreciate the advice. I saved $40,000 in the last 12 months and I had the birth of a child in the last 12 months too. ”
Congrats don’t do what I did and buy the market at 3:30pm yesterday with a 15k bet..lost $160 pretty fast.
Also how is your urethra after having that kid come through? Sounds more painful than a kidney stone.
Kids don’t come out of urethras!!! Bob…bob…bob, you need a lesson in female anatomy. Stop posting on cribchatter and work on your profile on match.com or eharmony – stat!!!!! (and that’s a doctor’s order).
clio,
“I had the birth of a child”
HD is a he, making it quite unlikely that he had the birth of a child. I get that.
perfect reply, bob.
Babies come from the baby store.
“Babies come from the baby store.”
I would like refunds on two, then!!!
my model needs an upgrade to one that sleeps the promised 16 hours per day!
“but I know plenty of people who can’t save $4,000 in a year; and after 2 years you can save $80,000; three is $120,000?
“Right, and that was my point. I don’t know how variable your income is, but assuming you save the same for 2 more years, that’s 120k down on a 450k place, leaving you a mortgage of 330k. PITI should be under 2k. That would reasonable for someone in your income bracket.”
Yeah, the thing is HD really can afford the $450K house now, if he can save $40K a year. If he really believes in the bottom, buy the house now, lock in a fixed rate, and pay down more quickly, or not, in next few years. In the Ze (and others) view, if inflation takes off sometime, you’re set.
A household making $225K a year can afford a $1MM house. Takehome is about $12,500 (after maxing 401k). Mortage and RE taxes are about $5K/month (assuming $800K mortgage and 10 year jumbo arm). Still have $7500 a month for everthing else including savings. I know this from personal experience.
Of course i can afford teh $450k house now like the old irving property. however i’m sort of a cash flow kind of guy and i like to hedge my bets; remember the ‘lucky strikes’ from mad men? of course, it can all come crashing down, only on TV is everything ‘OK’ in the end. I’d rather save a larger down payment and lower the monthly mortgage nut for cash flow purposes. You never know when that day will come and if my payment is $2,700 a month vs. $1,600 a month (with the larger down payment), you can preserve your savings all that much longer. In my line of work it’s not that easy to just jump into a new job, it takes a while, and i don’t want financial turmoil with high monntly expenses . i’m a real low overhead guy.
I know a guy worth a mil at age 50, he doesn’t work anymore. he doen’t spend any money either, i doubt he spends the principal, but he has freedom. he pays the small mortgage (if he even has one, he’s very evasive when you ask), gets around on a bike, and has the money to buy whatever he needs. now granted he has no family to support so it’s easier to live that way, but regardless, I relish the idea that I can finish off my time on this earth without having to work and still have a safety net, i will be a happy man.
“You never know when that day will come and if my payment is $2,700 a month vs. $1,600 a month (with the larger down payment), you can preserve your savings all that much longer.”
Not if you’ve sunk most of that savings into basically locked up equity. I realize that is likely a large, unstated reason why you won’t jump in, but even when you do, there is much to be said for retaining more of your liquidity, even if it is thru a HELOC up to 80% LTV. If/when you cross the rubicon into K-1 territory and estimate tax payments, you’ll be very happy to have a way to access some of that locked up “savings”.
anon(tfo): i want the large down payment AND the savings. I’m a lot closer than most people on this board realize or I lead people on to believe. It’s just that we’re still coming off this housing bubble thing. those k-1 days could be tomorrow, next year, or never. I don’t know but given that the big money cases I would take away from here would take another 24 or 36 months for a verdict or settlement, I need both liquidity and low overhead to carry those costs.
“but regardless, I relish the idea that I can finish off my time on this earth without having to work and still have a safety net, i will be a happy man.”
Forget it, you have a kid.
@Clio: You haven’t called the right banks. There are plenty of lenders who will allow up to 10 properties to be mortgaged. At one point, Fannie & Freddie restricted it to 4, but it caused so many problems they go rid of the rule. However, there are still some banks that “overlay” and max at four. A good broker knows what lenders will allow more than four. If you are serious, call me.
In theory, $225k should afford a $800k mortgage. However, that would be stretching imho when you factor in all the vampire expenses. The PITI on a typical $1 million home with 20% down would be $5k on the low end. Probably closer to $6k with typical property taxes.
$800k @ 4% = $3806.63
Property Taxes @ 1.75% = $1458.33
That is $5200/month and we haven’t even included utilities, lawn care, assessments, cable, car payments, eating out, day care, clothing, student loans, etc. Unless you have a boring lifestyle, $1 million purchase on $225k is stretching imho.
Hardly anyone I know making $225k spends $1 million on a home. Most million dollar buyers I see have HH incomes of around $300k on the low end and usually closer to $400k on average. Most are BigLaw partners, Consulting Partners, Doctors, VPs/MDs at Banks, Upper level execs.
Rule of thumb is 3x gross income.
“i want the large down payment AND the savings.”
I think you prob have both already. I think you still have price concerns and are looking for a deal. Not that there’s anything wrong with that, at all.
Or you actually have jumped in…
$225K is not theory. Also, in the City taxes won’t be 1.75% of value, it will be less and no lawn care. Rule of thumb is housing cost should be no more than 28% of gross income.
“I think you prob have both already. ”
Close, it’s a question at this point how long I can hold out in my current living situation…
“Also, in the City taxes won’t be 1.75% of value”
Last year (09, pay ’10), if the $1mm house had an AV of 100,000 (as it “should”), then the monthly RE tax allocation would have been ~$1220.
“Close, it’s a question at this point how long I can hold out in my current living situation…”
I lasted in my condo until my daughter was 1.5 years old. Couldn’t take it anymore after that.
There are plenty of properties in the City, especially single family homes in nice areas, where the property taxes are above 2%. Sure, they SHOULD come down on appeal, but that takes a while, is uncertain and there are costs to it, and it doesn’t change the fact that you have to get a mortgage based on those property taxes and pay them until they come down.
And I think that you’ll be hard-pressed to find many newish, desirable SFHs with property taxes at 1%.
“And I think that you’ll be hard-pressed to find many newish, desirable SFHs with property taxes at 1%.”
All depends on the AV’s relationship to actual sale price. They arent very consistent.
A prop with the HO exemption had taxes last year of about 1.5% of the *assessor’s* market value. If the assessor’s value is different from real market value, that will vary, but is a pre-purchase diligence issue rather than a “my taxes will be 1.X% of what I pay” issue.
Vlajos, I am speaking from what I see on a daily basis actually financing $1 million dollar homes. The average HH income of my typical client is around $200k and hardly any of them are remotely considering buying $1 million properties. The typical income I see for $1 million dollar purchases is usually north of $300k minimum and closer to $400k. The $200-$250k set are usually looking at places between $450-$700k.
Just because someone can qualify for a mortgage, does not mean they can afford the mortgage. Everyone qualifies for more than they can afford because banks do not consider all the miscellaneous expenses such as child care, property maintenance, and all the other undocumented monthly expenses that homeowners typically incur. $250k is on the low end of income for the typical $1 million dollar borrower and assumes a relatively simple lifestyle.
Anon is correct. And it’s quite easy to challenge your AV. I’ve done it successfully without an attorney.
That’s fine russ. But if you earn $225K you can buy a $1MM home. Your at the 28% of gross income threshold with current rates. You would still have plenty of income to live a decent life.
Maybe in the City it’s easier to live a good life on that income. I wouldn’t know, I would slit my wrists if I lived in the burbs.
I understand how assessed value works and that it does not always correlate to market value as it theoretically should. I am also intimately familiar with the multiple levels of appeal/challenge to property taxes.
My point is that: (a) actual property taxes to actual market value are now often above 2% or so, especially for recent, but non-distressed, sales at recent market prices; and (b) in the current environment, it’s not really accurate to say “oh, just challenge the property taxes/AV if they’re too high”, as the challenges have become much more difficult to get and the recent increases are always much more than the decreases due to the challenges. My belief is that you’re silly to do it without a lawyer, but that’s based on my aggressive nature and a few past experiences, as well as observations of others’ challenges without a lawyer.
I see tax bills closer to 1.75% which is why I used it. Two percent or more is not uncommon in the burbs. When a place is new and doesn’t have a tax bill yet, underwriting uses 1.5%.
1.75% is a safe estimate for the city imho.
It’s certainly the case that the nature of the income starts to matter a lot more at the income levels necessary to buy SFHs. Wage earners making more than $400k start to get hurt by a lot of deduction phase-outs and AMT. If you have LT capital gains as a large part of your income, the marginal rates are going to be much lower (but I’m poor at recalling the effects of AMT on CG). If you’re the typical small business owner, you’ve probably got $50k of questionable but mostly audit-proof expenses and carryforward losses you can offset against income. If that $400k is one income instead of two, you’re avoiding more than $10k or more of SS/FICA taxes. All the little things add up, and it starts to get pretty complicated.
I do think that a good rule of thumb for the Chicago area is a house costing 2.5-3x gross income, but I’m not personally comfortable with that (ignoring other assets). I personally think that it’s crazy for a couple or individual making $250k to buy a $1 million dollar house, but I can appreciate that some people want to do it. I have only secured loans from “conservative” lenders traditionally, and they have pretty much stuck to the standard percentages, so it seems that a couple got fit into the conservative standards on that income, but it would be pretty close.
“I have only secured loans from “conservative” lenders traditionally, and they have pretty much stuck to the standard percentages, so it seems that a couple got fit into the conservative standards on that income, but it would be pretty close.”
Exactly, and the standard percentage is housing cost of no more than 28% of gross income.
‘my belief is that you’re silly to do it without a lawyer,
in that case, sounds better to just pay the taxes. Lesser of 2 evils.
“Exactly, and the standard percentage is housing cost of no more than 28% of gross income.”
Right, but that 28% is monthly gross DTI, so:
income of $250k per year ~= $20.8k per month * .28 = $5,833 / month. An $800k mortgage puts you at $3600 P+I (and that’s at 3.5%!), and the taxes and insurance put you at least to $5k, if not more. And that’s before any other debt the couple may have. So, if a couple earning $250k a year wants to buy a million dollar SFH, they basically have to have saved $200k for a down payment, have to be able to pay closing costs and maybe points to get a rate well below 4% (which may require points, although probably not right now) and they have to have pretty much no other debt at all (student loans, etc.). It’s not impossible, but my view is that it’s not wise. Most lenders are also going to take a very close look at the income source when it’s within a few percent of their limits.
“in that case, sounds better to just pay the taxes. Lesser of 2 evils.”
It’s pretty standard to pay a portion of the savings in the first year, but it’s definitely the case, in my experience, that the lawyer more than pays for himself or herself with the savings that you get over what you could get on your own. I went to watch one of my appeals a few years ago and homeowners appearing on their own behalf invariably got some token reduction, while the lawyer knew exactly what to do to get much larger reductions (I followed up on a few later to see if I was getting my money worth from my guy.)
The standard ratios are 28/36. PITI (principal, interest, taxes, insurance, assessments) should be 28% of gross income while the 36% is including the major debts (min. payment on credit cards, student loans, car notes).
The 36% doesn’t consider utilities, lawn care, child care, dining out, cigs, starbucks, clothing, hobbies, hookers, strippers, weed, coke or anything else.
Most jumbo lenders won’t go much above 36% although some still allow up to 45% back ratios. Different strokes for different folks, but most folks I know would feel a little tight trying to live in a $1 million dollar place on $250k. That feels house poor to me.
Ah see, smart people don’t have car loans or other debt.
“The 36% doesn’t consider utilities, lawn care, child care, dining out, cigs, starbucks, clothing, hobbies, hookers, strippers, weed, coke or anything else.”
Right. That’s why its 36% and not 100%. Hookers and crack fall under the other 64%
‘I’d slit my wrsits…’
So, if you cross Howard St, and set foot in Evanston, it’s ‘awful’ since it’s not within boundries?’
Suburban communities are not ‘all alike’, just like the whole city is not ‘[white] hipsters sipping Latte and eating Thai food on sidewalk’.
“So, if a couple earning $250k a year wants to buy a million dollar SFH, they basically have to have saved $200k for a down payment”
Correct, as it should be.
“Have to be able to pay closing costs and maybe points to get a rate well below 4% (which may require points, although probably not right now)”
Can get a 10 YR Jumbo ARM for at 4.5% no points right now.
“they have to have pretty much no other debt at all (student loans, etc.)”
Correct, as it should be.
It is possible to buy a $1,000,000 home on $250,000 income but given today’s conservative buyers they’re more likely earning in the $300’s or $400’s. But i’m sure it does happen every so often
Of course not tomm, I was exaggerating somewhat. Lighten up ; )
“Right. That’s why its 36% and not 100%. Hookers and crack fall under the other 64%”
LOL!
I don’t think that anyone is saying that it’s not possible for a couple with $225k in annual income (down from $250k) to buy a million dollar house, it’s just that most buyers at that income don’t have no other debts and $220k for a down payment and closing costs.
4.5% sucks – 10/1 ARMs are pretty close to the 15 or 30 year rates, so I don’t really see the point. Might as well get a 30 year fixed loan if you’re within 25 bps of that rate. I think that the 5/1 is still the sweet spot for savings plus some medium-term interest rate certainty.
As for no other debt, I personally don’t see much of a point in paying off my 2.05% fixed loans much faster than I have to, and my income is a lot higher. It’s a different calculus for higher interest rates. Cash is cheap right now – I even got a car loan for the first time as a non-student because the rates are so good. I just have better stuff to do with the money. Some of it is sitting in cash – I’m comfortable losing about 1% (after taxes on the interest) to keep a sum like that in cash instead of paying it off. I think that avoiding all debt for the sake of doing so it stupid, but then I’ve always been a saver and an investor, so paying off low interest debt to get low interest on cash deposits doesn’t appeal to me.
No having no debt besides a mortgage is what I’m referring to.
lol.. Sorry JJJ, i was just referring to having to be in the same room. Lil joke.
As for the loan thing… One is really not priced better than the other. Just a give and take. I would take 30 unless i planned to pay early, i wouldn’t plan to though so….
jjj: I too have some fixed debt at 2.35% right now and it makes no sense to pay that off, only to turn around and borrow the same amount from a mortgage at 4%. So I sit in cash, like everyone else. There is a lot of cash out there, and no one wants to spend it.
Let me end the debate about income as I know the couple that bought this home quite well. they both make well over the ~120k each as stated, one double and one triple that. end of story. they can more than afford the mortgage and other expenses associated with living in a million dollar home. and they still own a large townhome in the south loop which they currently rent. sooo, all of you people who are jealous/angry that you can’t afford this house or other high bracket housing, stop the hating. these people will be fine. and more than likely, they’ll be hiring your children some day.
have a nice day.
that’s fine, but I have no debt to pay off with my cash.
HD your mortgage debt is tax deductible. Student loan interest isn’t unless you’re one shitty lawyer. That makes them a wash so payoff the student loans for a decent risk free return these days.
exactly, pay off the student loans, that’s like giving yourself a guaranteed 2.35% return which is a hell of a lot better than a CD or money market rate
Right, the person is piling cash to pay interest?
It’s piling cash for the sake of piling cash.
“#Vlajos on August 5th, 2011 at 1:58 pm
Right, the person is piling cash to pay interest?”
“exactly, pay off the student loans, that’s like giving yourself a guaranteed 2.35% return which is a hell of a lot better than a CD or money market rate”
Those rates might be about to go higher thanks to the s&p downgrade. Then again, in an ironic twist, it could cause them to go lower as they become a “flight to safety”. US bonds aren’t as safe anymore….quick, hide in US bonds!!!
“Student loan interest isn’t unless you’re one shitty lawyer.”
That’s not necessarily true. Times have changed in this profession. The IL bar association did an income survey a few years back (2004 iirc) and the previous survey was taken during the 70’s. They found that attorney’s salaries, on average, increased only about 1% per year, from the 70’s until 2004. The authors of the survey expressed shock at that figure.
They also found the number of practicing attorneys exponentially increased in that time period, with the average age getting younger and younger every year. They found that attorneys practicing in Chicago earned the most in the state, and the Chicago suburbs earned the least; but surprising attorneys in smaller IL towns (Peoria, rockford, quad cities, effingham, etc) did much better for themselves than attorneys who practiced in the cook county suburbs. The collar county attorneys (kane, mchenry, etc) did slightly better than suburban cook county but less than Chicago. Unfortunately the survey link is behind the ISBA firewall.
This is great for the consumer, I told you my friend hired a 30 year practicing attorney for an uncontested divorce for $2,000 and that cost was split with his ex-wife. That’s insanity, it probably cost $2,000 nominally for that same divorce 20 years ago. the price has stayed the same and has not risen for inflation. And this divorce lawyer has years and years of experience too, this is not a shitty lawyer.
I know other lawyers who can’t even manage to docket court dates properly but because they have personal relationships with clients who control seven figure books of business, they make tons of money. Ive known quite a few lawyers like that.
think michael clayton, the ‘fixer’ was good lawyer, fixed problems, yet he made shit and never made partner, but his partner boss was calling him to go out and ‘fix’ the problem.