Forget the Duplex Down, Get a 4-Bedroom SFH in Lincoln Park Instead: 2337 N. Southport
This 4-bedroom single family home at 2337 N. Southport in Lincoln Park just came on the market.
It is listed for under $650,000 which a price you normally see townhouses or duplex down/up units.
The house is now listed for just $9,000 over the 2001 purchase price.
3 of the 4 bedrooms are on the second floor and the fourth is on the top floor.
The kitchen has stainless steel appliances and granite counter tops that open into the family room.
It has all the bells and whistles of central air and a 2-car garage.
Built on a 24×125 lot, there is even a backyard.
The house has been on and off the market for 15 months.
Is this finally a deal?
Mario Greco at Prudential Rubloff has the listing. See the pictures here.
2337 N. Southport: 4 bedrooms, 2.5 baths, 2 car garage, no square footage listed
- Sold in September 1993 for $372,500
- Sold in June 1999 for $472,000
- Sold in June 2001 for $640,000
- Originally listed in June 2009 for $755,000
- Numerous reductions
- Listed in May 2010 for $669,000
- Reduced to $649,000
- Withdrawn
- Recently re-listed for $649,000
- Taxes of $12,731
- Central Air
- Bedroom #1: 18×14
- Bedroom #2: 16×10
- Bedroom #3: 12×10
- Bedroom #4: 18×13 (third level)
- Family room: 19×16
This seems like a great house for a family of 4 making 200-250k/year. There should be enough of those people out there who want to live in this neighborhood to make this a good buy.
Is there something horribly wrong with this place that you can’t see in the pictures? A problem with the foundation, etc?
Isn’t this lot alone worth $550k?
“Isn’t this lot alone worth $550k?”
Based on this http://www.redfin.com/IL/Chicago/2215-N-Southport-Ave-60614/home/13353427 from last Nov., it looks like ~$350k on this stretch of SoPo. Of course, 2242 Wayne sold for $775k in Jul-10.
“AK49 on September 8th, 2010 at 1:30 pm
Is there something horribly wrong with this place that you can’t see in the pictures? A problem with the foundation, etc?”
Other than the fact that the floorplan sucks, it’s on the small side, the taxes are very high for the price, and the finishes are mediocre at best, nothing.
I agree with Clio. There are probably plenty of newer families with $250K household incomes that would go for this. But the $130K downpayment might not be all that easy to come by for most of these newer families… especially if they’re not able to pull much equity out of the 2/2 in Lakeview that they need to sell in order to purchase this place.
In regard to Bradford’s comment, the way I see it, if you’re getting in for this low of a basis, and you really can afford to be in a single family, you can probably afford to dump $50K into renovation work that’ll really spruce this place up.
“There are probably plenty of newer families with $250K household incomes that would go for this. But the $130K downpayment might not be all that easy to come by for most of these newer families… especially if they’re not able to pull much equity out of the 2/2 in Lakeview that they need to sell in order to purchase this place.”
I know my frame of reference is skewed because I’m unmarried and don’t have a kid, and I know little Jayden and little Madison and their side-by-side buggies can cost a lot, but if you’re serious about it saving up half of yearly gross shouldn’t really be that hard, especially the higher your income is.
Of course if you have to bring money to close on your underwater 2/2, different story.
This place is a good deal. I’ll be looking for places like this in a few years for maybe a little less.
Just more proof to myself that, wow, I am really under water….nothing like buying in 2007 (when this house would have gone for $825-850 pretty easily).
Taxes look about right to me.
“(when this house would have gone for $825-850 pretty easily)”
I dunno. I hate the location. Would have sold for their initial $755k ask, tho, for sure.
“I dunno. I hate the location. Would have sold for their initial $755k ask, tho, for sure.”
Hate is a strong word, but it really does kind of suck as far as LP goes. I’d rather live in SouthCostCo.
“Hate is a strong word, but it really does kind of suck as far as LP goes.”
Yes, it is. But it is the correct one. I would not willingly live on this stretch of SoPo. Directly behind on Wayne (or other way on Janssen)–different story.
“JP$ on September 8th, 2010 at 2:07 pm
In regard to Bradford’s comment, the way I see it, if you’re getting in for this low of a basis, and you really can afford to be in a single family, you can probably afford to dump $50K into renovation work that’ll really spruce this place up.”
$50K might get you some cosmetic upgrades but the bottom line is that it’s still a small footprint house other than the addition behind the kitchen. The whole thing just looks like a hackjob to me. The living room off the kitchen would be one of the most used rooms in the house and it’s horrible. A tiled addition, on slab – gee that must be cozy in the winter. *rolls eyes*
Have we talked about the fact this place has *NO* basement? That’s right, slab construction. OK, now everybody recompute their values please…
It might have gone for 8+. for sure would have been listed there. the stuff on the market 2+ years ago had insane asking prices.
there is a playground at webster and s port, clover park. they had basketball hoops several yrs ago. then one morning my friends and I decided to meet there for our sat game only to find some sort of club device (auto theft) over the rims rendering them useless. guess the yuppie parents didnt want to share the park with hooligans shooting buckets. heavy bullshit.
@Bradford:
GRRR…don’t make Groove angry…Groove not nice when angry
(ok me too) has had to deal with pumps backing up for stuff that is below grade.
I factor it into my insurance costs. Every since I left the high rise scene, I’ve seen it happen in my 3 / 6 / 8 flat type constructions on the lower levels.
“chichow on September 8th, 2010 at 3:07 pm
has had to deal with pumps backing up for stuff that is below grade.”
Whatever your feelings toward the risk of flooding of a basement, SFRs that lack basements are valued substantially less than those that do, for many reasons. (loss of storage & expandability, lack of comfort due to the fact that your slab is sitting right on the Chitown tundra in the winter, etc)
Cheap looking place which will not age well. In this market it is getting closer to what it is worth. 600K may move it but I wouldn’t touch it except as a teardown.
“People make interesting choices” – those are the words my grandmother would use when she meant “what the f#*k were they thinking”. And boy does that apply here. 45 degree hardwood? Those tiles in the living spaces? And the bathrooms? Good lord. They look like someone walked into the bath section at home depot closed their eyes and pointed at random items. Or did they just install whatever happened to be on sale?
When we’re talking $250k household income are we talking gross or net of tax?
I’d argue that 250k pre-tax with 2 kids is NO WHERE near enough to afford this house. Fed/state income taxes, 401k, college fund, and health care/insurance will suck up half your income.
So that leaves you with 125k for living expenses and savings. Feeding, clothing, childcare, camp, pre-school = 15k a kid? Easy. Down to 95k.
2 cars? A Nissan and a Toyota insurance/payments/gas/maintenance = 10k a year. Down to 85k.
With a 30yr/20% down taxes and mortgage on this place = 44k a year. Down to 41k.
Utilities/internet/cable = 3,500 a year? Down to 37.5.
Insurance = 1500?
20k for you and your spouse for food, clothing, some entertainment expenses?
That leaves you with 15k for savings and unexpected expenses. And we haven’t even gotten into student loans from grad school, furniture, etc..
That’s pretty tight. Some of my numbers might be off individually, but on the whole I think this estimate is pretty accurate.
To comfortably afford this home, a family of 4 is looking at household income closer to 400k. Not 250k. That’s a MUCH smaller demo.
“Utilities/internet/cable = 3,500 a year?”
Please post the names of your utility/phone/cable providers as I am apparently paying over 2x too much.
“To comfortably afford this home, a family of 4 is looking at household income closer to 400k.”
$400k income to afford a $500k mortgage? How does anyone buy anything?
Let’s do it the other way–30+10+3.5+1.5 = 45k * 2 for taxes/HC/savings = $90k gross *before* paying any rent or having any living expenses. A family of 4 needs to make over $100k to afford to live in *public housing* for *free*.
Marc your numbers are all jacked up.
$3,500 is as conservative as possible. Yeah 6-7k is more reasonable.
“$400k income to afford a $500k mortgage? How does anyone buy anything?”
Well, most folks have viewed their mortgage as savings and have save very little money otherwise. But I think an awful lot of people have been disabused of that notion.
“Utilities/internet/cable = 3,500 a year?”
“Please post the names of your utility/phone/cable providers as I am apparently paying over 2x too much.”
I think you should be able to do it in the neighborhood of say $5K. Monthly costs (very rough guesses of average): $125 gas heat and hw, $125 elec, $125 cable (incl a movie channel) and internet, $45 for my wife’s cell (work pays for mine). No landline for us.
Marc’s numbers are fairly accurate other than taxes. He’s right most people don’t max the 401k or have a college fund or save. Daycare is 15k a year for 1 kid and nannies are way more. If you want to live a few paychecks from the edge then yes this is perfect for you.
“Daycare is 15k a year for 1 kid and nannies are way more.”
Nanny for two kids = daycare (at that rate) for two kids + a lot of flexibility. It’s certainly possible to get daycare for a lot less than that.
“I think you should be able to do it in the neighborhood of say $5K.”
I was exaggerating, but my point remains. And we have a landline, b/c we’re dinosaurs (and I *won’t* use comcast for *anything*, and RCN is too unreliable, so what’s another decent non-T ISP option in Chicago?).
I PROMISE you, a family with earnings upwards or 400,000 wouldn’t touch this house with a ten foot pole.
“I PROMISE you, a family with earnings upwards or 400,000 wouldn’t touch this house with a ten foot pole”
I’m curious why you think so…
Because it’s an ugly glorified shack in a yuppie neighborhood
“I’d argue that 250k pre-tax with 2 kids is NO WHERE near enough to afford this house.”
But you’ve described a budget that pays for everything and allows a little room for savings on top of the 401k. And you could still knock a few $K off here and there. If this family has saved up some money for a few years already (including renting at a lower cost than this house), they’d have a bit more of a cushion. Depends on how risk averse you are and how much of a emergency cushion you need.
“I was exaggerating, but my point remains. And we have a landline, b/c we’re dinosaurs (and I *won’t* use comcast for *anything*, and RCN is too unreliable, so what’s another decent non-T ISP option in Chicago?).”
Comcast may be bad, but I will say the only reason we don’t have a landline is the telco couldn’t keep the line in working order. Landline is still only about $300/year if you get basic measured service.
But the househild that pulls in 250 isn’t buying this place either. They’re buying a larger place in a nice suburb or they’re buying a newer construction sfh in a nice place in town. Its all about stretching. Probably like 2/5 can truly ‘afford’ to live in a 600k plus home and the rest just stretch through the use of credit and neglecting to save for retirement. I can tell you first hand my industry is full of burnt out busted old attorneys whlo made a good living back in the day but spent it all on stupid things, like their kid’s car insurance in college even though they went to depaul, and now they’re in their 60s or 70s and busted out, broke and didn’t save for retirement and are basically lower paid service partners. Those gvood earning years where the household is making 250k ayear, they don’t happen every year for most people, and those days of milk and honey come to an end. The pyramid at the top of an organization is very small, and its usually up or out, and out always means somewhere futher down and food chain and lower paying.
I am looking at one of the last pictures of the back elevation of the home. There appears to be a leak from perhaps the gutters? Or perhaps from the roof? If you look at the porch flooring, either they replaced the wood in front of the door (where that puddle sits) or it is damaged from the leaking water.
Surprised MG would allow this to be shown on the listing pics? Small things like this drive me crazy but in the end they are warning signs that something is amiss in the structure.
Either way, I am not at all into wood frame construction esp with a climate like Chicago’s.
““Daycare is 15k a year for 1 kid and nannies are way more.”
Nanny for two kids = daycare (at that rate) for two kids + a lot of flexibility. It’s certainly possible to get daycare for a lot less than that.”
$30k a year for a nanny that takes care of 2 kids?
Not in Chicago. Unless they have a criminal record.
Or am I not understanding what you wrote?
have a great nanny and she makes approx 30k working w 2. and i checked with a couple nanny agencies before we agreed on compensation.
no criminal record either.
No one making 400k a year is going to buy this home. Agree they would most likely consider Hinsdale or Winnetka.
I think 250k affords this place easy. Marc’s tax calculation of 50% is laughable. At 250k, you AGI is probably top of 28% bracket (18% effective tax rate assuming 40k in deductions). 3% for state. 4% ish for payroll taxes (remember SS cuts out at 106k). Even if you maxed your 401(k) at 16,500 — that is 6.5%.
So:
18%+3%+4%+6.5% = 31.5% all in. That is 20 points lower than Marc’s lousy estimate. 20% x 250k = 50k more disposable income.
That math is a joke.
“…your AGI is probably top of 28% bracket”
yeah — just wait until next year when tax rates go up – marc’s math will be closer to reality.
CH, where do you live?
I’ve only got one kid and nannies in the downtown/northside all want $14 or $15 an hour for one kid. Don’t forget your portion of the payroll taxes and a couple hundred bucks for a decent worker’s comp policy. That’s a little over $30,000. I can’t imagine anyone would take on 2 children for the same money.
Glad you like your nanny; ours is well worth the money we pay her as well. We’ve heard many horror stories from other people who wonder why they cannot find a decent nanny. But it all comes down to money – they won’t pay the going rate for a good one.
Clio, you are incorrect. The different is more modest than you would think.
At 250k all in, it is not that dramatic — about +3% effective at current bracket levels, so 21% on the federal side.
So now we’re at 34.5% all in, including a maxed out 401(k). Still leaves about 40k in disposal income to Marc’s flawed math — about 165k free and clear after taxes. The total PI on a 480k mortgage for a home like this (assuming 600k) is 30k.
Paid mortgage, maxed 401(k) and you have 135k in cash (11k a month) to cover everything else?
Give me a break. If you can’t live on that comfortably, you don’t deserve the 250k to begin with.
JMM, what do you mean by $40k in deductions on a $250k salary?
Are you talking about health insurance, flex spending, 401k-type stuff?
Clio – Obama has recently said that he is willing to keep the Bush-era tax cuts in place for people earning less than $1 million. But of course this is all political theatre designed to trap the republicans into voting NO right before an election.
“especially if they’re not able to pull much equity out of the 2/2 in Lakeview that they need to sell in order to purchase this place.”
I see a lot of people commenting, considering only very narrow scenarios that make presumptions such as the one above. Keep in mind there are people that will be looking to buy that haven’t lived by the ‘always spend as much as you possibly can afford’ mantra that so most americans seem to.
I’m still renting a modest buy nice 1 bedroom at only $1500/month, am at the 150k salary level now, realistically getting another ~30k raise soon, very stable job, and will be looking forward to buying my first place soon.
The caveat to this is that I’m going to wait until prices have truley corrected, which means waiting until Fall 2011 or Summer 2012.
And mortgage interest, taxes, chartitable contributions, childcare credits, etc.
With a 480k mortgage, your interest alone is around 23k. Throw in 10k for taxes and you are home with a maxed out 401(k).
Not sure why this is lost on people. 250k in gross income does not pay a high effective tax rate.
This place has been on the market for a long time. I have never seen it personally but, if it is such a great house and a great deal it would be snapped up by now. I am guessing the pictures look better than the house and the pictures don’t look that good.
On the comment about the 130K down payment. You don’t NEED 20%. There are other options out there is you have good income and good credit.
JMM, at $250,000 a year, you can’t take the full amount of your schedule A deductions. Further, AMT is likely to wipe out all but your mortgage interest deduction.
“I’ve only got one kid and nannies in the downtown/northside all want $14 or $15 an hour for one kid. Don’t forget your portion of the payroll taxes and a couple hundred bucks for a decent worker’s comp policy. That’s a little over $30,000. I can’t imagine anyone would take on 2 children for the same money.”
We, looked into nannies when she got preggie, and ones across the board. 10/hour up to 20/hour, in the end a what we consider a great nanny would have cost us more than my wife’s salary so we ruled that out.
then on to daycare it ranged from $175/week to $375/week, cheaper as they get older and cheaper again when potty trained.
so by the 3rd month of looking for care she just went to her boss and said you need to hire somebody to replace me i wont be coming back.
care can range and you can get it cheap or pay $$$$$ so much its all about your personal level of comfort in the care. our level was WWAY WAY WAY to high so the cost reflected that which turned out great as her staying home raised her and our families happiness by leaps and bounds.
“JMM, at $250,000 a year, you can’t take the full amount of your schedule A deductions. Further, AMT is likely to wipe out all but your mortgage interest deduction.”
That is not necessarily true and it certainly would not eliminate all Schedule A besides mortgage. AMT is complicated and might come into play on the margin, but if you’ve been through that schedule you know you do not end up taking the full 28% hit.
Your AGI is what matters, not what your gross salary is. Between 401(k) and 125 / FSA plans, you end up a lot closer to 200k. And at 200k AGI, you still have a substantial AMT deduction (circa 70k) which is not full phased out at that AGI. Plus your largest deduction is mortgage interest anyway and that is untouched.
I don’t know many people who pay more than 20% effective federal tax at that income level.
“Further, AMT is likely to wipe out all but your mortgage interest deduction.”
This is definitely not true.
GROOVE:
Check this out baby:
http://www.redfin.com/IL/Kenilworth/533-Exmoor-Rd-60043/home/13784465
I’ll see you and the kids at Homers before long.
Groove,
That is always a valid option as well. It doesn’t necessarily mean that your wife can never work again either. She could even take classes at night to prepare for an even better career once the youngest is in full-day school. That’s what my mother did. She had her masters degree by the time my little brother was in kindergarten and by the time he was in 2nd grade she was back to being a working professional, except she was the boss this time.
JMM,
we took a look last year at a yellow house a block or two south of it its been on and off the market. but to us is still to high for the layout.
“She could even take classes at night to prepare for an even better career once the youngest is in full-day school.”
Tipster,
Great idea in theory, but when you go down to one income and start a family, paying for grad school is increasingly tough.
http://www.redfin.com/IL/Kenilworth/618-Melrose-Ave-60043/home/13783989
This one? I thought it was a rental. Guess its for sale now. Good looking house from the outside. Previous renter had lots of kids and somehow it worked layout wise.
Tips,
i actually can tell she is happier not working a corporate job, she says she get more exercise and enjoyment out of being a homemaker. she says she worked way less in the corporate world but the atmosphere and commute sucked the soul out of her.
i dont think she will be going back to work, she has her sights set on PTA or working with the alderman to improve things. she has pissed off our local school principal and is at the moment trying to get her booted. *our son isnt even of school age yet, so you can see where my wifes head is at and what she enjoy’s 🙂 and it wont be “working for the man”
i do think when kid(s) become teens she may go back to school but something like design or art.
JMM those are some compelling “comps,” I have to hand it to you– especially the Melrose place. Walking distance to Metra, no less. . .
The Exmore place, I absolutely detest in-wall window units for a/c, so that’s an immediate dq. (Curious where Groove comes out on it. . . I know you hate window units, but if you don’t have to take em in and out every year, is that better?).
I had to look at those places, because as much as I dislike the idea of living in the burbs, I’m with Anon(tfo) and would rather live almost anywhere than this place.
“I thought it was a rental. Guess its for sale now.”
this was for sale last year also but it wasnt this house i was talking about, maybe it was north not south? the house is off the market now.
there was also a fixer upper on wayland that we entertained the idea of. and when i say fixer upper it was really only cosmetic, mechanicals, and needed a second bath added.
Groove,
Sounds pretty cool.
RNGirl,
If that’s what she wants to do, you make it work. It can be done.
“Curious where Groove comes out on it. . . I know you hate window units, but if you don’t have to take em in and out every year, is that better?”
it is better and noise level is down on wall units and even if you dont have to take them out they are an eyesor.
only C/A for me now on.
i will refer to my shower dilemma, where on a hot day i get out of the shower sweating because there is no A/C unit in the bathroom, fans can only do so much.
“I’ve only got one kid and nannies in the downtown/northside all want $14 or $15 an hour for one kid. Don’t forget your portion of the payroll taxes and a couple hundred bucks for a decent worker’s comp policy. That’s a little over $30,000. I can’t imagine anyone would take on 2 children for the same money.”
(1) Off the books. Not what we do, but it’s *very* common.
(2) *many* will not ask for more for a 2d kid, especially if the 2d comes after she’s been working for you for a while–easier than finding a new job.
(3) If (1), then no WC.
(4) Sure, not exactly $30k, but the flexibility (not being tied to the 7-6 daycare schedule) is worth the extra cost.
Counterpoint–who’s your WC insurer that’s only a couple hundred bucks? As always, please share. anon_tfo at hotmail, if you don’t want to post.
Tipster, I admire your additude and agree that it can be done — in the right situation — but you have to admit that it doesn’t work in all situations. My husband travels 5 days/week and we don’t have a family support system nearby. In my case, going down to one income, supporting two children and going back to school just isn’t feasible.
“Groove,
Sounds pretty cool.”
its great in the winter to come home from work to hot chocolate and pot roast cooking in the oven. i know it sounds old fashioned but i find its not money but these little things that makes me damn happy 🙂
“18%+3%+4%+6.5% = 31.5% all in. That is 20 points lower than Marc’s lousy estimate. 20% x 250k = 50k more disposable income.
That math is a joke.”
If you look at my comment “Fed/state income taxes, 401k, college fund, and health care/insurance will suck up half your income.”
I’m assuming 50% for taxes, 401k, healthcare, AND college savings. Why? because to me, a couple making 250k those 4 things are non-negotiable and come before everything else. Maybe that’s just me.
So here’s my math.
You’re assuming one 401k, while I’m assuming one for you and one for your spouse and that you’re maxing both. So that’s another 6.5%. Now that’s 38% of gross.
On the health care side, if you have two young kids and decent insurance that’s 5k a year or 2% which brings us to 40%. If you don’t have great insurance or just had one of those kids this year you can tack another 5k to that total.
Now on college saving, things can get all over the map. Top end, you’re looking at $250,000 in today’s money for EACH kid. Let’s be conservative and say you will save $250,000 in todays money for BOTH kids. They can get a job and loans to cover the rest or go to state school. College education has increased at 6-7% a year for a while now, so lets assume any investment returns are going keep up with that, but no more. We haven’t been explicit, but lets say your kids are 2 and 4, you’ve got 15 years to save that money. That means you have to put away 17k a year (increasing 6-7% a year keep up with outsized edu inflation). 17k is 7% a year of gross. That brings us to 47% of income.
The math is far from a joke.
“its great in the winter to come home from work to hot chocolate and pot roast cooking in the oven. i know it sounds old fashioned but i find its not money but these little things that makes me damn happy”
Groove — THis is fantastic. I LOVE that you guys have figured out the right balance!! Gives me hope 😉
“(3) If (1), then no WC.”
Disagree. You should have workers comp regardless of your tax withholding. Two separate issues and one does not preclude the other.
“Disagree. You should have workers comp regardless of your tax withholding. Two separate issues and one does not preclude the other.”
So, you’re 1099’ing her? Who’s providing WC insurance when you aren’t using a tax id? Know an insurer that wouldn’t deny that claim AND rat you to the feds? If so, please provide info.
Marc,
While you are at it why don’t you start saving for the Aspen ski house?
Your numbers are unreasonable. U of I is 14k a year, and that is in one of the professional schools like business. I don’t know how you get to 125k, unless they are living better than mom and dad.
Plus you assume people with kids that young are making as much money as they ever will their entire lives. Yet they are maxing 33k a year in 401(k)?
Plus you assume no inflation, ever?
It is a patent joke to asset someone who makes 250k gross cannot afford this house @ circa 600k. I’ve heard some dumb statements on here about income to affordability, but that takes the cake.
“I’ve heard some dumb statements on here about income to affordability, but that takes the cake.”
More than someone making $400k not being able to *really* afford a $950k house?
That was pretty dumb too.
I wonder where all the parents find their money to pay for college? I guess everyone makes more than 250k a year nowadays. Or perhaps they live in trailer parks making 250k.
I am surprised at all of the positive feedback about kenilworth on this thread – in the past, everyone seemed to be bashing the suburbs (especially the more expensive ones) and talking about how it was better to live in the city and how they hated the suburbs. I guess it depends on the day…..
The comments on affordibility are not “dumb” – they are real issues. If you actually know people making 250k+, look at where they live. MANY MANY MANY of them live in places that are 400k-600k and feel that they can’t afford more. I believe they are right. As I said before, most of my colleagues/friends (N >50) are in the 400-800k income range and NONE of them live in a house more than 1.5 million, NONE of them drives a car that costs more than 60k and NONE of them considers them rich or are able to retire. Money continues to be a worry to these people. Seriously, unless(until) you are in this income range, please refrain from commenting.
“most of my colleagues/friends (N >50) are in the 400-800k income range and NONE of them live in a house more than 1.5 million, NONE of them drives a car that costs more than 60k and NONE of them considers them rich or are able to retire.”
1. You’re range may well include someone making $400k and owing a $950k+ home. I’d bet it does, in fact.
2. What does one get in a house over $1.5mm that is *objectively* worth the stretch?
3. Not one of them has a Rover? I don’t believe you.
4. Almost no one who still has a job considers themselves rich.
5. Of course they don’t have “enough” $$ to retire, as they don’t have the $10mm+ in liquid assets to throw off the income to replace their job and maintain their lifestyle.
“Seriously, unless(until) you are in this income range, please refrain from commenting.”
Seriously, until you’re living with a family, making less than $250k, please refrain from commenting. Or at least from making such stupid statements as the above.
“Seriously, until you’re living with a family, making less than $250k, please refrain from commenting.”
fair enough…
“Groove — THis is fantastic. I LOVE that you guys have figured out the right balance!! Gives me hope”
RnGirl,
I hate admiting this but most men will say, i want my wife to have a career, but deep down we would rather have the 50’s house wife. I for one never new i could be so “old fashioned minded” as i was the one pushing her to stay at work and climb to the top.
but now i swear i wouldnt have it any other way 😀
i think society would benefit with an at home parent instead of dual incomes. but current perceived lifestyles cant afford to do it on one income. (dont get me started on groceries and the smaller packaging and higher prices)
“I am surprised at all of the positive feedback about kenilworth on this thread – in the past, everyone seemed to be bashing the suburbs…… and talking about how it was better to live in the city and how they hated the suburbs”
nope its just me with the keni idea and JMM wanting me to be his new neighbor?
its not my ideal place to live but it look as though by HS time will will need to make a move to the burbs, and we say why not now when its in our price range.
it will be soul sucking but i will just need to remind myself its “for the kids”.
“Seriously, until you’re living with a family, making less than $250k, please refrain from commenting. Or at least from making such stupid statements as the above”
quote of the Week!!!!!!!!
“nope its just me with the keni idea and JMM wanting me to be his new neighbor?”
I’m pretty sure that’s a sitcom pilot right there.
“i think society would benefit with an at home parent instead of dual incomes. ”
Interesting point. And occasionally an economist will point out that really today’s standard of living is similar to the 1950s except you need both spouses to work. From a family perspective all the large wave of women entering the workforce did was drive up the equilibrium price of household goods & services. (There’s that whole women’s economic independence too, but that’s another issue).
But in my upbringing (80s & 90s) I could actually tell societal institutions were actively trying to make stay at home mothers and single earner families feel like bygone relics of a prior era.
Its a media myth that one can have it all, esp. such fraudulent lies as Candace Bergan being the Murphy Brown single mom with a power career. My ma was stay at home with my older sis and I was daycare raised and she is definitely more closer to my parents and me more my own person.
What a disgusting person Candace Brown is and if I hear of some malady afflicting her I will definitely purchase some nice scotch and enjoy a good cigar.
“What a disgusting person Candace Brown [sic] is and if I hear of some malady afflicting her I will definitely purchase some nice scotch and enjoy a good cigar.”
She’s an *actress* playing a *role* written by others. I had thought your grip on reality was stronger than that.
err Candace Bergen.
“She’s an *actress* playing a *role* written by others. I had thought your grip on reality was stronger than that.”
Actors have considerable leeway regarding whether they want to go along with whatever political agenda the writers are trying to propagandize upon America (ie: Kirk Cameron not going along with their attempt to create a moral dilemma utilizing him).
“ie: Kirk Cameron not going along with their attempt to create a moral dilemma utilizing him”
And look at how much work *he’s* gotten since that series ended.
always thought homer’s was disappointing. that chuck wagon place in downtown wilmette was solid
“Your numbers are unreasonable. U of I is 14k a year, and that is in one of the professional schools like business. I don’t know how you get to 125k, unless they are living better than mom and dad.”
hmm…
Let’s look at the cheapest: U of I living at home is 14k. Let’s look at the top: All in cost of attendance at Harvard (or basically any private school) is 60k a year. Let’s take a midpoint and call it 30k a year. That’s how I get 125k in today’s money. Everything here accounts for inflation.
“Plus you assume people with kids that young are making as much money as they ever will their entire lives. Yet they are maxing 33k a year in 401(k)?”
33k a year in retirement savings isn’t that much. In REAL terms, at best you can hope to double that money in 25-30 years. At 3% inflation a year your money will be worth half what it’s worth today in 25 years. So doubling it in real terms = 4x in nominal terms. That’s a 6% investment return net of fees for 25 years. What’s the S+P at versus 10 years ago? Right.
So when you’re retired, you and your spouse will be able to pull the equivalent of 66k a year PRE TAX in todays money out of your 401k for every year you maxed it out. That’s assuming that you’ll have paid in as many years as you want to pay out. Ok, maybe that’s aggressive, but if your lifetime payments into your 401k are equivalent to 25 years of MAX contributions that’s not that far off. Maybe you didn’t pay in during your first job out of school or while you were in grad school. When you did, it may not have been the max. And if you paid in more, then you’ll cash out more than 66k PRE TAX in todays money a year. Congrats. You won’t burden your kids with too much of the cost of putting you in a home at some point.
Of course you are going to make more money as you get older and you will have other savings. How’s that retired couple living off 66k a year pre-tax living today? How much are the taxes on this house again? 12k? Exactly. You’re going to need those future savings from higher income.
Am I really crazy to think that a 250k family ought to be saving 40-50k? Seems like what I think is basic savings everyone else is willing to spend or leverage. That makes our definitions of “comfortably afford” very very different. Maybe it’s just that I am not depending on home prices to increase at much more than inflation for the next 30 years. If you think they will, then maybe you can get away with saving much less.
“Seriously, unless(until) you are in this income range, please refrain from commenting.”
I imagine my income (and net worth) is higher than yours or they are very close, yet comments do not reflect my views…in any way… whatsoever.
And as anon (tfo) just pointed out, you need to refrain from making comments about those families in the $250k and under range.
Exactly what is your yearly income clio? And don’t say it is none of our business as you have taken the liberties of revealing everything else about yourself…so come on now, fess up and let us know exactly how rich you really are!
Kirk Cameron, Candice Bergen, Corky from life goes on?
ahhhh this is the crib chatter i have come to love and know 🙂
westlocoleo,
My comments, once again, were not meant to offend anyone – I just wanted to give people some perspective on the unknown/unrealized expenses and lifestyles of people making over 400k. They do NOT live the glamorous lives that people think (those are the people making over 3-4 million).
In terms of your views, of course they ARE important -but remember, as a gay man w/o kids(?), you also are not representative at ALL of the high-earners out there.
In terms of comparing our wealth, it is a non-issue on this site. That is a personal matter and I would be more than happy to discuss with you privately – I don’t think anyone cares or wants to go through the westloco vs clio match on this site – remember, the site is about real estate
“If you actually know people making 250k+, look at where they live. MANY MANY MANY of them live in places that are 400k-600k and feel that they can’t afford more.”
If you’re making 250k a year and don’t feel like you can afford a more expensive house it’s simply because you don’t prioritize it. Which is understandable because the more you make the more it seems you have to keep up the lifestyle and start dining at L20 and Schwa and the likes 5 times a week, but the ability is certainly there. Priorities, really.
“That is a personal matter and I would be more than happy to discuss with you privately – I don’t think anyone cares or wants to go through the westloco vs clio match on this site – remember, the site is about real estate”
Actually, I think this would be the greatest thing ever
“Actually, I think this would be the greatest thing ever”
Agreed.
Tho I don’t know that Sabrina would.
better than westl vs mario greco? I dont know.
certainly better than westl vs g, that got tiring quick.
“That is a personal matter and I would be more than happy to discuss with you privately – I don’t think anyone cares or wants to go through the westloco vs clio match on this site – remember, the site is about real estate”
Is there anyone on here who wouldn’t want to see it?
Barry’s right, it’s about what you prioritize and I’ll add to that it’s about how willing you are to leverage yourself. I’ve showed time and time again behind every house that’s sold for $1,000,000 there is an $800,000 mortgage. Sure they can ‘afford’ the payment on a DTI schedule, but as shown above, it requires that you don’t save for college education, you don’t max out the 401k, etc.
I know for a fact people in my office earn $250k and upwards and just like clio, none of them are looking to buy and all of them live in homes that cost between $400k and $600. And most of them bought pre-2001 before teh bubble drove up housing prices to such extremes. The one show boat attorney lives in a million dollar home and due to various economic reasons and slow business she’s going to be one of those busted out 60 year olds working because they spent all the money they earned.
It’s the same mentality as the guy who works a factory job and makes $12.00 and hour yet drives a $700 a month car. SURE he can afford the monthly payment but….
“always thought homer’s was disappointing. that chuck wagon place in downtown wilmette was solid”
I never liked it as a kid, but now that I have kids, they all seem to love it.
Everyone likes the pancake house though.
“but as shown above, it requires that you don’t save for college education, you don’t max out the 401k, etc.”
If you’re referring to the $250K example from Marc, it doesn’t actually show that. It shows you can max out the 401k for both, save for school, live more than comfortably, and still have a bit left over. Whether that gives you enough cushion to be comfortable, seems to me a personal thing, but it doesn’t clearly show you can’t “afford” it. Big issue I think is how secure you feel about your income.
“I’ve showed time and time again behind every house that’s sold for $1,000,000 there is an $800,000 mortgage.”
Not true. Also don’t forget that approx half of all homes are owned outright.
“If you’re referring to the $250K example from Marc, it doesn’t actually show that. ”
It would if you doubled the mortgage and taxes to reflect the $1mm house HD is proposing–and that no one else said was “affordable” on $250k, so it’s sort of a strawman, but that’s HD.
“Everyone likes the pancake house though”
can you even get a table anymore, wait times are insane (this was two years ago it may have changed).
Marc:
Your return assumptions are low and your inflation assumptions are a little high.
Equity risk premiums average 7-7.5% and most ERISA-governed actuary valuations use 8% or so for expected return on plan assets over that duration. You must know something the world doesn’t.
The 10 year treausry is 2.75% and that has to trade above the inflation expectations for the duration you are assuming (middle segment circa 12 to 15 years).
In 15 years you can double your money in real terms and then some.
I’m glad you are worried about paying for Harvard but obsessed with living in the cheapest house available. The return on a Harvard undergrad degree is not worth it, though this comes from someone who went to another school.
Sorry but you are FOS if you maintain that $250k is not enough to afford just about any comfortable lifestyle in Chicago, and not live in a crappy house in an overpriced neighborhood.
Groove — depends when you go. The line moves quicker than you think. With kids, you are there before the NWU college crowd shows up but after the senior citizens. There is a sweet spot around 8am on weekends.
HD is correct in his assertation that a lot of big dollar homes do have big dollar mortgages. I see a lot of them in my neck, but its not always because they are stretched.
The reasons / profiles I think is fairly straight forward.
1. The 50 something executives. Those who can comfortable afford it think it is wasteful to tie up capital in a house that is an expense and not an investment. Borrowing costs are very low and equities continue to look attractive with fixed income in such a bubble.
2. The 40 something middle managers. Those who can marginally afford it need the leverage and believe it could be an investment because most of their net worth is tied up there.
3. The young affluent (30 to late 40s). Newer and increasingly affluent younger buyers see their expected salaries increasing from 200k to 300k and view the payment as very comfortable 5 years out. Or plan to equitize with GSCO pays the end of year bonus. Wall Street is having a bang up year this year, despite the economy. Go figure.
agreed, JMM. Just because folks have a big mortgage or a 80%LTV doesn’t mean they can’t afford it. Some people want to take advantage of the crazy low interest rates you can lock in these days.
The 800,000 mortgage HD seems so happy to cite has gone from:
PI of $5,300 in 2009 (7%)
PI of $4,800 at beginning of year (6%)
PI of $4,300 currently (5%)
These are facts and they are indisputable. They are powerful rebates going to homeowners who can use the difference to i) equitize, ii) spend or iii) save.
JMM
Equity risk premiums at 7-7.75%? So you’re thinking nominal return rates in the 11% range. I think that’s drinking a bit too much of Siegel’s kool-aid. A lot of people do, but they get paid to do so. It really only holds for very distinct periods. We can get into all kinds of survivorship bias, limited data from the 1890s, and long-term demographic asset allocation discussions, but in the end Ibbotson produces the numbers they get paid to produce.
Every ERISA plan I’ve dealt with is hard pressed to keep up with those assumptions and is dramatically underfunded. Managers will promise the kinds of returns you talk about, but that’s to win business. The few that can deliver over the long-term aren’t out there shopping for new cash. My 6% a year return means $100 in 2000 turned into $180 today. David Swensen has managed that. Buffett beat it. Few institutions can match that their record. When breaking down a balance sheet, most value investors will take the pension obligations and adjust the return assumption down to 5-6%, and knock down shareholder equity accordingly. If you beat those returns, great. But you certainly can’t depend on it.
My inflation assumptions are not for the CPI-U but for the basket you need to consume when you need the money. It’s great that computers are cheaper, but when you gotta pay for healthcare and long-term care you don’t care about the overall makeup of the CPI (as an aside if you continue to use the pre-1990 adjustment CPI 3% is very conservative)
10-yr needs to be above inflation in the LT, but certainly not in short term when Fed is buying as much as it is and QE2.0 is in full swing. Look at recent auction allocations and see if that seems like a “normal” market. Just like housing prices have to track income/household formation rates over the long term, that doesn’t mean you can’t have huge deviations when the market isn’t functioning properly.
Not worried about paying for Harvard, just using the top end and bottom end to find a mid point.
Thanks for proving my point JMM. Behind many $1,000,000 homes is $800,000 of ARM leverage. I’m happy to see you’re not fooled by the debt facade.
HD — some people can afford to carry that much debt and do so. Many more can afford it but choose not to, though some are tempted with today’s rates. You cannot argue that home ownership, especially jumbo financed properties has gotten dramatically cheaper.
Insert a “not” in there. You get the point. $1,000 is real money.
“Equity risk premiums at 7-7.75%? So you’re thinking nominal return rates in the 11% range. I think that’s drinking a bit too much of Siegel’s kool-aid. A lot of people do, but they get paid to do so. It really only holds for very distinct periods. We can get into all kinds of survivorship bias, limited data from the 1890s, and long-term demographic asset allocation discussions, but in the end Ibbotson produces the numbers they get paid to produce.”
The other thing is that the average return isn’t the only thing that matters. Unless you’re buying guaranteed returns, you have to think about plausible worst case scenarios. What are the odds that over a say 30 year span, the market performs substantially worse that current expectations or historical averages (or even the worst case historical experience over a similar span). If things work out well, you can always spend a little more in the future, it’s hard to go back in the past and save more.
“When breaking down a balance sheet, most value investors will take the pension obligations and adjust the return assumption down to 5-6%, and knock down shareholder equity accordingly. If you beat those returns, great. But you certainly can’t depend on it.”
Do they also pump the discount rates up to reasonable levels? Because that impacts the funding deficit — not expected return on plan assets, which if you knew anything about pensions, only influences the period pension cost which is non-cash and doesn’t matter to investors in, or acquirers of, businesses.
“My inflation assumptions are not for the CPI-U but for the basket you need to consume when you need the money. ”
I’m glad you have a special, pro-forma CPI that is in its own little world. If your CPI is 3%, then every risk free investment pays a negative real return. If this were the case, you should call Gross and ask for his job. Meantime, you might want to let the trillion dollars invested in the fixed markets know your special secret.
The biggest question is: How the hell do you guys manage to get any work done if you are posting on “cribchatter” all day?
“If things work out well, you can always spend a little more in the future, it’s hard to go back in the past and save more”
No but you can earn more. For the vast majority of people, the only thing they have of any worth is their expected future earnings.
Let’s not confuse the issue here. Marc’s “you cannot afford a 600k house making 250k” is a complete and total load of crap (even HD would suggest its less than the 3x income “rule of thumb” which was created with rates were double digits by the way).
Sure if your tax rate was 50% and your savings rate was also 50% (to pay for six kids at Harvard), you couldn’t afford much of anything (technically zero really). Hell, why not build in a 25% tithe for your religious institution? Then you’d be at 125%…
JMM: I don’t know about dramatically cheaper, or even drastically cheaper, but less expensive maybe. But we’re at the point that I’m not even sure what we’re discussing anymore.
JMM: You might be able to afford a $600k home on a $250k salary, I personally know people who make $250k and live in $900k homes or $1,000,000 homes….
but it’s a lot like the guy with the spinning chrome rims on the CTS and the $1,000 a month car payment…..
sure, their paychecks are larger than the car payment but….
someday when that $250k goes away (it’s never guaranteed you know!) ka-boom! which are the people who walk through my office every week and I’m not talking about the bankruptcy clients I have…
expected return rates on plan assets certainly influences pension costs over a full business cycle. somebody’s on the hook for the shortfall. sure it’s non-cash for a few years while you pray things bounce back, but then you gotta fund the thing. from the outside looking in, adjusting discount rates is useless since the firm knows way more than you ever will about the specifics of their obligation. but you can say quite a bit about the expected long-term return of their investment managers.
From Jan 2000 – Jan 2010 CPI-U was 2.6% annually. If you’re saving for retirement and your expenses are going to be linked to things like healthcare that can rise in price very quickly, you don’t think it’s smart to maybe punch that number up a bit. You really going to argue 0.4% difference?
gross is a very shrewd businessman, though that pin-drop quiet trading floor takes some getting used to.
“I personally know people who make $250k and live in $900k homes or $1,000,000 homes” and “Marc’s “you cannot afford a 600k house making 250k” is a complete and total load of crap”
Those people making 250k and living in 1mil houses are probably losing sleep at night – there is absolutely no doubt about that. Run the numbers any way you want – there is NO way (w/o extra help) that a family making only 250k could easily afford a 1 mill house.
Furthermore, I guess someone making 250k could afford a 600k house (many do) BUT they also are cutting back and watching their money (had me down clothes, old cars, no vacations, etc.). It is all about priorities – but to think that a family making 250k could live in a 600k house and have a “rich” lifestyle (w/nice cars, clothes, vacations, etc. ) is absurd and part of people’s fantasies.
“The biggest question is: How the hell do you guys manage to get any work done if you are posting on “cribchatter” all day?”
Can’t speak for anyone else (nor do I particularly post here all day) but I have lots of downtime running sims and calcs waiting for results, it’s pretty sweet. I guess I could multitask, but farting around on the internet is more entertaining.
“No but you can earn more. For the vast majority of people, the only thing they have of any worth is their expected future earnings.”
For a lot of people at $250K, they earn what they earn. It’s not like they’re going to moonlight at the 7-11. And working harder even if feasible is not without cost either.
I disagree with Marc’s claim that someone making $250K couldn’t afford a $650K house pretty comfortably. At the same time, I don’t think it’s unreasonable for them to buy a cheaper house if it meets their needs, and feel a little more secure.
“It is all about priorities – but to think that a family making 250k could live in a 600k house and have a “rich” lifestyle (w/nice cars, clothes, vacations, etc. ) is absurd and part of people’s fantasies.”
When rich = private school for the kiddos, St Barts for break, Gstaad for skiing and multiple $60k+ cars, sure.
Note–I do *not* think that an HHI of $250k from work is anything like rich. I think that rich = not having to work for income to support one’s lifestyle.
And, again clio, until you go a week w/o telling everyone else to not talk about things they don’t know about, don’t talk about things you don’t know about (like “I guess someone making 250k could afford a 600k house (many do) BUT they also are cutting back and watching their money (had me down clothes, old cars, no vacations, etc.)”, which is a load of shi … stuff). Of course, anyone who has kids and works for a paycheck “watches their money”, but a mortgage of less than 2x income =//= “hand me down clothes”. You’re demonstrating *quite* effectively why people don’t like you once you open your mouth.
“The biggest question is: How the hell do you guys manage to get any work done if you are posting on “cribchatter” all day?”
having a shyte servers, software and computers, running any report or any query, or post anything will freeze up the software. (this morning it froze for 30 min) in that time the groove can either check and reply to emails or crib chatter.
the other postings are from daily meetings and other random meetings that i have to be at that dont concern me at all.
then there is the deuce emergency, where my phone postings pass the time.
“There is a sweet spot around 8am on weekends”
will have to say it was around 9:30 so i will take you advice next time i roll up that road.
This thread was the best comment thread in a while. Gave me a lot to think about as far as how much house we can actually afford.
Also, I want Groove77 to counsel my husband so I can live a life like grooves wife 🙂
We obviously are going around in circles. We probably should stop beating this dead horse. Basically, the people who make less than 250k want to believe that when they make this amount, they could comfortably afford a 650k house and all the trappings of a nice life- if they can’t hold on to this fantasy, they may go into a depression. Marc, let them have their little fantasies, they are obviously undeucable.
“undeucable”
Does this imply that they could never possibly become a Deuce Bigalowe?
Actually, that last post sounded really snotty – but seriously, I remember what it was like to make 250k – you can’t afford a lot of things people think you can (and I don’t even have any kids). We are not saying that it isn’t a lot of money – but, for the people who make this amount and are looking for houses, beware of all of the added expenses that come with the associated lifestyle – don’t get trapped!!
Anon:
“Counterpoint–who’s your WC insurer that’s only a couple hundred bucks? As always, please share.”
I use State Farm – the policy is an add-on to my existing rental insurance policy. I’ve been told that some of their homeowner policies include WC for the IRS-defined Household Employee.
My renewal amount is in the mid 3s for next year.
The only caveat (if you want to call it that) is that you have to agree to let them audit your books anytime they feel like it.
Every other place I called was quoting over a thousand a year. I still don’t know what the catch is – so far I can’t figure out why SF is so much cheaper. Perhaps just my long history with them.
Tipster–
Thanks. Sounds like there *must* be a catch, but you never know.
“expected return rates on plan assets certainly influences pension costs over a full business cycle”
Ok, I know you aren’t a pension expert, but I am. Expected return on plan assets has nothing to do with a pension deficit.
The net period pernsion expense cost is non-cash anyway. If you are adjusting a P&L you’d just pro-forma the cash cost in in lieu.
But no one does that, they adjust subtract the liability out of EV just like the subtract out net debt. Deficits aren’t influenced by expected returns, only discount rates.
I’ve concluded you don’t know much about pensions (or pension accounting), which is fine because most companies are away from them now, or they’ve been annuitized, de-risked and/or frozen.
As Bob likes to say, I’m sure you make good pitchbooks though.
As for me, I’m usually on a boring confernece call.
If you’ve made $250,000 a year for the last 5 or 10 years and can reasonably expect to continue making $250,000 a year for another decade, then a $650,000 house is not a big deal.
The problem is that most $250,000 a year jobs have very little job security. Most of them are in “industries” that are well-known for being up-or-out or being so stressful that only a rare few people last for very long.
“The problem is that most $250,000 a year jobs have very little job security. ”
Of course, it’s more common that $250k HHI is a combined amount, rather than the single wage (and dual income was an important piece of Marc’s example that started this thing). The issue becomes what happens with the kids–if they’re already school age, not too big a deal, but if you buy the house pre-kids, do you really maintain the income–and deal with the expense of childcare–or do you have a drop in HHI b/c one parent stays home?
Tipster, you are liable to spark an intense debate about all the jobs that pay 250k or more. Truth is, there are plenty of them.
Biglaw starts associates at 160k (still?!) for %$&^%! sake. Lots of jobs that supposedly have high levels of incentive compensation — financial services — aren’t as variable as they seem. Firms need to pay 1x to 2x base salary for senior employees or else they go to another firm. Sure, they could go to zero, but Wall Street mopes are sort of like NFL coaches, they always end up somewhere. Even if its as off coordinator for the Bears (n.b. I hate Tice)…
Of course.
The prudent thing to do is to not commit to a huge expense and save as much as you can while you can. At some point you are either certain of a continued income level or you have so much savings that you don’t need to borrow much money. Or maybe none at all.
JMM,
Biglaw is up-or-out. The turnover is incredible. Less than 10% of first-year associates are in Biglaw 7 years later. Probably less than 5%.
“Ok, I know you aren’t a pension expert, but I am.”
Ahhhh…JMM is a PBGC analyst. Got it.
How are those actuarial table copies coming along?
Yes but they end up somewhere and 7 years is the partner cut off so of course that captures all the turnover. The economics don’t work unless its a pyramid — that is all professional services firms.
2nd tier pays ok, in house, corp development. I’ve hired a few in my day.
Bob, is that all you came up with?
Distressed debt investor
Bankruptcy consultant
Plan trustee
Portfolio manager
Investment banker
Accountant
Actuary
CFO
CIO
You forgot:
Union hack
Mobster
I was trying to leave my official occupation off the list. Thanks for outing me.
Bob remembers the PBGC from his days in IT at United when his pension got distress terminated. Poor guy. At least PBGC insurance covers his crappy income.
Leave my jobs out of this discussion!
“anon (tfo) on September 9th, 2010 at 4:12 pm
You forgot:
Union hack
Mobster”
I know an IT guy who lost his pension and his job at United a few years back. The other day he told me that his net worth is about a million. But Bob, this guy lives like a pauper and he would put you to shame. He could drink you under the table too. He doesn’t spend a penny more than he has to. He’s in his early 50’s and he’s basically, for all practical purposes, retired. But like I said, he doesn’t spend money other than booze and even that he drinks the cheapest he can find. He told me that he’s lived most of his life like it was the depression and now that we’re in a depression he’s doing just fine. Most of what he owns is from the alley. But he’s a millionaire. How many of you can say that? I’m not saying it’s for everyone but he sure is an interesting guy with a tremendous amount of financial freedom that few other people. It helps to not have a family or children either. But he’s got a long term girlfriend so it’s not like he’s alone.
I know that I will be vilified for saying this, but a million dollars for a person in their early 50s without a job is not as much money as you think. Think about it, even if he “lives like a pauper”, his living expenses have to be at LEAST 30-40k/year. Add healthcare and unexpected expenses and he may run out of money before he knows it – maybe that is why he is living like a pauper -not by choice.
You’re probably right Clio, and ZIRP isn’t helping much either.
But I see 40/50 years on a regular basis that make 70-100k a year, are underwater on their house, have $80k in credit card debt and have serious health issue. They don’t have a pot to piss in. I’d rather be this guy at 50 living like a pauper than 50 completely hopelessly in debt.
homedelete – I understand your point and agree. The simple life sometimes (actually, most of the time) makes more sense than all of this materialistic nonsense!!
“The simple life sometimes (actually, most of the time) makes more sense than all of this materialistic nonsense!!”
Which is exactly why it’s so hard for me to comprehend that you think that once you make 250k+ you automatically have to start throwing around cash on stupid crap you don’t need. I realize that MOST people probably do (this is America after all) but my material needs are pretty simple and I can’t imagine I’d change my lifestyle that much if I was making that kind of cheese. Granted, spouse/kids is the enormous wildcard when considering our example of 250k/600k house being hard to afford.
“…once you make 250k+ you automatically have to start throwing around cash on stupid crap you don’t need”
psychology is interesting – w/ the exception of 2 people, every single person I know making 500k+ has fallen into the trap of luxury – didn’t matter what their background was (rich/poor, etc.). These are ALL post-graduate level intelligent people. There are too many temptations – and once you taste the forbidden fruit – watch out!! It probably is easier to control if you are alone (obviously not in my case), but when you add a wife/partner things REALLY change (especially if that person doesn’t work).
Candice Bergen is a talented actor and should not be blamed for the increase of single-parent headed households.
According to wikipedia: “In 2002, Bergen said in an interview that she personally agreed with much of Dan Quayle’s speech, calling it ‘a perfectly intelligent speech about fathers not being dispensable’ and adding that ‘nobody agreed with that more than I did.’ ”
As per “Wall Street mopes are sort of like NFL coaches, they always end up somewhere.”
What? I wish! What’s your evidence?
If out-of-work “Wall Street mopes” like Fuld, O’Neal, Prince, Cioffi, Cassano, Cayne and other ‘NFL coach’-types can get new gigs that would indeed be very bullish. But over the course of my 25 year “career”, I’d say today’s wall street is nothing like the bond selling culture I joined (at Bear Stearns!) in the mid-80s. Back then the bubble was still inflating, so just about everyone was “smart”, “talented”, “above average” & well-paid — even me.
So to be informed that “Equity risk premiums average 7-7.5% and most ERISA-governed actuary valuations use 8% or so for expected return…” puts me in mind of Jake’s famous words:
“Yes, isn’t it pretty to think so.”
I’m with Marc.
“There are too many temptations – and once you taste the forbidden fruit – watch out!!”
Absolutely. A lot of it also has to do with your social circle. If they’re out living the yup life buying Bimmers and McCrapBox condos, chances are most people will too.
Most people indeed aren’t intelligent or restrained enough to not ramp up their lifestyle when more money is coming in. Its human temptation to both live for today as well as conform to the pack.
I’m able to live on 40% of my net and the rest goes to debt. The trick is to not surround oneself with spendthrifts who expect you to act similarly.
“There are too many temptations – and once you taste the forbidden fruit – watch out…………..but when you add a wife/partner things REALLY change (especially if that person doesn’t work).!!”
bunch of F’ing hooey, for every relevant thing you say we have to dodge about 35 posts of cow dung slop.
please stick to the good things you provide, and write the rest of that swizzle stick krap in a journal or something. (the go publish it under ironic comedy)
How does a $200,000 annual income household afford a $750,000 house? Prior sale of home at peak market, capital gain of $300,000 rolled into new home purchase, plus prudent lifestyle. That household has a $450,000 house masquerading as a $750,000 house. Aside from small number of true “deep-pocket young yuppie high-paid professionals buying first house” home-buyers often mentioned as case-example, most $750,000+ suburban houses are bought by trade-up suburban households selling previous house to leverage into a nicer home, who had both equity and capitcal gains to roll into their new down payment.
Regarding stay-at-home spouses, Elizabeth Warren’s book concerning financial uncertainties of dual-income upper-middle income households is well worth reading. We try to live on one income, and save other income for retirement, college, and emergencies.
“Millionaire Next Door” books (two?) are also worth mentioning; I recall punchline was that average millionaire lives modestly relative to household’s net worth, and that flashy lifestyles and expensive housing and car choices are often sustained by significant credit debt rather than true wealth.
Regarding those households who can still ‘afford” $750,000+ houses, most happily already own a nice house and have little incentive or motivation to move elsewhere. Trying to sell your house in this market is excrutiatingly painful. Many listings are one or even two years old, house “picture perfect” for any sudden showings. Any offers are low-ball. If contract is reached, likely to be renegotiated twice more – after home inspection, and again just before closing. Yuck.
“Then there is the deuce emergency, where my phone postings pass the time.”
Groovy, what’s “the deuce emergency”? I don’t get it.
“Groovy, what’s “the deuce emergency”? I don’t get it.”
just a different way of saying i am on the toilet pooping 🙁
Architect, it depends on the house and neighborhood. One house on our block sold in 3 weeks about a month or so ago. We asked the buyer, why did you pick this one given all the other ones on the market. Answer: move in ready and quality renovation / finishes.
I pressed it, saying there were plenty of those also on the market. Answer I got back was — we sold our place faster than we thought, SFH rentals in the suburbs were either crap or overpriced and we simply needed somewhere to live.
I thought the SFH rental argument was interesting. I bet there is some truth to that.
“I thought the SFH rental argument was interesting. I bet there is some truth to that.”
Absolutely!! I see that w/ my rental houses in Hinsdale. They are virtually never vacant and, as soon as they come on the market, they are snapped up – mainly because there are no other nice single family rental homes (fully renovated and upgraded) in decent areas. The same holds true with nice units in great buildings in Chicago.
“I thought the SFH rental argument was interesting. I bet there is some truth to that.”
Really. How often do you see/hear of a genuinely nice 4+ BR house in a good district available for rent? I know there are more than a few, but my feel for it is that most of them are rented to someone in the owner’s network (ie, someone with some reputational skin in for not messing up the house) rather than available to anyone (even with significant screening) on the open market.
“How often do you see/hear of a genuinely nice 4+ BR house in a good district available for rent?”
Just look on the MLS (the Multiple Listing Service). It lists houses for sale and rent.
One of the pains of SFH rentals is many of them are temporary–someone on assignment for a couple of years or whatever, or someone renting for a while but still thinking of selling. Hard to feel settled if you may be asked to move. I’m thrilled to be in one with a long term landlord.
“Really. How often do you see/hear of a genuinely nice 4+ BR house in a good district available for rent? I know there are more than a few, but my feel for it is that most of them are rented to someone in the owner’s network (ie, someone with some reputational skin in for not messing up the house) rather than available to anyone (even with significant screening) on the open market.”
That is the point I guess. They bought because they couldn’t find something they liked that was a rental. As I recall, PITI on the home purchase was about 20% less than rentals they saw (this is my supposition piecing a convo together, but I did check MLS rentals and tend to agree). That is BEFORE the tax benefits, so it’s pretty significant in terms of the difference.
It also shows a lot of people are scared to buy and willing to pay ridiculous premiums to rent at the SFH end of the spectrum.