Walk to Work from This 2-Bedroom Duplex Up: 1034 W. Monroe in the West Loop
This 2-bedroom duplex up in Carmichael Place at 1034 W. Monroe in the West Loop has been on the market since April 2010.
It is now listed $24,500 under the 2005 purchase price.
Built in 1997, it lives more like a townhouse with both bedrooms and a 10×9 den on the second floor with the main living and dining areas on the first floor.
The unit also has a 600 square foot roof top deck.
The kitchen has stainless steel appliances and a kitchen island.
There is central air and an attached garage.
The unit also has multiple exposures as it’s in the higher portion of the building.
Is this a deal?
Jason Vondrachek at Quest Realty has the listing. See more pictures here.
Unit #1: 2 bedrooms, 2 baths, den, no square footage listed
- Sold in August 2005 for $413,500
- Originally listed in April 2010
- Was listed in February 2011 for $409,900
- Reduced
- Currently listed for $389,900 (parking included)
- Assessments of $245 a month
- Taxes of $5278
- Central Air
- Washer/Dryer in the unit
- Bedroom #1: 20×12 (second level)
- Bedroom #2: 15×13 (second level)
- Den: 10×9 (second level)
Sorry, going off topic here…
Dan – You mentioned your love for the “Home Alone” house a while back. Here’s your chance to buy it…only $2.4M!
http://www.chicagotribune.com/business/ct-biz-home-alone-house-may5,0,5907768.photogallery
Nice townhouse, good option over cookie cutter 2/2 in area
Nice rooftop deck. Does anyone here have experience with a rooftop deck of this size? I would think it will reduce the life of the roofing material. It would also add to the cost of replacement replacing the whole deck.
why does there always have to be a crib, why?
aside that i strangely like the place even at 380k!
if that roof top deck is private, meaning unit #1’s only. i cant see why this wouldnt be the best option for a small family needing to live in the westloop.
“Nice townhouse, good option over cookie cutter 2/2 in area”
Is it really a “townhouse”?
There is a unit on the first two floors right underneath it. To me, this is a condo that is simply duplex up.
“Is it really a “townhouse”?”
I don’t quote understand this either. If I search the MLS for a townhouse I want a common party wall only. No noise from above or below.
“I would think it will reduce the life of the roofing material. It would also add to the cost of replacement replacing the whole deck.”
It depends on the roof. That’s probably a modified bitumen roof. If the deck is floated correctly, it should not reduce the life of the roof at all. It may even extend it by protecting it from the sun, since modified bitumen degrades in the sun and needs to be resilvered to for longevity. You always want to have a new roof before you put down a rooftop deck over it, but the useful life of a well-constructed and sealed rooftop deck floated over a modified bitumen roof is probably at least 20 years. Maybe 40 or more if you use synthetic wood, but that’s when you have to worry about ripping off the deck to redo the roof.
If I remember correctly, these were going for around $500k back in 2007. This unit didn’t sell then, but it’s interesting to see the ups and downs in the market over that period.
I also am one who wouldn’t want to pay much more than $2,000ish all in. I guess that means I will be “banished” to some suburb or neighborhood with bad schools. Such is life. I’m always curious to find out where all the people live who didn’t do well in college who just scraped by. Did they all move to Waukegan or out of state? Or maybe still at home with mom and dad at 29, 30 years old?
They’re all in prison or Bollingbrook or Johnsburg.
“I guess that means I will be “banished” to some suburb or neighborhood with bad schools. Such is life. I’m always curious to find out where all the people live who didn’t do well in college who just scraped by. Did they all move to Waukegan or out of state? Or maybe still at home with mom and dad at 29, 30 years old?”
That’s not how it was in the 1980’s or even the 1990’s. I live across the street from a guy who didn’t go to college, but due to the real estate boom from 1990 to present, was able to consistently move up from a small condo, to a larger condo, to a single family home, to another SFH that he bought for $2M. Talking to him makes me wonder why I worked so hard in school to just be able to barely afford a 2 bedroom condo in a not so decent neighborhood, or a SFH in Galewood with not the greatest schools.
“That’s not how it was in the 1980’s or even the 1990’s. I live across the street from a guy who didn’t go to college, but due to the real estate boom from 1990 to present, was able to consistently move up from a small condo, to a larger condo, to a single family home, to another SFH that he bought for $2M. Talking to him makes me wonder why I worked so hard in school to just be able to barely afford a 2 bedroom condo in a not so decent neighborhood”
Make sure he’s first against the wall when the revolution comes; his profit on the real estate ponzi game was at everyone else’s expense!
Dave M: don’t be biased by clio’s opinions on here. They are wildly out of touch with the overall Chicago market, yet, oddly as it sounds, not terribly far off with most of the neighborhoods and properties featured here on CC.
“That’s not how it was in the 1980’s or even the 1990’s. I live across the street from a guy who didn’t go to college, but due to the real estate boom from 1990 to present, was able to consistently move up from a small condo, to a larger condo, to a single family home, to another SFH that he bought for $2M.”
Two things happened here: the myth that all college careers pay more than blue collar/govt careers (not the case at all in Crook county) AND the RE asset bubble for related industries (ie: mortgage brokers earning 110-180k during the boom but now doing something else, or contractors earning 70k/yr during boom but now unemployed or working side jobs). Government policy also had an effect via sheltering the equity gains from taxes if you rolled it into a more expensive primary residence. If his income isn’t that stable and was tied to the RE bubble, he might not be keeping that $2M house is my guess. He can always walk and say eff the bank, too.
Also don’t forget there is competition for GZ areas as they are the areas the transplants move to and want to stay. I noticed before a lot of Michigan transplants but lately it’s gotten ridiculous. Michigan is an completely failed economy with NO job prospects for recent college grads so they all move here. Some are bound to land somewhere and they wind up pushing up prices, too via increasing demand.
Dave M,
remeber back in the early 2000’s people would wonder how some people bought a boat and went on fancy vacations had new cars every 2 years?
then the market crashed and as anon puts it the ponzi game stopped these people couldnt use the HELOC anymore and in 2011 those same people are foreclosed on taking thier kids and stuff and living with the grandparents or renting in Justice, IL or Romeoville, IL with no hopes of owning in the near future.
all while you kept steady and true and now your on a RE site with the opportunities to purchase even if its a 2/2 in roscoe village or a sfh in galewood.
shoot if HD’s sky falling is true by 2012 it will be a 2/2 in ELP or a SFH in Edgebrook
Some of us are making it just fine without college degrees.
They should be priced similarly.
“shoot if HD’s sky falling is true by 2012 it will be a 2/2 in ELP or a SFH in Edgebrook”
Many with college degrees are struggling due to student loans.
“#Jennifer on May 17th, 2011 at 8:13 am
Some of us are making it just fine without college degrees.
“
I really like this place and think it’s a good deal. That area of the West Loop is developing nicely, with new retail on Monroe and Madison popping up all the time. The addition of the beautifully designed park at Peoria and Monroe just two blocks away, has really given the area a community anchor, for parents, dog owners, and now boot camp exercisers. The neighborhood school for this place is Skinner, which used to be gifted/test in only but now has a neighborhood enrollment as well, currently for K and 1st grade. I’ve heard mixed reviews but it’s got good potential.
I like the area and the layout of the property, but with the cost to update the place to my specs, I don’t know if it would make sense.
nobody answered my question 🙁
is this a shared roof deck or private to the unit?
“shoot if HD’s sky falling is true by 2012 it will be a 2/2 in ELP or a SFH in Edgebrook”
Is Edgebrook near Chicago?
“Is Edgebrook near Chicago?”
Pass
“is this a shared roof deck or private to the unit?”
Appears private, from the pix and aerial. (code-required) Second access is across other portions of the complex’s roof, so another roof deck unit has physical access (those stairs that go up in the pic) to yours.
deck is private, but there are FOUR sets of stairs to get there. two sets from the car or street to the living area, one to the bedrooms/den and one more to the deck. exhausting.
“Pass”
Is it where Derrick Rose is from? Honestly, I don’t know. I think I’ve heard of many “Edgebrooks” in various places throughout the country.
“Appears private, from the pix and aerial. (code-required) Second access is across other portions of the complex’s roof, so another roof deck unit has physical access (those stairs that go up in the pic) to yours”
cool thanks,
i wish it had one more bedroom and a kitchen/dining/front room seperation but i really like this place when you add the the large *private roof deck.
it does suck it technically is a three floor walk up, but still i like the place alot even with its blah bathrooms.
http://metrarail.com/content/metra/en/home/maps_schedules/metra_system_map/md-n/schedule/_jcr_content/pdfLink/file.res/MD-N%20Schedule%20Effective02012010.pdf
warning annoying file format attached
edgebrook is IN chicago, on the outskirts of chicago, sort of near edison park and is across the edens from sauganash.
it’s quasi suburban, but, it has one of the best elementary schools in the city, it not a far metra commute or drive downtown.
“I think I’ve heard of many “Edgebrooks” in various places throughout the country.”
Yeah, and there’s an Oak Street in almost every city, too, but if someone says “Oak Street” on CC do you honestly wonder which one they’re talking about?
Should, the next time you refer to being “close to the lake” someone inquire if you are talking about Fox Lake, or Round Lake, or perhaps some other lake not in Illinois?
Derrick Rose is from ENGLEWOOD not EDGEBROOK I hope you’re just being factitious here.
pssssst….
Edgebrook elementary is ranked HIGHER than Bell….
http://www.chicagomag.com/Chicago-Magazine/October-2010/Best-Elementary-Schools-City-of-Chicago/
And higher than Lincoln too. ….
anon(tfo) the lake means murphy’s lake in park ridge – duh!
“factitious”
def: Feigning ignorance of known facts to reinforce an internet personality trait.
Don’t know where Edison Park is either, and while I know this will come as a shock, I don’t even know exactly where Bell is located (I only know that, its great reputation notwithstanding, I wouldn’t want to live there).
well, annony, i’m not sure where ELP is either. somewhere by the zoo iirc.
I think Park Ridge is a subdivision located near Fairplay, CO.
“Edgebrook elementary is ranked HIGHER than Bell….”
That’s a straight ranking of “meets/exceeds”. If the test cohort included all the kids at the school (yeah, I know it doesn’t, but I’m not interested in digging up the exact number, as the point is the same), Edgebrook would have come in behind Bell if just TWO kids out of the 424 had had a bad test day. Or Bell would have topped Edgebrook if just FOUR more kids out of 944 had had a better test day.
“somewhere by the zoo iirc.”
Where is this “zoo”? I seem to recall there being zoos in many cities around the country.
ps: I don’t think I could actually drive/walk/whatever to Lincoln Elementary without checking it’s address, regardless of whether I would live in the attendance area or not.
“Is it where Derrick Rose is from? Honestly, I don’t know. I think I’ve heard of many “Edgebrooks” in various places throughout the country.”
wow, how dumb are you? Maybe venture west of clark street sometime and learn about the city
“wow, how dumb are you? Maybe venture west of clark street sometime and learn about the city”
Sonies, two things. First, see anon’s comment above (“’factitious’ def: Feigning ignorance of known facts to reinforce an internet personality trait.”). Second, I don’t harp on your penchant for (i) living in River North of all places, (ii) highrises and (iii) open kitchens, so please don’t infer any geographical or socioeconomic ingnorance on my part based upon the value I place on being near the park/lakefront, to say nothing of the umbrage I take (only half seriously) when some of our midwestern-SFH-obsessed regulars compare (only half seriously?) “Edgebrook” housing stock of any type with a condo in ELP.
“I live across the street from a guy who didn’t go to college, but due to the real estate boom from 1990 to present, was able to consistently move up from a small condo, to a larger condo, to a single family home, to another SFH that he bought for $2M.”
Yet there are many who claim the market is bifurcating as if move-up buyers do not affect pricing on the high end. It means that you have to ignore that the supply increase was affected by them, too.
“when some of our midwestern-SFH-obsessed regulars compare (only half seriously?) “Edgebrook” housing stock of any type with a condo in ELP.”
Annony you pulled a *clio on that one didnt you. look back up there and reread the post to see the real meaning of the post. it was not a “comparison”
Off topic but how can builders sell new construction 4 bed 3.5 bath homes in the city for less than $500,000? I know there’s a cheap lot but this is pretty crazy if true.
http://www.redfin.com/IL/Chicago/4224-N-Bernard-St-60618/home/13485234
Maybe I am Clio (in the 80’s, I did have a poster of a Lambo, right next to posters of KITT and the G. Lee).
The place has been listed on and off since April 12, 2010 (400 days). I like the place, but I don’t know if it’s priced right. How do the owners think that it can fetch much more than the 2003 price of 325k, with all of the out-of-date finishes? Unless maybe the rooftop is a new addition since then…
“right next to posters of … the G. Lee”
Yeah, you seem like a Rush fan.
“Off topic but how can builders sell new construction 4 bed 3.5 bath homes in the city for less than $500,000? I know there’s a cheap lot but this is pretty crazy if true. ”
Part of the answer is this:
” Appliance Package/Allowance
Carpet/Pad/Vinyl Upgrade
Interior/Exterior Doors Upgrade
Lighting Allowance
Cabinets & Counters Upgrade
Floor Plan Modifications Allowed”
$100 psf for a very basic, code-compliant, livable house ($300k–or $100k in profit), then an upcharge for *anything* nicer.
Seems like a nice place, slightly dated interior, but nice deck, reasonable assessmenta and taxes, no one above, and a place for an office. I don’t have stats to back it up, but my impression is that there is substantial distressed/shadow inventory in the Woop that will continue to erode prices. I don’t see enough value to cover the risk at $390K–maybe $340K would do it.
Edgebrook is one of the nicest enclaves in the city, if you ventured west of Clark sometime, you’d know that…
And confusing Englewood with Edgebrook sounds like something some dumb tourist from NW Indiana eating at Rainforest Cafe would do
“Off topic but how can builders sell new construction 4 bed 3.5 bath homes in the city for less than $500,000? I know there’s a cheap lot but this is pretty crazy if true. ”
I don’t get it, has it been built yet? Lot purchased Dec 09′ and relisted Jan 10′. Are they building to order? If yes, then what anon said and add the fact that a lot of builders are running on thin margins to keep their crews busy and inventory low.
“add the fact that a lot of builders are running on thin margins to keep their crews busy and inventory low.”
Yeah, forgot to put that in, too. Very true, especially if it’s a “family” builder, employing brothers/uncles/cousins.
Homedelete:
It’s not a 4/3.5 (4/2.5), but have you seen all these modern SFHes popping up:
http://www.redfin.com/IL/Chicago/1429-N-Rockwell-St-60622/unit-1/home/13290577
Same builder has build a handful of them.
“Make sure he’s first against the wall when the revolution comes”
Or in SA
“Or in SA”
Then his house will be available for the vanguard to squat in. Win-win.
Take the house… Leave the head… Some tradeoffs ya gotta go with.
Too busy to Chatter much today. I guess that’s why they call me the working man.
“Too busy to Chatter much today. I guess that’s why they call me the working man.”
….yet you had enough time to post this uninspiring and irrelevant piece of information…..
“….yet you had enough time to post this uninspiring and irrelevant piece of information…..”
Sorry, Clio, but it seems to me I could live my life a lot better than I think I am.
“Off topic but how can builders sell new construction 4 bed 3.5 bath homes in the city for less than $500,000? I know there’s a cheap lot but this is pretty crazy if true.
http://www.redfin.com/IL/Chicago/4224-N-Bernard-St-60618/home/13485234”
HD, these have been around for awhile in some nieghborhoods. http://www.redfin.com/IL/Chicago/4553-S-Vincennes-Ave-60653/home/12718973 While some may think it is an awful neighborhood and question about schools, I have lately seen some families with children moving in. Most I have met are moving from Rogers Park. It definitely is closer to downtown!
Nothing? anon(tfo) makes one of the funnier comments in a while, off of which I make a pathetic attempt to keep the joke running, then Clio chimes in with an absurdly hostile comment, off of which I not only hope to keep in running, but perhaps let Clio in on the joke…and still nothing? Tuff crowd.
An interesting post on tax deduction:
http://blogs.forbes.com/beltway/2011/05/17/how-not-to-fix-the-housing-market/
Clio with the Rush tune. Rock on Geddy Lee
As for anon’s jokes, I barely get half of them, but when I get them, he is right on point. I did not get what SA meant : (
“An interesting post on tax deduction:
http://blogs.forbes.com/beltway/2011/05/17/how-not-to-fix-the-housing-market/”
“…and paying $50,000 in annual interest. The government pays 35 percent of that interest, a very nice $17,500. Meanwhile, a married couple holding…jobs that pay a combined $60,000 gets just 15 percent of their $12,000 interest paid—$1,800”
I agree this is BS. Tax the married couple 35% and they can get a 35% deduction too!!! Somethings in life are so simple!
Ozzie Guillen lives in the complex!
I just find the whole concept of mortgage being tax deductible off. Why should the government pick up the tab for folks buying expensive homes? One thing is help with low income housing to curb the crime, another is this stuff.
“Why should the government pick up the tab for folks buying expensive homes”
uhh – because for every house built, it creates 3 jobs (or something like that).
You know I don’t get the government system in this country. It has always some indirect bizarre subsidy system for the rich disguised in the the wrap of helping to create jobs. Corporate tax deductions are another example. The whole tax code is a mystery to me.
subsidy system for the rich??!!!! The rich work harder and pay WAY MORE than their share for the rest of the idiots in this country. Let everyone pay their own way and then see how you like it.
“The rich work harder and pay WAY MORE than their share for the rest of the idiots in this country.”
The mortgage deduction is almost exclusively claimed by the upper middle class (not the middle or lower middle class who don’t itemize deductions or, I should say, don’t have enough to get above the standard deduction.) So the mortgage interest deduction is a giveaway to the upper middle class (not necessarily the rich.)
And the truly rich pay way less taxes than the upper middle class. The truly rich make most of their money off of capital gains which are taxed at 15% tax rate. The rich don’t make money off of “income” so anyone who only has income is who gets slammed by taxes. Again, that would be the upper middle class. If we taxed assets or even sales, instead of income, it would likely be more fair to everybody. But we don’t.
I’m with you miumiu. It makes no sense to spend $60 billion a year allowing the upper middle class to write-off mortgage interest. They don’t have it in Canada and everyone buys homes there just the same. And, again, the middle class still buys homes in the US even though they don’t get the deduction.
While not quite edgebrook, this seems like a nice house at a reasonable price in the area although definitely not edgebrook school I am guessing (although CPS isn’t letting me find the school at the moment.
HD, et al. of the edgebrook crowd, thoughts?
http://www.redfin.com/IL/Chicago/5458-N-Lawler-Ave-60630/home/13498778
“I did not get what SA meant : (”
Ze was suggesting running off to South America like he did.
“Nothing? anon(tfo) makes one of the funnier comments in a while, off of which I make a pathetic attempt to keep the joke running, then Clio chimes in with an absurdly hostile comment, off of which I not only hope to keep in running, but perhaps let Clio in on the joke…and still nothing? Tuff crowd.”
I’m not enough of a Rush fan myself to catch lyric references in most cases. On re-read, good stuff, and funny that I was at least kinda right.
Rush was always great in the pool hall. Gotta luv 8+ minute songs with bass.
Roll the bones, roll the bones
so let’s see… Poor people will want the tax deduction withdrawn becuase it helps the despised rich. Richie Rich, rich people don’t get it so don’t care. Gov’t needs revenue and Obama can look like a progressive and reinvigorate his base goin after this one. Not good for housing but lately nothing is helping and people are tired of hearing the ‘must support’…. Looks like we probablly be kissin this deduction g’bye. Bit of fight expected by banks and NAR but banks will concede and most likely get something in return for it…
“While not quite edgebrook, this seems like a nice house at a reasonable price in the area although definitely not edgebrook school I am guessing (although CPS isn’t letting me find the school at the moment.
HD, et al. of the edgebrook crowd, thoughts?”
benjamon9,
school there could be farnsworth or beaubian.
have you taken a trip over to forest glen? if not please do it is insanely quiet and only traffic is from the forest glenn metra stop and a few who cut through forest glen ave to get to cicero.
and the forest preserve right there is awesome for dogs!
let’s get rid of the mortgage interest deduction entirely. It’s time to get rid of these stupid government subsidies that incentivize buying the most expensive house with the largest mortgage. It may hurt in the short-run, but will not affect lower priced properties as these people often don’t have enough deductions to exceed the standard deduction, especially when married. I’m sure the NAR would be pissed and spend millions against any such legislation.
benjamon9,
just found out it is farnsworth for the elm and taft for the HS.
“Looks like we probablly be kissin this deduction g’bye.”
Expect it to be phased out, prolly with a intermediate stop–maybe for many years–at “limited to the conforming max” or “fha max”.
There’s no *good* reason to have it, but cap it at $1mm + $100k 2d.
They’d better not do away with the deduction entirely. NOTHING should be done to deter home sales right now.
If Congress wants change the tax code to allow for REAL relief for those carrying huge student loan debt, then fine, take away my mortgage interest deduction. As of now, I’m paying at least $12k/year in interest on student loans, and I think I’ll pay about $20k this year in mortgage interest (my first full year paying mortgage interest). I’m inelligible for any sort of deduction (let alone a credit) for the student loan interest, but I’m certainly looking forward to deducting my mortgage interest (and taxes, donations, etc.) when I do my 2011 taxes.
I (i) got an advanced education, (ii) purchased a home and (iii) spend a good portion of my income on dining, travel, clothing, home improvements, various services, and charity. Correct me if I’m wrong, but I don’t think the government should be doing anything to deter behaviors such as (i), (ii) or (iii), particularly during a time of economic recovery.
p.s. And I’m not even going to bother holding out hope that expenditures on private education (pre-school through high school) would receive any sort of favorable tax treatment. I realize that it’s entirely fair for me to (i) pay high property taxes AND (ii) pay for private school costs.
Annony… The government thinks you are rich remember. You aren’t paying your fair share.
Instead of deducting interest, maybe we should be able to deduct principal payments on mortgages dollar for dollar. That would encourage folks to deleverage. Encourage people to get rid of debt instead of taking it on.
“I’m paying at least $12k/year in interest on student loans”
Yikes! That’s a lot of loans. Almost a Lambo’s worth.
“Correct me if I’m wrong, but I don’t think the government should be doing anything to deter behaviors such as (i), (ii) or (iii), particularly during a time of economic recovery.”
Sure they should, when tax deductions for expenses like (i) and (ii) in reality increase the cost of each, then the govt is actually already working to diminish the money available for (iii).
“Instead of deducting interest, maybe we should be able to deduct principal payments on mortgages dollar for dollar.”
Geez, who do you suppose that would benefit most? How about this: no deductions at all that prop up housing prices and diminish more productive uses of money?
G, I have no issues getting rid of the deductions along with all the other special interest manipulations of our tax code.
However, my point is that if the government is going to use the tax code to encourage certain behaviors, maybe they should look at it from a different perspective given the situation with mortgages today. Reward people for getting their mortgages paid off quicker instead of doing the opposite.
I agree with Russ, that makes more sense for society in the long-run to allow deductibility of principal payments on mortgages. I would exclude home equity loans though.
The mortgage interest tax deduction is a stupid deduction. It encourages wreckless borrowing, and is came about and still exists because of heavy lobbying from NAR and the banking industry.
We should also include in the potential CC poster polls whether or not people think the mortgage interest deduction should be phased out, or limited to a certain level of borrowing.
It is crazy to think that people consider the interest they can deduct when determining how much they can afford. Sure the deduction is nice but come on you are still paying a lot more money out that you are getting back with a deduction!
“It is crazy to think that people consider the interest they can deduct when determining how much they can afford.”
Despite it being the accurate way to determine your transaction.
“Despite it being the accurate way to determine your transaction.”
People shouldn’t make accurate, informed decisions, they should do what I think is the best thing to do.
“I (i) got an advanced education, (ii) purchased a home and (iii) spend a good portion of my income on dining, travel, clothing, home improvements, various services, and charity. Correct me if I’m wrong, but I don’t think the government should be doing anything to deter behaviors such as (i), (ii) or (iii), particularly during a time of economic recovery.”
your money… it will still get spent… just not by you. There is a big bullseye forming around you right now.
“It is crazy to think that people consider the interest they can deduct when determining how much they can afford. Sure the deduction is nice but come on you are still paying a lot more money out that you are getting back with a deduction!”
Obviously. However, in determining how much we could afford, our decision to purchase went something like this:
(1) We wanted to live in a place that meets the Unicorn Criteria; (2) we were willing pay no more than $3k for such a place; (3) we could not find such a place to rent; and (4) we managed to find one such place to buy (after about a year and a half of searching, while quite content in a rental that met most, but not all, of the Unicorn Criteria, namely onsite parking and in-unit w/d).
Now, in addition to there simply being a dearth of quality rentals that actually meet all of the Unicorn Criteria, there is the fact that we have two major expenditures each month: housing (approx $2800) and student loans (approx $2200). Up until our purchase late last year, we were enjoying no favorable tax treatment on either of those expenditures (i.e., paying approx $5k a month, with no tax benefit). Starting this year, we’ve got the same two major expenditures, only now there’s (at least theoretically) SOME type of tax advantage.
Honestly, the facts that (i) after a few years we’ll have paid at least a bit towards principal (probably close to transaction costs in the event we opt to sell after only 3 or 4 years) and (ii) might enjoy a tiny bit of appreciation played only minor roles in our decision to buy.
more rush less unicorn, please
Should we start subsidizing car loan interest by making it deductible too, in order to spur car sales? This is the stupidest deduction ever and should be taken away. Totally messes with the supposed free-market economy.
“Should we start subsidizing car loan interest by making it deductible too, in order to spur car sales?”
I think there are societal benefits associated with increased rates of homeownership that set mortgage lending apart from, say, automobile lending (which, in the context of societal benefits, should arguably be discouraged; I say arguably and not absolutely because, obviously, auto manufacturing and servicing are a big part of the economy).
But what do I know. I’m still finding my way.
At the margin, the typical first time buyer is not buying a $500K house, and would not even get to use much of the tax deduction, especially if they are married. The benefit is largely for people who don’t even need it in order to be a homeowner.
Dave, the theory behind mortgage interest deduction is that home ownership is good for society as whole which is why it was encouraged. Homeowners tend to take care of properties and have a vested interest in their communities.
Interest deduction largely served its purpose when financing options were limited and when we had higher interest rates.
I threw out changing from interest deduction to principle deduction in that I think it could help the overall market by encouraging people to get rid of housing debt. It encourages people to payoff mortgage balances and potentially reducing the number of underwater homes. Instead of strategic foreclosures, we could have people strategically paying off mortgage debt.
It rewards people for reducing debt instead of incurring more of it making loan products such as 10 and 15 year loans more attractive and affordable for buyers – higher mortgage payments are offset by lower tax burden.
“Should we start subsidizing car loan interest by making it deductible too, in order to spur car sales?”
Um, we do subsidize it thru having the fed window open to the auto manufacturers’ “in house” (quotes b/c they mostly aren’t any more) finance arms–they get super cheap money to lend to car buyers, and pass along the super low rates to encourage buying new cars. And we did that up until 1986–(virtually) *all* personal debt interest was deductible before then.
Russ… So i buy a home with cash a plenty to the side but all debt. Then the next 5 yrs, every year, i pay a big principal pmt and take the deduction. I just made out like a bandit for tranfering an asset to an asset. I get paid for paying my right hand with my left. Sign me up!
Gringo, I am sure someone can figure out how to game the system. The point is if someone has a mortgage, they should be rewarded for paying it off. This does more than interest deductions. Principle deductability encourages homeownership, but also encourages people to discharge the debt sooner than later thus helping the economy not get in the same situation we are in now with mortgages being underwater.
Right now, we reward people for having debt. Maybe allow a deduction of bonafide down payment funds.
I’m just throwing ideas out…. not claiming these are 100% fool proof concepts by any means.
“Gringo, I am sure someone can figure out how to game the system”
Yes, I just did.
nice
Something that obvious isn’t gaming anything but a .0001% fool proof concept.
Sorry about that Russ. I had to go grab something with the wifey.
I respect to just throwing things out there, as that’s a good thing. I just don’t get warm and fuzzy about principal repayment in the first place, quite the opposite, so it’s a fun topic for me to go after. Also don’t see how freeing people from mortgage debt so they can go out and take on more credit card debt will help. (last sentence is kinda a sad but probably true joke)
G, of course it is obvious. However, I am sure there are ways to prevent folks from borrowing money to pay down the loan balance. People try to borrow down payments on mortgages all the time, but the underwriting is done in a manner to prevent it.
“I am sure there are ways to prevent folks from borrowing money to pay down the loan balance.”
Cash is already sitting on the sidelines.. Don’t need to borrow. You are missing this one.
The banks would just hike up interest rates if they were collecting less because people were paying down earlier. We’ve already seen them jack up banking fees to compensate for the reduction in income from borrowing, as more people try to reduce their debt.
btw.. chronologically…early 40’s..!
“It rewards people for reducing debt instead of incurring more of it making loan products such as 10 and 15 year loans more attractive and affordable for buyers – higher mortgage payments are offset by lower tax burden.”
As I commented on the other thread, this is the proper way to incentivize home ownership — I saw owernship because most people do not own the preponderance of their home.
There are ways to prevent abuses and limit the incentive every year. The trick is making it sufficiently uncomplicated so people’s behavior is influenced. The earned incom credit suffers from this in a big way.
“Cash is already sitting on the sidelines.. Don’t need to borrow. You are missing this one.”
Good — then put the cash in the house — fewer people walk away from homes. Any sort of credit would limit refinancing activity and would only allow for equitization of a principal residence once every x years (5, 10, who knows).
“Good — then put the cash in the house”
It’s funny cause this is a hypothetical argument, but it’s the last place I want the money. liquid assets are so much sweeter than non productive non liquid assets. I don’t want the house. I want the ‘right’ to the ownership of the house. We both own that. Our P+L, and balance sheets will look the same regardless.
Gringo, I follow you. I don’t think something like this is really targeted at guys like you and as I said, there are always people who think they can get a better return or game the system. That isn’t what this is really about. The point is to get people out of mortgages and how to encourage them to do so assuming that government continues to interfere or use the tax code for social engineering.
There are always people who play the move money around game and believe they can get higher returns in the market. Not criticizing it or disagreeing, but that isn’t most homeowners.
We keep hearing about principle reductions/cram downs, underwater mortgages being a problem, loan modifications, short sales, etc yet there really aren’t any incentives being offered to people who can still afford to pay their mortgages but further to get those existing loans paid off so they don’t become a problem in the future assuming declines do continue.
We keep talking about people putting skin in the game and putting 20% down, so let’s encourage it if that is what is really needed.
“We keep talking about people putting skin in the game and putting 20% down, so let’s encourage it if that is what is really needed.”
THAT is what needs to be done. THAT is why this whole mess happened.
But now in all fairness, opening your mouth and saying only loans to those that could afford it was un-PC 10 years ago.
“We keep talking about people putting skin in the game and putting 20% down, so let’s encourage it if that is what is really needed.”
Then why not just require 20% down? No need to incentivize at all. Better yet, the govt can just get out of lending altogether and let the market determine the requirements.
Russ, I totally agree with you when you say “”The point is if someone has a mortgage, they should be rewarded for paying it off. ”
But the system is not set up to reward borrowers, it’s set up to reward banks. The system is set up so that banks can earn as much interest and fees as possible over the life of the loan, and they encourage you to refinance and pull out as much equity as possible. The system is set up to reward the banks!
All you need to do is look at the HAMP program. The government touted the programs as being set up to help homeowners, yet, when you read the HAMP program guidelines (And sometimes the banks even put it in denial letters to borrowers) – the bank is to perform a NPV test designed by the treasury using different variables to determine whether or not the bank would profit more in the long run by offering a loan modification or by foreclosing. If they offered a loan mod, the terms are always onerous, such as increasing the principal balance, then amortizing the loan over 40 years, then by lowering interest rates (only to have them increase again over the next 10 years) and if all those fail, they offer the principal deferment, which basically means your mortgage becomes a 40 year note with a balloon payment of the deferred principal at the end of the term. This is not designed to help the homeowner keep their home, it is designed to squeeze as much money out of the homeowner over 40 years for the bank’s benefit.
The entire system is set up for the benefit of the banks. They’re the ones writing the laws.
“We keep hearing about principle reductions/cram downs, underwater mortgages being a problem, loan modifications, short sales, etc yet there really aren’t any incentives being offered to people who can still afford to pay their mortgages but further to get those existing loans paid off so they don’t become a problem in the future assuming declines do continue.”
This all falls into my broad category of where losses are taken and by whom. Nothing to do that will not make them losses for someone. Paying off that loan just makes the losses the owner and not the banks. If I were in a non-recourse state with 3.5% down (better yet one of those negative loan things) I’d be laughing at the thought of putting equity into something underwater.
“let the market determine the requirements”
Yeah, because that was successful.
JP morgan was only the 5th most profitable company in the U.S. Last year… they ‘only’ made like 19 billion dollars! The poor bastards can barely feed a family on that kind of income! Won’t someone pleeease think of the children! They absolutely ‘need’ more money!
And the crazy thing is that their borrowing costs are practically nothing. They put a ledger in a book and borrow 1/10th of the loan on the interbank market as ‘reserves’. Sweet deal but the only caveat is that you have to remain solvent! Oh wait…you don’t even need to remain solvent if you’re TBTF!
“#Sonies on May 18th, 2011 at 3:04 pm
JP morgan was only the 5th most profitable company in the U.S. Last year… they ‘only’ made like 19 billion dollars! The poor bastards can barely feed a family on that kind of income! Won’t someone pleeease think of the children! They absolutely ‘need’ more money!”
“let the market determine the requirements”
“Yeah, because that was successful.”
Well, you altered the quote to remove the part that hasn’t even been attempted.
“Better yet, the govt can just get out of lending altogether and let the market determine the requirements.”
I’m curious as to when this occurred and was unsuccessful?
well I could make 19 billion too if my cost of capital was $0
“I’m curious as to when this occurred and was unsuccessful?”
Are you saying that Countrywide, IndyMac et al basically eliminated lending requirements *because of* gov’t involvement in lending?
And, even if that’s off point, you think that, absent fnma/fhmlc/fha that the Tan One would *not* have presided over such reckless practices?
“”It is crazy to think that people consider the interest they can deduct when determining how much they can afford.”
Despite it being the accurate way to determine your transaction.””
How can you even say that? The simple fact is that you should be able to pay your mortgage, taxes, home costs, etc etc without “expecting” to get any of it back. Tax write offs should not always go into your calculation because it may not always be there. Just like people shouldn’t determine how much they can afford based on 2 peoples current incomes as that might not always be there. Granted you can really only take it so far but I think deducting interest would be the last thing that would get factored into that calculation. If this was such a significant factor – why are people not out there demanding 12% interest rates and interest only loans??
“Are you saying that Countrywide, IndyMac et al basically eliminated lending requirements *because of* gov’t involvement in lending?”
Indirectly, yes. Govt involvement gave a seal of approval to mortgage lending to the unwashed masses. The idea that they were involved (even when not) instilled the trust that was exploited.
“And, even if that’s off point, you think that, absent fnma/fhmlc/fha that the Tan One would *not* have presided over such reckless practices?”
Sure, but it would have been on a used car lot where it belongs.
Add to my first response: It also led people to believe that they were regulating the nonsense.
The tan one is known as ‘agent orange’ to me.
http://www.dealbreaker.com/images/entries/mozilo.jpg
@HD: Believe me, I know how much the Govie is in the back pocket of the Too Big Too Fail banks. All kinds of new laws and regulations that went into effect over the past two or three years designed to “help consumers” did nothing but drive a lot of the smaller independent lenders out of business and some how miraculously also increased costs to consumers and helped the TBTF banks.
Most people do not factor in mortgage deductibility into their affordability equations. Lenders certainly don’t consider it for underwriting.
@Onlooker, there were a lot of people who chose interest only loans because they felt they could get better returns elsewhere. They were very popular among the amateur investor types. Same with some of the negative amortization loans. In fact, there were some scams where financial advisers would team up with unscrupulous mortgage lenders and do cashout refinances so people could “put their equity to work” in the market.
“Just like people shouldn’t determine how much they can afford based on 2 peoples current incomes as that might not always be there.”
In that case, no one should by anything, ever, unless that have sufficient assets to fund an annuity in excess of 200% of the expected annual tax burden. Because you never know when everyone might lose their jobs.
“there were some scams where financial advisers would team up with unscrupulous mortgage lenders and do cashout refinances so people could “put their equity to work” in the market.”
There were people I worked with who did so w/o the involvement of advisers or unscrupulous lenders. Talked openly about what a good idea it was, too, with *no* means of benefiting from someone else doing the same.
Before the bust and even during it, I heard numerous times how great it is to have small down payments and high mortgages specially when interest rates are so low and then get the added bonus of tax deduction. I did not just hear it from Realtors, but seemingly smart educated folks. We were ridiculed for our attitude of paying large down payments and paying off our mortgage aggressively.
“Most people do not factor in mortgage deductibility into their affordability equations.”
“Before the bust and even during it, I heard numerous times how great it is to have small down payments and high mortgages specially when interest rates are so low and then get the added bonus of tax deduction. I did not just hear it from Realtors, but seemingly smart educated folks.”
Absolutely.
“smart educated folks”
Smart educated folks also said dot-com would grow 50% for 30 years and also said that the U.S. financial markets would never collapse. I believe a long time ago smart educated folks felt appeasing a certain maniac dictator in Europe would cause problems to go away.
Smart educated people don’t always get it right. Very few had this one right, and certainly not the whole extent of it.
I guess I would always rather have less debt – sure my money might be able to make more in the market in turn reducing my overall debt – but there is something refreshing in my mind in being agressive and paying off my initial debts instead of using that money in a market which may or may not lead to a better financial position.
And, I agree, you need to take your income into account when buying a home – but if spouse A makes 125 and spouse 2 makes 110 you shouldn’s assume 235 or higher forever. Situations change, jobs are lost, other expenses arise.
Call me conservative….
america has great wines… Everyone should enjoy a glass tonite.
Yeah I’ll be at the corner sportsbar sipping my vino to the Bulls game tonight.
Yup they have ok wines but they are also fanatics. I was having a glass of wine in a party a month ago and everyone looked at me as if I am committing genocide. I mean it is not like sipping on some wine once in a blue moon is proven to be bad for the baby. I was lucky that two french women were present to defend me after I was attacked by the puritan mob.
“I was having a glass of wine in a party a month ago and everyone looked at me as if I am committing genocide.”
People are loony tunes.
i’m in bumbblefu*k nowhere with my 1970’s 5 channels of tv, switch channels, and the game was on. Nice ass kicking that was. Thanks for reminding me to watch tonite.
Below is not even my real argument. I can think of 3-5 mathematical disadvantages you are creating but that’s a bit lengthy.
A- own the right to a 700k home, 500k equity in home, 50k cash, mnthly i pmt of $750.
B- own the right to a 700k home, 140k equity in home, 50k cash, mnthly i pmt of 2100, 216k in diversified domestic/international equities, 144k of intermediate term fixed income.
You need to move cities.. whose better off? You see a business opportunity somewhere that you love, who is more flexible? and who is cash poor-house rich?
How long will it take B to become A at any point in time that B so desires? 2 transactions in 48 hours? The reverse??
BTW.. I never am assuming that I was NOT able to outperform some measly pathetic interest rate. Again 3-5 other reasons that you are modifying a structure counter to your best interests, but that’s complicated.
basically the value of an option is not always what you see today but for what is unseen today. Rates rise to 8% and B goes 100% into a 30yr and offsets all his pmts against his 4.5% loan. A gave that option away… something is very wrong here ain’t it!
roflmao.. double negative at end of 2 posts ago, but you get the point.. need a trip to the balcony.. only coffee doesn’t work…
House price drops to 200k.. B is on CC asking one of the 5 anons about strategic default and fraudulent conveyance laws… A.. well A is very silent.
House goes to 5 million. A and B look exactly the same…
had a dream last night that stev heitmen dropped by to post on this thread that Ozzie Guillen lived in this complex. kind of strange.
wow, guess it wasnt a dream after all. lol
lol @CH
nobody caught it huh?
might be so random/odd, memory can’t capture it.
A- own the right to a 700k home, 500k equity in home, 50k cash, mnthly i pmt of $750.
B- own the right to a 700k home, 140k equity in home, 50k cash, mnthly i pmt of 2100, 216k in diversified domestic/international equities, 144k of intermediate term fixed income.
what scenarios are worse for B?.. equities in long bear market, etc
mostly, people like to pay off debt. I argued with a friend who had a lot of student loans and was paying them off fast even though the rate had gone super duper low. of course those are hard to get out of, the opposite of no recourse.
CH.. Since people seem to think this is about trying to get a better return on money by investing it as opposed to paying principal I neutralized that by making returns identical. Going forward needs to remain the same or analysis goes on the tangent to hell.
For the record, I am A. But contrary to the CC criticism of always arguing your position as better, I know A is B’s bitch.
Step thru just the above examples.
there is actually a very funny thing you are doin to the structure of the contract when you pay principal early that makes it funny that people think they are hurting the bank doin it. Nope!
“I neutralized that by making returns identical”
Aren’t all your examples in favor of B based mostly on differences in returns?
“people think they are hurting the bank doin it”
Few reasons for that:
1. Bankers say it, if not in so many words.
2. If the bank is term matching, it has a rational appeal.
3. The existence of pre-payment penalties.
4. People believe that banks make a lot of money on the loans, at least in the aggregate.
5. more, but I’d have to think.
“Aren’t all your examples in favor of B based mostly on differences in returns?”
No, with exception of the 1 example of house going to 200 they should all be the same. I was referring to keeping return on what would have been principal the same as principal. Portfolios have same asset value that way.. The other three examples are benefits of not exercising (foolishly) free options.
“Aren’t all your examples in favor of B based mostly on differences in returns?”
At least one is based on in large part on flexibility.
Oh and benefit of liquidity, which no one knows how to value. But people accept it has value.
4- “People believe that banks make a lot of money on the loans, at least in the aggregate.” They should, but you returning principal allows them to issue again. Theoretically, 10 times over.
“5. more, but I’d have to think.”
1- 99.999% of bankers won’t see it either. correios quente depues.
“You need to move cities.. whose better off?”
What’s the diff between A and B’s positions?
“You see a business opportunity somewhere that you love, who is more flexible?”
I see this as a difference in returns.
“and who is cash poor-house rich?”
But what’s disadvantage for A? Also, can’t A take out a new mortgage (I realize rates may have gone up–I don’t disagree there’s a major advantage of taking out a long fixed rate loan in low interest rate environment)
“Rates rise to 8% and B goes 100% into a 30yr and offsets all his pmts against his 4.5% loan. A gave that option away… something is very wrong here ain’t it!”
Isn’t this difference in returns?
“House price drops to 200k.. B is on CC asking one of the 5 anons about strategic default and fraudulent conveyance laws… A.. well A is very silent.”
Agree there is some difference here (even if all assets are declining dramatically).
“You need to move cities.. whose better off?”
What’s the diff between A and B’s positions?
Again these are touchy feely examples. If I’m A I’m cash tight with only 50k in cash. I can’t even come up with a downpaymnent on the house in cash. He needs to sell to move? B.. bags packed and ready to go.
“You see a business opportunity somewhere that you love, who is more flexible?”
No difference in returns on assets, difference in ability to take opportunity.
“You see a business opportunity somewhere that you love, who is more flexible?”
I see this as a difference in returns.
I can understand that. I see it as a difference in ability to take on opportunities. Someone shows A and B Groupon 2 years ago, both love it, who gets 100k seed money in faster? A or B?
“Rates rise to 8% and B goes 100% into a 30yr and offsets all his pmts against his 4.5% loan. A gave that option away… something is very wrong here ain’t it!”
Isn’t this difference in returns?
Once again opportunity. Both have same structure, market in yields move identical for both, only one can take advantage cause only one left himself in position to. House remains same, equities same, bond portfolio somehow the same -i know – i know–.
*He is not making money on any of the original positions but the opportunity a change in market (that both A and B were part of) left him.*
I don’t disagree substantively Ze. Maybe semantics, maybe I’m just quibbling to no good end. I will say what seems to me big advantage of paying down quickly is greater spending discipline, which is assumed away in your examples.
The thing is, I’m greatly tempted to put down more than I need to when I buy. Greatly tempted to a perhaps irrational degree.
and Anon.. 2 of the 5… small ones, but to paraphrase JMM when said to Sabrina “1% adds up big over 30 years.”
I want a loan from you… so we sit and you ask “how long” I say 30 years so you look at a yield curve and see 15 yr is 3%.. then you accurately say “hmmmm i need more risk premium for time and say 4%”. I say fair let’s sign. You say.. no not yet Ze.. “you have a spotty work history and reek of weed”, “what’s your collateral” Ze says 20%.. and you say hmmm, good not great so.. with that let’s add 1/2 point.
So we agree on 4.5%
Now I start paying principal down. When i do this I push the term structure in reducing your risk. I also remove your risk the more and more I go add principal as I now eat 30-40-50%.
So what do you have. A reduced size loan with much less risk while maintaining the same return. your loan for that term and risk would have priced at 3.3% and you still getin 4.5% from me…see what just happened to the valuation cause only one side of risk/reward moved.
” paying down quickly is greater spending discipline, which is assumed away in your examples.”
EXACTLY!! You can create a side account at Vanguard and do that and keep your options and structure.
If I offered you 30 yr 20% out of the money put on oil you would take it in a heartbeat.. when you pay principal to the bank you are giving them back those options that you just don’t see that you have. (nor should you). The ultimate example is the strategic default comment I made. Again all same assets, but B has options. Options have ENORMOUS unseen value!
“The thing is, I’m greatly tempted to put down more than I need to when I buy. Greatly tempted to a perhaps irrational degree.”
Dwell on it a bit more.. belief systems don’t go down easy. You lose your job tomorrow who do you want to be?
A- own the right to a 700k home, 500k equity in home, 50k cash, mnthly i pmt of $750.
B- own the right to a 700k home, 140k equity in home, 50k cash, mnthly i pmt of 2100, 216k in diversified domestic/international equities, 144k of intermediate term fixed income.
““1% adds up big over 30 years.””
I was addressing why people think that, which was why I selectively quoted the way I did.
I know it doesn’t actually hurt the bank, but didn’t find the “why” of that as interesting as the other why, as one is provable (as you did) and the other about people’s misperceptions of and willingness to invest in those misperceptions to make themselves feel better.
Also, depues confused me, but now yo se.
“You lose your job tomorrow who do you want to be? ”
That’d be another great CC poll question.
Yep.. it was for you that I said
“own *the right* to a 700k home,”
Most won’t see the significance of that one word.. you do.
Knowing some MBA analyst is trying to value that word.. have fun! ROFLMAO!!
“That’d be another great CC poll question.”
For me, simple, Ze!
Time to return to him now… Did I mention something I ate made my poop smelled like extra sweet fruit loops this morning?.. ahhh Ze again!