From Demos:
House of Cards (Large PDF)
In response to ever-increasing financial pressures, families have come to depend on high-cost credit as a way to bridge the gap between stagnant or decreasing incomes and rising costs. How are families coping with their new burden? To hang on to the American Dream, to be part of the ownership society, homeowners are depleting their homes’ equity to pay off a growing mountain of unsecured debt —a financial strategy fraught with serious consequences.
As mortgage interest rates fell to record levels during the refinance boom, it became more appealing to cash out home equity during the refinancing process to pay down credit card debt and finance current living expenses—a short-term solution that fails to address the long-term economic realities faced by the average
family.As the housing bubble deflates and interest rates on risky adjustable-rate mortgages have risen, more and more homeowners are feeling the pinch. Refinancing for a second or third time is becoming a common band-aid. Defaults are also increasing, particularly for subprime mortgages. The added burden of missing a mortgage payment results in putting at risk your home—your family’s most important asset. All of these factors lead to a crisis in personal finance: a blurred line between good debt—debt that results in appreciable asset—and bad debt, which does not.
…
Households cashed out $715 billion worth of home equity between 2001 and 2005. In the three years between 2003 and 2005, owners extracted $150 million more in equity from their homes than they did in the previous eight — a level three times higher than any other three-year period since Freddie Mac started tracking such data in 1993.Households have used cash equity from their homes to cover living expenses and pay down credit card debt, further eroding their homes’ cash value, which many families rely on for economic security.
Between 1973 and 2004, homeowner’s equity actually fell—from 68.3 percent to 55 percent. In other words, Americans own less of their homes today than they did in the 1970s and early 1980s.
In 2006, the financial obligations ratio— the percentage of monthly income to the amount needed to manage monthly debt payments —has surpassed 19 percent, a record since data started being collected in 1980.
About $400 billion worth of adjustable-rate mortgages (ARMs), representing about 5 percent of all outstanding mortgage debt, are set to readjust this year for the first time. Another $1 trillion in loans are set to readjust next year.
Adjustable-rate mortgages made up 31 percent of mortgages in 2005. Interest-only loans, which were uncommon just two years ago, made up about 20 percent of loans.
In current conditions, a typical borrower with a $200,000 ARM could feasibly see their interest rate climb from 4.5 percent to 6.5 percent, resulting in a 25 percent increase in their monthly payment.
Rising foreclosures signal many homeowners are already buckling as interest rates rise and home values soften, trends that will continue as more mortgages adjust. According to RealtyTrac, foreclosures in the third quarter of 2006 were up 17 percent from the previous quarter, a 43 percent yearly increase from the third quarter of 2005.
House of cards this………..
http://www.bloomberg.com/apps/news?pid=20601103&sid=aT0L9Lm0h8E8&refer=us
Thanks chifi,
When the dollar declines further, let’s see where rates will be going. I’m betting up and the RE market will get really ugly.
Hard Place.
Those boneheads at the Kannekt site have deleted alot of the my posts….
Can you believe that crap?
A lone voice speaks out against the RE cartel and steps up to the plates and squashed any arguement, and they deleted most (not all) of my posts.
You don’t think there are people who want to shut me up.
If thats the case, I can only imagine the kind of crap Grim must get in his emails everyday.
That damn Kannekt, what are you afraid of?
SAS may just have to open a can over there.
;)
Not worth it SAS.
jb
So just who is the contrarian? The housing bull or the bear?
Based on the housing bubble barrage in the media, you might think that the bullish, pro-housing position is the contrarian one at this point in time.
http://www.nj.com/search/index.ssf?/base/business-5/1163656491107360.xml?starledger?b&coll=1
The vast majority of Americans are optimistic about what will happen with home prices, according to a nationwide survey.
RT Strategies, an Alexandria, Va., polling firm, contacted 2,000 households and found 81 percent of homeowners think the value of their homes will rise during the next five years. Only 13 percent felt their home would fall in value, while 4 percent expected no change and 3 percent were unsure.
Grim,
he he… yes.. of course.
I was just a little surprized that they actually deleted alot of comments that were bearish on RE and left all those who are bullish. If they really wanted something to deleted, why didn’t they just delete all the comments that called me every name in the book?
There is obviously a higher power and a greater hand in the RE markets that alot of people don’t know about or does not want to admit exists. That higher power wants the keep the gravey train rolling.
I am sure you know what I am talking about…
SAS
“81 percent of homeowners think the value of their homes will rise during the next five years. Only 13 percent felt their home would fall in value, while 4 percent expected no change and 3 percent were unsure”
That is what I call wishful thinking….
Nobody wants to see their price do down, but hey, nobody wants to see Grandma Sally on her death bed either, but sooner or later, prices do go down, and sadly Grandma Sally passes away.
SAS
The bear’s often have their comments deleted on the Kannekt board. Some think that the board maybe run by Toll itself or Toll and some local Realtors “buy” more advertising than they normall would.
That kannekt website is primarily financed I believe by real estate ads. That’s why the guy is always removing posts. I by the way am the HeHeHe guy, I had those agents and flippers all riled up a couple of weeks ago. Essentially their argument is real estate prices won’t fall in Hoboken because “THEY SAY SO!” no matter what facts you put in their face.
“81 percent of homeowners think the value of their homes will rise during the next five years. Only 13 percent felt their home would fall in value, while 4 percent expected no change and 3 percent were unsure”
SAS,
99% would tell you that the stock market and the dollar outperformed gold over the last 4 years.
I browse Kannekt only for a good laugh. Every post is someone bragging about how great their yuppie life is, but at the end of the day they are dead inside.
“Households have used cash equity from their homes to cover living expenses and pay down credit card debt, further eroding their homes’ cash value, which many families rely on for economic security.”
Get used to it. The damn party is over. The asset appreciation induced spending is over. It will be painful. The last 10 years, spending spree, seems to be very similar to the roaring 20’s. There is a major storm brewing on all fronts, housing/debt/credit bubble. Prepare yourself for rocky times. By the way, household spending can be compared to a hamster running on a spinning wheeel. Well, the households have spun themselves out of control. JUDGEMENT DAY is coming.
That kennekt site is a joke. They cannot present any good facts all the know how too do is belittle others.. Its like an elemebtary school on that site. I wont even waste my time posting on that site. There is no intellegance over there just a bunch of parrots that cannot think for themsekves. I mean we are the enemy for having our own opinions. What amazes me is the mock us say we dont know what we are talking about… thats grat service we are the clients because most of us ar looking to buy. Thats not a way to get more buyers by insulting us or our Ringmaster grim and his trusty sidekick Bob
See this is why i say most realtors could not sell there way out of a paper bag, they cannot think for themelves and they mock there clients so of course I want to run out and have these people sell me homes. I hope theses jidiots know how too say Welfare cookies
It takes discipline to not spend…but I guess we all have our addictions…
JB,
Could you open the forum? There are several post by Chicago that I had referenced.
Thanks,
-Sapiens
Those are the people that have no clue as to what’s going on in the markets.
My grandfather used to say: “From the fool or ignorant feeds the intelligent.”
As it translates…
-Sapiens
Opened
The vast majority of Americans are optimistic about what will happen with home prices, according to a nationwide survey.
“The poll clearly debunks the more sensational media reports speculating on the demise of the housing market,”
Well, not so fast. There is actually an interesting dynamic at play here. I read (sorry I can’t cite) another study, which retuned very similar results on this question. The other study, however, also asked people if there was a bubble somewhere else in the U.S. Overwhelmingly, respondents said “yes”.
What I take away from this is that people believe other places are overpriced and subject to a correction, but their area is special and somehow “bubble wrapped”. Just think how many people have come to this board and said “…but we’re close to NYC”.
RentinginNJ-
I think this month and the next three will be very telling. I don’t know if you looked at the spreadsheet JB posted about cash bonuses, but many were trying to close before the end of the year. The panic level is starting to rise with sellers. Veteran realtors are battening down the hatches and getting ready to ride this out and cutting any dead/green wood from their offices (see Clot).
But, the mind set of the owners who don’t need to sell will take a very long time to change. As a matter of fact, it may only change when they need to sell which may not be for a very long time. If you can afford your mortgage, you’re going to hang on to the peak ’05 value as long as you can.
I’m happy to keep renting until full blown prices come back to reality.
JM
Thanks JB!!
-Sapiens
81 percent of homeowners think the value of their homes will rise during the next five years
Wow so now they are turning to the Homeowners to make there economic guesses. Its interesting that people actually believe prices will rise in the next 5 years. So if many people cannot afford the prices that are here right now, what makes people think that these same people will magically be able to afford higher prices in 5 years? The only way I can say yes home prices will rise over the next 5 years is if prices go back to 2000 prices and they have a normal apprciation of about 3% per year. Than maybe I will agree and say they will. But at the moment I do not see that happening quickly. A lot of people maybe saying that in hopes that someone will bail them out of the trouble they have gotten themselves into. Last I check companies are laying people off left and right in NJ. But hey the market will recover. And yes I know everyone wants to pay theses absurd prices with all the high property taxes in this state.
The only reason I want to buy a home in this state is for the fact that I have lived in NJ since I was 8 years old. So this state has grown on me. But if I grew up somewhere else I would never move here. NJ is becoming less desirable for the fact of high property taxes and extremely overpriced homes. But realtors are still saying everyone wants to move here. LOL I dont think so NJ is proably one of the least desirable places to live. Yes you have access to NYC but a lot of cities are becoming more and more popular. So living close to NYC is not as enticing as it used to be. I think the only enticing thing left for out of staters to move to NJ is all the Pharmaceutical companies here.
“Households have used cash equity from their homes to cover living expenses and pay down credit card debt, further eroding their homes’ cash value, which many families rely on for economic security.”
In the old days people who did this would be described as “living beyond their means.” For the life of me, I don’t know why this hasn’t raised red flags all over the place.
Somehow, the phrase “pay down credit card debt,” just doesn’t seem to translate as “spent money they didn’t have.” Maybe it has something to do with the fact that they appear to still be solvent, and looks are what really counts, right?
Yes you have access to NYC but a lot of cities are becoming more and more popular. So living close to NYC is not as enticing as it used to be
Here is a fun fact. Lets say you move from NJ to Raleigh, NC. Your property taxes on a house purchased today for $400,000 would drop from about $7k in NJ to about $3k in North Carolina.
At $150 per plane ticket (Continental actual fare, including taxes and fees), you could buy about 26 round trip tickets between Raleigh and Newark. This means that you and your spouse could visit NJ/NYC once a month and still come out ahead based on property taxes alone.
This doesn’t even factor in the fact that $400k in NJ will get you a run down cape that needs work. $400k in Raleigh will get you a brand new McMansion built to your liking.
Chifi,
When the euro breaks over $1.30 watch out. The dollar has been ranged bound for months, but I think the markets are really going to punish us when it starts to slip.
As noted on CR, when organized crime started moving into euros instead of dollars, our days as the world’s reserve currency were numbered.
Without that fallback, the dollar is in a lot of trouble. To get macro here, the storm that is the housing collapse will seem like a warm spring rain compared to the hurricane that the currency crisis is going to hit like.
Reminds me of a song called “Foreclosure of a Dream” from Megadeth.
Read the lyrics:
Rise so high, yet so far to fall.
A plan of dignity and balance for all.
Political breakthrough, euphorias high.
More borrowed money, more borrowed time.
Backed in a corner, caught up in the race.
Means to an end ended in disgrace.
Perspective is lost in the spirit of the chase.
/chorus/
Foreclosure of a dream,
Those visions never seen,
Until all is lost,
Personal holocaust.
Foreclosure of a dream.
Barren land that once filled a need,
Are worthless now, dead without a deed.
Slipping away from an iron grip,
Natures scales are forced to tip,
The heartland cries, loss of all pride.
To leave aint believing, so try and be tried.
Insufficient funds, insanity and suicide.
/chorus/
Now with new hope some will be proud.
This is no hoax, no one pushed out.
Receive a reprieve and be a pioneer.
Break new ground of a new frontier.
New ideas will surely get by.
No deed, or dividend. some may ask why?
Youll find the solution, the answers in the sky.
Rise so high, yet so far to fall.
A plan of dignity and balance for all.
Political breakthrough, euphorias high.
More borrowed money, more borrowed time.
On the 81% —
I think this is kind of like the way people perceive their favorite sports team before the season starts. I would guess most people certainly give their home’s value less thought than the home team’s chances every year.
Really, I think this is the Nets’ year. (Hey, I have a better chance of being right than they do.)
The NYSE recently took over Archipelago, the electronic trading platform.
Well, the merger is complete and now they have just announced the lay off of 500 hundred people.
I guess those 500 people will not be able to help save the housing market in north Jersey come January 07, which by the way is only a few weeks away.
In the old days people who used cash equity from their homes to cover living expenses and pay down credit card debt would be described as “living beyond their means.
Now it’s considered good cash flow management. People who pay off their mortgage are considered stupid.
The Economist ran an article a few weeks ago which opened with ”Lending is a sober business punctuated by odd moments of lunacy
I don’t believe the move by crime syndicates into Euros has anything to do with currency stability or investment outlook.
It has to do with the 500 Euro bill representing more value per weight/size than the 100. It’s simple, you can traffic a higher value of currency in a smaller volume using the 500 euro.
If we started to print $500 bills, I’m sure we could regain much of the lost market share.. :)
jb
Given inflation and currency outlook, we might just need that $500 bill sooner rather than later. Getting rid of the penny might just not be such a bad idea either.
Just who would be on the $500 bill anyway? Dubya? Greenspan? Reagan? :)
jb
Lindsey, the transformation from reality to perception is pretty complete. If someone looks and acts a certain way, they must be that thing they impersonate.
Yes, of course, to have that lie become believable, we’ve had to convince our society that certain behaviors are acceptable most of the time. Taking support from parents (after a certain age) is “smart” and living beyond one’s means is no longer something to be ashamed of. Having credit card debt is something to brag or joke about while shopping for unnecessary consumer items.
These behaviors are not uncommon or isolated within areas like Hoboken. I’ve seen it in small towns in empty states, in Mom & Pop stores in Kansas and in mountains in Vermont.
Maybe these behaviors are not immoral and can be defended, but I can’t.
http://money.cnn.com/2006/11/16/real_estate/willis.moneymag/index.htm?postversion=2006111610
“Pulling cash from your home: What’s new, what to do”
This one basically says if you’re going to bleed your house, do it right.
MLS Number: 2299495
MLS Number: 2330830
Can someone pull addresses, time on market, how much they paid
Also if anyone can tell me what happened to 7 Alpine Court in Hillsborough I was just curious.
Thanks
Lindsey,
I agree with you on the currency storm. I don’t know the currency preference of organized crime. However, when we see our bankers starting to diversify we better take notice real fast.
James Bednar Says:
November 16th, 2006 at 10:06 am
Given inflation and currency outlook, we might just need that $500 bill sooner rather than later. Getting rid of the penny might just not be such a bad idea either.
Just who would be on the $500 bill anyway? Dubya? Greenspan? Reagan? :)
How about picture of ………”Great Wall Of China”??????
Lindsey, it’s no wonder people have lived beyond their means. Wages have fallen behind inflation for almost 30 years and health care costs have sky rocketed.
Bergenbubbleburst, my husband was affected by that layoff, but during the last round, a few months ago. The people who run the exchange (meaning, the people working there and keeping the exchange running, not the management) used to make a modest, but secure living. Once they decided to go public, it was all slash and burn to raise the stock price and coffers of those at the top. What’s new?
Anybody can let me know what the difference is between Caldwell, North Caldwell, West Caldwell?
Thanks in advance.
Caldwell is here.
North Caldwell is north of here.
West Caldwell is west of here.
Just who would be on the $500 bill anyway? Dubya? Greenspan? Reagan? :)
Nixon!
The Caldwells are rather interchangable. I find North Caldwell a bit inconvenient from the city. The Caldwell downtown area is cute.
Trivia – Tony Soprano lives in West Caldwell. He once referred to Bloomfield Ave. as the “guinea highway.” Italian-Americans make their way up from Newark, to Belleville, to Bloomfield, to Montclair (and then presumably onto Verona and the Caldwells).
Thanks for the imput. How about the house price and schools? which town is better, Caldwell, N.caldwell, or W.Caldwell? I see there are two high school, J.Caldwell or W.excess. And also the property tax. Thanks again.
I’d suggest taking some time to get lost driving around the areas you are interested in.
North Jersey towns tend to vary pretty dramatically, even those next door to each other. Even more confusing is the variablility within a single town (“good side of town”-kind-of-thing).
jb
JB – The Caldwells, especially West Caldwell and Caldwell, don’t vary much at all. You’d be hard-pressed to figure out where one ended and another began.
Anon- I live in Montclair, down Bloomfield Ave. and our pediatrician and several friends live in the Caldwells. They’re all lovely towns, though Caldwell is the most densely populated and diverse (though not by much — very upper middle class and Italian throughout). I would say that North Caldwell is the most suburban of the three, the least densely populated, and more wealthy than the other two. All are pricey and considered safe with good schools. Caldwell and West Caldwell share a school district. Property taxes high (Essex county), but are generally lower than Montclair or Glen Ridge, for example.
But yes, you should drive through and see what you like. All the towns out in that part of the county (including Verona, with an excellent school system), are going to be similar enough so that you’d have to really live there before you knew much difference. It would be different if you were comparing close neighbors Bloomfield, Montclair, and Glen Ridge — all within 10 minutes of the Caldwells, but all very different.
I currently rent in in Pequannock & am always looking at area homes for sale. I was skimming thru local listings on NJ.com & came across this one…in Spanish. I’ve never seen that before. However, I don’t see it also listed in English???
Price: $369,900
Ref. # 32805208
Description
La vida en l(ella/eso) es mejor! Vivir en “Las caadas” es slo el lugar de serlo. Disfrute el tranquilo preparando de esta unidad de Grenville. Caminata breve para las pistas de tenis & la piscina. Cocina espaciosa, madriguera / oficina, chimenea de w / gas de sala comedor formal. El dormitorio principal brinda techos de la catedral rea de vanidad distinta & ducha / bao. Segundo w / soldado raso bao completo de dormitorio. La gran ubicacin para autopistas muy importantes, I – 287 & Rt. 23 y cirrese a salidas de Bergen County. Disfrute todos los comodidades de pueblos para todas edades. Llame a Colleen para obtener mayor cantidad. Please contact Crest Real Estate.
Here is the Alta Vista Babble fish translation
———————————————-
The life in l(ella/eso) is better! To live in “the caadas ones” is slo the place of being it. Enjoy the calm one preparing this unit of Grenville. Brief long walk for the tennis courts & the swimming pool. Extensive, madriguera kitchen/office, chimney of w/gas of formal hungry room. The main dormitory offers to ceilings of the cathedral criminal of different & skillful vanity/beam. Second w/welded flat complete beam of dormitory. Great ubicacin for very important freeways, Is – 287 & Rt. 23 and cirrese to exits of Bergen County. Benefit all the comforts of towns for all ages. Call to Colleen to obtain greater amount. Please contact Real Crest Estate.
——————————————–
This translation from another site
The life in l (she/that) is better! Living in “The caadas” is slo the place of being it. Enjoyment the tranquil one preparing of this unit of Grenville. Brief walk for the tennis courts & the pool. Cooks spacious, burrow / office, chimney of w / formal dining room room gas. The main dormitory offers ceilings of the different vanity defendant cathedral & shower / beam. Second w / flat soldier complete beam of dormitory. The great ubicacin for very important freeways, I – 287 & Rt. 23 and cirrese to exits of Bergen County. Enjoyment all the comforts of towns for all ages. Call to Colleen to obtain greater quantity. Please contact Crest Real you Be you.
Wonder if “Horse-Manure” translate same as above cause that’s what is being offered for $369K
Just who would be on the $500 bill anyway? Dubya? Greenspan? Reagan? :)
It has to be Ronnie!! After all, isn’t he responsible for this bubble when he told Gorby to tear down this wall???
I want a house with a “Formal Hungry Room”
Thanks Homer.
I actually see one more listed right under that ad. I see the owners bought it 7/05 for $400,000. Current asking price is $379,000. Also “For rent” $2500 month. I guess if you can’t sell it listed in English, try listing in Spanish.
84 Village Rd
Price: $379,900
Ref. # 32963855
Description
Colono excelente con 2nd Addition 1998 de piso que ofrece espacioso vivir. La ubicacin conveniente para autopistas muy importantes, los parque de pueblo & la playa. Actualiz Eat en cocina con cargas de armarios & espacio de mostrador. Sala, habitacin familiar o 5th dormitorio, dormitorio & Bath en el primer piso. W de dormitorio principal / plenty of roperos, muy grande se baan. 2 garaje de automvil extra grandes, puestos de observacin de patio cubiertos traseros cercados en propiedad. 3 cobertizos de almacenamiento tambin! Aire central, Police de seguro de w / tanque de calefaccin de petrleo. Gran vecindario dentro de la distancia andanta hacerlo/serlo Please contact Crest Real Estate.
Correct me if I am wrong but most of this country speaks English last time I checked. Doesnt this seem like this realtor is discriminating against people who speak English?
I guess because these have been listed in English so long, they have try a new approach to sell???
Caldwell and West Caldwell are more interchangable (same recreation dept, same school district – Caldwell-West Caldwell School District) but North Caldwell is very different (regional West Essex School district for Jr and Sr High School and their own for elementary). North Caldwell has no town center or businesses to speak of and more expensive housing than Caldwell and W. Caldwell but the lots are bigger. If you live in Caldwell or West Caldwell, you can walk to shops, movie theater, schools, etc but you can’t if you live in N. Caldwell. As for property taxes, Caldwell’s are high (no industry, lots of churches, recent reval but if you pay at least 15% less than the assessed value of a house, you can appeal and get the taxes lowered) while W. Caldwell’s are lower but they will be having a reval within the next few years. North Caldwell’s are high but that might be more a function of having more expensive properties.
Tony Soprano “lives” in North Caldwell (the house is off of or on Wildwood I think) but they do alot of filming in Caldwell and W. Caldwell (especially Italianissimo Restaurant).
Can someone help me with this listing in Pompton Plains???
16 Garden Pl
Asking price $499,900. MLS # 2298873
Tax records shows it’s owned by “Flip This House, LLC” Sale price if $10.00??? Can anyone find out what the previous sale price was?
I think this was the prior sale.
MLS# 2108806
OLP: $449,700
SP: $405,000
CD: 4/12/2006
After that sale the property was sold/transferred for $10 on 8/9/06.
What a joke. The home builder’s confidence went up a statistical insignificant 2% — from 31 to 33 — and the mainstream media sounds like happy days are here again. A year ago it was 61.
——————————
Homebuilder Confidence in U.S. Unexpectedly Rose in November
By Shobhana Chandra
Nov. 16 (Bloomberg) — Confidence among U.S. homebuilders unexpectedly rose in November for a second month, in a sign that the slump in housing may be moderating, according to a private survey released today.
The National Association of Home Builders/Wells Fargo index of builder confidence rose to 33 from 31 in October, the first back-to-back gain since June 2005, the Washington-based group said. A reading below 50 means most builders view conditions as poor.
…
“It seems we may be past the worst point for housing,” Chris Rupkey, senior financial economist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York, said before the report. “Home builder confidence has stabilized.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=atpLRnvkqQyg&refer=home
typo, should be
The home builder’s confidence went up a statistical insignificant 2 points
16 Garden Pl
Bought 4/11/06
VIGILANTE, DANIEL P
23 CHURCH ST
DENVILLE, NJ 07834
Transferred 8/9/06
FLIP THIS HOUSE LLC
23 CHURCH ST
DENVILLE, NJ 07834
Organization:
kannekt
Thomas Keerikattu
(edited – jb)
Email: tomkee@hotmail.com
Registrar Name….: Register.com
Registrar Whois…: whois.register.com
Registrar Homepage: http://www.register.com
Domain Name: HOBOKENX.COM
Lots here, but I’m going to start with post 23:
Renting, you’re leaving out some real considerations on your return trips to NYC. First, there are time issues. Yes, you can pay for the trip, but its going to add a lot of travel time, even if you are close to the airport in NC. Second, you will be spending a whole lot more than plane fare as I’m guessing you’re not going to try and get in and out in one day, so you might want to add the cost of a hotel room.
Also, while your property taxes are lower, other taxes are higher. According to our good friends at the Tax Foundation (taxfoundation.org) state and local taxes in NC are 10.5 percent, compared to 10.8 percent in NJ. Even if your income where to remain the same (highly unlikely) you would be saving a whopping .3% in taxes. If you want to peg your income at $150K (a reasonable amount for the purchaser of a $400K home) you save a whopping $450.
There are lots of reasons to move away from NJ, but you simply can’t have your cake and eat it too.
JB,
I don’t think the weight/value ratio is all that big of a concern to criminals (although I guess it counts for something) in comparison to the currency’s ability to maintain its value. My point was that the criminals are seeing the same thing as Central Banks around the world, the dollar’s usefulness as a store of value has to be questioned when the supply of dollars far exceeds the demand for them. Other than paying us to buy their stuff, why would China etc., keep sucking up all those excess greenbacks?
1,000,000USD = 781,500Euro
10,000 * 100USD = 1,563 * 500Euro
$100 Note = 1g
$500 Euro Note = 1.1g
10,000 grams versus 1,720 grams
It would take 22 pounds worth of $100 bills to transport the same value as 3.8 pounds of 500 Euro Notes.
Don’t take my response as any kind of argument, just playing with numbers.
I really don’t spend my days trafficking money.
jb
Lindey,
First of all, I was just making a back of the envelope calculation, not a detailed economic analysis. True, I didn’t factor in the airport aggravation factor and time sitting in a terminal. Because of this, I personally wouldn’t want to fly to Newark once a month.
However, the difference in taxes would be much greater than 0.3%. The tax burden as a percentage on income is the about the same in both states because of the difference in per capita income and household size. NC has a lower per capita income and also fewer people per household (2.47 in NC versus 2.71 in NJ). Fewer people per household means fewer people to divide the property tax bill for the purposes of the tax foundation calculation.
As far as actual taxes paid, people in NC pay $3,526 per capita versus our $5,234. The income tax structure is about the same, so my income taxes wouldn’t change much (NJ is 6th highest versus NC is 8th highest). Sales tax is about 50 basis points higher in NC, but that’s small potatoes. However, I would enjoy a big drop in property taxes from about $7k to about $3k for a house that is probably 2x the size. I would also have to pay a property tax on my car (about $100 per year), but that is nothing compared with the property tax savings.
Finally, I think I could find a comparable job. Even if I took a hit in pay, I would still come out ahead as long as the pay level was commensurate with the cost of living in the area, as my federal income tax rate would decline.
The ownership arbitrage game doesn’t work out as well if you move up as you move out.
The analysis looks much less favorable if you buy the same priced home at the less expensive destination. Ideally, you’d be purchasing a lower priced home there, but one that was equal to what you were buying here.
So, for the NC example, ideally you’d be looking at a $275k used home that was on par with what you would buy for $400k here. At that point your 20% NJ down payment ($80k) would be equal to a ~30% down payment in NC. The goal there would be to lower your overall cost structure even further. Of course, that requires you leave with a nest egg.
jb
LOL, a long time ago, they used to ask for T-bill in high denominations they used to use as cash. Ease of transport.
Now they are just book entries….
JB,
You are correct. I used $400k in both examples just for the property tax comparison. When I visited NC, we were looking at houses in the $275 – $290 range. The biggest argument for going would be that my wife could stay home with our baby, because our house would cost much less and we could swing it on one income. Here, that would be impossible.
I can’t say I didn’t have the exact same thought when I spent time in San Antonio. You can get a fantastic place for $250k.
jb
Just to try and keep us all on the same page I do not normally refer to per capita income
Me too, but the tax foundation numbers you cited are on a per capita basis. I just dug a little deeper into the numbers used by the tax foundation in coming up with their calculation that shows the tax burden in NJ and NC are basically the same. As a percentage of per capita income, perhaps they are. But, as we both seem to agree, per capita information isn’t all that useful. For someone in my situation, NC would represent a substantial savings.
The fact of the matter is that my income taxes would be about the same, but I could cut about $4000 off my property tax bill versus if I bought in NJ. I would pay property tax on my car (about $300/year for 2 cars) and another 50 basis point in sales tax ($100/year if I spend $20k on taxable items), but at the end of the day, I come out about $3,600 ahead in state & local taxes.
While I know average incomes are lower, I think I can find a comparable job. Also, we have only discussed taxes here. The fact is that just about everything across the board from food to electricity to visits to the doctor will cost less.