<p><a href=“http://sfgate.com/cgi-bin/article.cgi?file=/c/a/2005/10/16/MNG7EF96GR1.DTL[/url]”>http://sfgate.com/cgi-bin/article.cgi?file=/c/a/2005/10/16/MNG7EF96GR1.DTL</a></p>
<p>Is this how it is in other parts of the country?</p>
<p>Dstark, there does seem to be something good coming out of the squeeze - I’m sensing more and more people are taking more entrepreneurial approaches to their careers, because traditional employment relationships aren’t paying enough for a significant segment of households to get ahead, or even to stay even. </p>
<p>Several of my friends have done this; I’ve been doing it too, the empty nest has allowed greater freedom and flexibility, so I pull in money from three different revenue streams now. Well - four, actually now that I count them. It isn’t so much a lack of money as the fear that if any one revenue source goes away, I want protection in place and no interruption in income, especially as long as D is still in school and not in the workforce. Technology makes it all so much easier. </p>
<p>That’s evident too in several of the examples in the article - I think the traditional single employer relationship is going to be challenged a bit in the coming years, and I think that’s good for everyone.</p>
<p>I don’t think everyone has the entrepreneurial spirit that you have. Some people do better when they know the have a check coming in every week.</p>
<p>I grew up in SF and the middle class used to thrive in the city.</p>
<p>I would like to look at the bright side, but I know that when we reduce the middle class we can kill a city. Most middle class people are only a major illness away from becoming poor. Even with 80% coverage a serious bout with cancer can wipe out a nest egg within a year.</p>
<p>American middle class families with kids in college saw a surreal inflation of college costs in the past 5 years, far above any tax breaks recieved.
The cost of medication has skyrocketed and the cost of caring for elderly family members has left people wondering what went wrong.</p>
<p>Wow, I can’t believe that one family’s mtg is $3300 :eek: !!!
I guess I shouldn’t complain about our $960 mtg 
Of course, prices are rising where we live quite a bit too. We bought our house 5 years ago, and I don’t think we could afford it if we had to buy it now.</p>
<p>My mortgage is $294, and I live in a GREAT place!</p>
<p>
</p>
<p>Oh, SHUT UP!! 
</p>
<p>just kidding, of course :D</p>
<p>This article is interesting and leads to several musings and questions:</p>
<p>With all due respect for the family of the probation officer, one ought to question WHY and HOW this family purchased a home worth $600,000. Any upward movement in income or property taxes could have made their situation unbearable. For what it is worth, looking at the reported salaries, it also seems that our society values the work of a probation officer more than a teacher’s. </p>
<p>Imagining that these families had a student applying to college this year (not possible in all cases, but it is just a simulation), it seems that only the single mother who rents and -maybe- the last family would have an EFC superior to zero. All families should be below a $3,000 EFC. </p>
<p>Noting that the probation officer family could probably send their three children to college for a virtual zero while the single mother should pay several thousand dollars, one ought to wonder about our system. While the first family is bound to reap the benefits of future equity in their home, the renter won’t be so lucky. In the meantime, the single mother is also contributing more in income taxes. The family that owns a home does pay real estate taxes but the amount must be quite low considering that the total house payment includes mortgage, taxes, and energy bills. </p>
<p>In the end, despite the article title, the question remains if we should really feel bad for the families described. For example, if were to analyze the net contributions of the family that owns a $600,000 home, send their 3 kids to a free public school that OUGHT to be pretty good given the neighbordhood, should be able to send their 3 kids to almost any university for little to nothing, and should be able to ultimately sell their home at a nice profit, and retire to a cheaper part of the US. 40 years of K-12 education plus college expenses add up to an amount well beyond the contributions made. How much PUBLIC money is spent fueling the dreams of THIS family? </p>
<p>If we ever needed proof that it is possible to live well beyond our means and earning capacity, this article provides it. We all want the life of a king, but expect the largesse of our government -or other citizens- to allow us to pay little to nothing for what we consider a minimum standard of living.</p>
<p>Xiggi, we are the ownership society. Our tax laws have benefitted those that own real estate, stocks, oil and gas properties, farmland, etc. We tax capital at rates substantially less than we tax labor. The result, you have people buying $600,000 homes in Richmond.</p>
<p>There was a movie starring Samuel Jackson about a baskeball coach and a school in Richmond. I can’t remember the name of it. You can get an idea about Richmond from this movie. </p>
<p>The house is probably near the water, since most of Richmond is a dump. I am unaware of any public schools in Richmond that are even close to average. I have never visited the area of Richmond near the water. The areas I have visited I wouldn’t want to spend much time in to say the least.</p>
<p>Prop 13 does keep a lid on increases in property taxes.</p>
<p>There is no way this family is living the life of kings.</p>
<p>DS, I understand that ownership is rewarded, and the “life of a king” was a figure of speech. However, you still have to deal with the issue that this family was given the opportunity to purchase a very expensive home either by rolling over prior equity or receiving a morgage that anticipated future increases in real estate values. Otherwise, a gross salary of $65,000 does not seem sufficient to support the acquisition.</p>
<p>Regarding the taxes, the situation of the $600,000 home would be impossible in most parts of the US as the property taxes rates of 3 to 4% would require annual payments of $15,000 to $18,000 after exemptions.</p>
<p>It is not my place to “blame” the people who made the decisions to purchase the home. I mostly question a system where someone holding a rather pedestrian job is “forced” to look at a purchase that would be deemed as extravagant in most of the states. I also doubt that this family ever focused on savings for college, except for using the equity in their home. This is part of the problem when facing education expenses: the expectation of “free education” is quite different from the reality of what will be available. The examples in the article were all in a similar range. The biggest shocks of EFC will be found in the next range (the 80 to 120) where families also spend the entire disposable income to maintain a “standard” lifestyle. </p>
<p>When compared to many first-world countries, it seems that we tend to bury our head in the sand, and hope for some magical wand to erase the reality that our standard of living is built on borrowed or elusive assets.</p>
<p>Well, I think we borrow too much and consume too much in this country. </p>
<p>I don’t look down at anybody’s job so I wouldn’t call the probationary job “pedestrian”. If I did look down at jobs, I see many high-paying jobs that are BS. </p>
<p>Yes, the property taxes in many parts of the country are onerous, but then similar houses don’t cost $600,000 in other parts of the country. It’s all relative.</p>
<p>No, this family isn’t saving much for college or anything else. That’s one of the points in this article.</p>
<p>People overpay for housing because housing prices have gone up for such a long time, people believe prices only go up. Housing has replaced savings in this country. That’s not a good thing.</p>
<p>“Yes, the property taxes in many parts of the country are onerous, but then similar houses don’t cost $600,000 in other parts of the country. It’s all relative.”</p>
<p>Very good point! I’ll remember it.</p>
<p>Xiggi, what is the property tax rate in Austin Texas? Is there a cap on how much property taxes can increase each year?</p>
<p>Edit: I found this.
<a href=“http://www.austin-chamber.org/DoBusiness/TaxesAndIncentives/TxProperty.html[/url]”>http://www.austin-chamber.org/DoBusiness/TaxesAndIncentives/TxProperty.html</a></p>
<p><a href=“http://austin.about.com/gi/dynamic/offsite.htm?zi=1/XJ&sdn=austin&zu=http%3A%2F%2Frecenter.tamu.edu%2Fdata%2Fhs%2Fhs140a.htm[/url]”>http://austin.about.com/gi/dynamic/offsite.htm?zi=1/XJ&sdn=austin&zu=http%3A%2F%2Frecenter.tamu.edu%2Fdata%2Fhs%2Fhs140a.htm</a></p>
<p>That is one high property tax.</p>
<p>Good thing there isn’t a state income tax</p>
<p>So let me get this straight. You live in the Bay Area and you buy a house which is way more than you can really afford when you buy it, but you decide to manage it anyway. Your property taxes are artificially low (by a factor of 4X? - by the way, the low property taxes are a significant factor in increasing prices, as they lower the actual cost of ownership.) Your mortgage interest deduction is WAY out of proportion to your income, so your federal taxes are massively reduced. Your house doubles in value every 5-7 years. When the kids are grown and ready for college, you sell the house, and collect the capital gain - the first $250-$500,000 is free and clear of any taxes whatsoever, the rest is at 15%. You move into a smaller home (probably makes more sense to rent), and you use the surplus which is massive (because you’ve put away all the money you’ve saved on taxes over the past 15 years, plus the capital gain - and you’re able to do that because, in the meantime, your income has gone up) for the kids’ education.</p>
<p>Sounds like a sweet deal to me. Where can I sign up?</p>
<p>Mini- well said! While I benefit from the mortgage interest deduction it seems silly to me from a societal point of view that I should fatten my net worth on the backs of others. As someone said though we are the “ownership” society. Somehow though it is not fair that a renter should subsidize my home with their tax dollars?..but what the heck we all subsidize colleges inadvertently when an alum takes a tax deduction for a contribution. Or subsidize a certain religion? Through redistribution of wealth policies that are inherent in our tax code the government is rewarding certain businesses and consumer behavior… after almost 25 years in financial planning, when I am asked what the secret to financial success in this country (or any for that matter) is, I respond “live below your means”,and remember that “happiness is a positive cash flow”</p>
<p>Mini, you are selling TOO early. </p>
<p>Keep the house until all kids have graduated as the equity in the house does not have a negative impact on the EFC or FM finaid -and only a small impact on the IM or CA finaid, especially if the AGI is low. This way you won’t spend the hidden capital on the pesky tuition fees.</p>
<p>The big redistribution is (as usual) from lower income minority renters (home ownership among African-Americans is lower than that of whites by the same percentage now that it was in 1901) to white home owners. No, they don’t have to work as slaves anymore, but the redistribution of the fruits of their labor has similar economic impacts. Same thing happens in Social Security.</p>
<p>Xiggi - another really interesting way to play that one would be the reverse mortgage during the kids’ college years before selling. Or simply a home loan. Or possibly (but I don’t know if that is possible, and it entails some risk), convert to an interest-only mortgage.</p>
<p>DS, I do not think that there are limits to the property taxes. I believe that the ad valorem taxes are the guiding value. </p>
<p><a href=“http://www.dallascad.org/forms/2005rate.pdf[/url]”>http://www.dallascad.org/forms/2005rate.pdf</a></p>
<p>On this site, you can search the taxes paid by owners of various properties. To show that there is no limit, check this record:</p>
<p><a href=“http://www.dallascad.org/AcctDetailRes.aspx?ID=0055160000001HS00[/url]”>http://www.dallascad.org/AcctDetailRes.aspx?ID=0055160000001HS00</a></p>
<p>Taxing Jurisdiction/Tax Rate per $100
DALLAS $0.74
DALLAS ISD $1.69
DALLAS COUNTY $0.22
DALLAS CO COMMUNITY COLLEGE $0.08
PARKLAND HOSPITAL $0.25</p>
<p>Taxable Value/Estimated Taxes
DALLAS $20,780,352 $153,774.60
DALLAS ISD $23,362,896 $394,832.94
DALLAS COUNTY $20,780,352 $45,716.77
DALLAS COMMUNITY COLLEGE $20,780,352 $16,624.28
PARKLAND HOSPITAL $20,780,352 $51,950.88
Tax Ceiling N/A N/A N/A N/A N/A N/A </p>
<p>Total Estimated Taxes: $662,899.48</p>
<p>PS It is a nice home. And Texans need the room to park their horses … or Hummers. :)</p>
<p>Actually, Mini, although people like to look the other way when this nasty fact floats to the surface - home values <strong>can’t</strong> double <strong>every</strong> 5-7 years. In the long run, home values can only increase as much as incomes - because you have to be able to pay the mortgage. We’ve seen a couple of things in my lifetime which have caused bumps in prices - women entering the workforce in larger numbers in the 70’s and 80’s caused prices to go up (2 incomes to pay the mortgage) - and recently, low interest rates lowered the monthly payments, goosing prices as well. But over the long term - real estate is rationally priced. And yes - low property taxes in California are certainly a partial cause of high real estate prices (as well as government revenue volatility.) As a result, a $600,000 house in the Bay Area is a “fixer-upper.” - And Xiggi - the school district in Richmond isn’t “pretty good.” I’m afraid they’ve got quite a ways to go to get to “pretty good.” In fact, they’ve got quite a ways to go to get to average.</p>
<p>“In the long run, home values can only increase as much as incomes - because you have to be able to pay the mortgage.”</p>
<p>In the long run, we are all dead. Actually, home values can increase as much as SOME incomes (the only ones that count - those who are going to buy the homes), and actually a little more - because with “interest-only” mortgages, you DON’T have to pay the mortgages. Add the incentive of high mortgage interest deductions, and rise in the capital gains exemption, and home values can increase substantially more than incomes. Not only can, but have. </p>
<p>No, it won’t last forever - nothing in the world of economics does - except that minorities will get the short end of the stick. That DOES seem to last forever.</p>