Post Race!

[Gruff]

When I have more than one applicant I send them to thunderdome.
The survivor gets the job unless it's this guy.

[Gruff]

Seriously though. The worst working experience of my life was hiring my own replacement.

He turned out to be really aggressive and wrong in the head.
I developed a deep and heart felt connection with Doctor Frankenstein.

[dday9]

Insurance and taxes more than doubles my mortgage payment.

My home insurance premium is $1,229.02.
My taxes last year were $182.33(hurray homestead exemption).
My total mortgage payments last year were $1831.92.

So my home insurance is not more than my mortgage, but then again my home is only insured for $114,000 and the market value is about $78,000. So for homes where the replacement cost is greater 250k+ then they start to become higher than the home insurance.

To make things worse, nearly every finance company requires you to escrow the home insurance here which means that they are going to charge interest on top of what you're paying for the home insurance. Luckily(if you want to call it that) I have a 5 year balloon mortgage and wasn't required to setup the home on escrow, but when I go to remortgage for a 15 year fixed rate I will be required to have it escrowed for at least the first year.

[Shaggy Hiker]

My taxes were just under $1000 for the year. My insurance seems like it was a lot less than that, but I don't quite remember. My total mortgage payments are hard to figure, due to overpaying them routinely, but I think they were around $300/month.

I guess I have no idea what I'm paying. The mortgage goes to $0 this summer, then I'll be able to figure out taxes and insurance.

[homer13j]

You guys in the sticks have it easy. My property tax bill this year is almost $4000 on a house the county insists is worth $130K. I paid half that for it (bank-owned foreclosure) and would consider myself very lucky to get $100K if I sold it.

I just found out one of my neighbors is getting $5000 to rent her house out for the week of the Republican convention. Wish I'd known about that...

[dday9]

I don't pay taxes on the first $75,000 because of the homestead exemption. I don't know what the home is assessed at but I know it is a little north of the $75,000.

[Shaggy Hiker]

We have a similar exemption, but it's implemented on some kind of sliding scale, so I don't get the full 75K exemption because my house isn't valued highly enough.

Looks like I pay about $1000 in taxes and a bit under $500 in insurance annually. The house is valued somewhere around $100K, though with this market...who knows. It's a fairly new 1800 sq ft house with attached garage. So, that's about the valuation in this area.

[dday9]

To calculate the replacement cost for the home(at least in Louisiana), which is what you would insure the home for, the rule of thumb is to multiply the living square footage by $100 - $120. So your home would be approximately cost $180,000 - $216,000 to replace.

Market value is generally going to be lower than replacement cost because it is the cost of the home that you could purchase it for. The only time we find homes with higher market value than replacement cost are historical homes and this is because you're purchasing the home for the nostalgic/romantic feel of the home or the neighborhood. That's the case for my dad who has a $500,000, 100 year old, downtown home but the replacement cost is about $380,000.

[Shaggy Hiker]

I think it's a bit less here, but I'm not sure.

[FunkyDexter]

Market value is generally going to be lower than replacement cost

That's the opposite way round in the UK and your way seems kinda weird. How do developers make money if you can't sell a house for more than it would cost to build it

[szlamany]

That's the opposite way round in the UK and your way seems kinda weird. How do developers make money if you can't sell a house for more than it would cost to build it

I agree - I was also shocked by that math.

Here in Connecticut and all around these surrounding states the market value of the house exceeds the replacement cost - by a large factor, I believe.

@dday - Has market value shrunk that much since the mortgage crisis???

[Shaggy Hiker]

When I refinanced my house, at some point a few years after the crisis, my house value had dropped below the price of the material that went into it. It has since recovered, but I'm not sure exactly what it has recovered to, or if I believe the valuation. After all, the valuation is what you can actually get for it, but the valuation used by the city is some other number.

[Shaggy Hiker]

One thing to point out is that DDay talked about replacement value, not the cost to build. A house down the street from me burned 100% (though remained standing as a blackened shell) just before Christmas. For the last week, very large dump-type trucks have been backing down the cul-de-sac and loading up with the remains of that house. It burned so thoroughly that the concrete foundation had to be removed, and the last piece may have left yesterday. Now they get to build.

So, I would expect that replacement is generally going to be higher than a new build cost unless the loss was particularly unusual.

[FunkyDexter]

The rebuild cost may be higher than the new build cost but things have got pretty skewed if the rebuild cost is higher than the purchase cost. I know you guys had a bigger bubble and burst over there than we had over here so that could explain part of it but it's still surprising.

[szlamany]

I guess that is the definition of a mortgage being underwater - when the value of said property doesn't cover the cost of loan. Someone in this situation cannot re-finance and usually cannot even sell the property.

[NeedSomeAnswers]

I guess that is the definition of a mortgage being underwater

Yeah Negative Equity, lost of people had that after the 2008 crash but in the UK at least the housing market is crazy again. Fortunately i have a house but i wouldn't want to be a first time buyer in the current market.

It's even worse in London soon unless your a Russian Oligarch or a Hedge Fund manager you wont be able to live in London!

[dday9]

You have to keep in mind that replacement cost is completely different from a new build cost.

With a new build, you do not need to worry about things like ordinance code or matching existing material

[SJWhiteley]

You also have to take into account land value.

A new build, when someone buys it is also buying the land. If you loose your house - and only the house - then you aren't going to be paying for the land. On the other hand, new builds, often are built in bulk with bulk savings (and also quite cheaply, these days).

[SJWhiteley]

Yeah Negative Equity, lost of people had that after the 2008 crash but in the UK at least the housing market is crazy again. Fortunately i have a house but i wouldn't want to be a first time buyer in the current market.

It's even worse in London soon unless your a Russian Oligarch or a Hedge Fund manager you wont be able to live in London!

They need to stop giving people 100%(+) mortgages.

[Shaggy Hiker]

I sent in my application to be an oligarch, but I was rejected.

[dday9]

They need to stop giving people 100%(+) mortgages.

I saw a meme that kind of played into this. I'm going for a quick search to find it...

I can't find it. It's probably a good thing, I like to keep the post race politics free and what I was going to put a lot of people like to make political.

[Shaggy Hiker]

Interest only and 100% mortgages were largely targeted at people who were into flipping houses. That made sense as long as you assumed that the property market would continue to rise until you were ready to cash in. I have a friend who bought into that idea, but who was prevented from losing his shirt by a lack of liquidity at the crucial moment.

[SJWhiteley]

Interest only and 100% mortgages were largely targeted at people who were into flipping houses. ...

Are you sure? It seems like it was targeted at people with no savings to put down on a house. So they ended up with a bigger house than they really could afford, leaving no market for small (low cost) houses.

True, it may make sense if you are a house flipper, but the two house flippers I know never take out a loan of any kind.

[dday9]

Are you sure? It seems like it was targeted at people with no savings to put down on a house. So they ended up with a bigger house than they really could afford, leaving no market for small (low cost) houses.

Yeah, I've only ever heard of people taking advantage of the 100% mortgages that did not have the 10% needed to close on the home. Traditionally if you didn't want to put any money down on a home then you'd use the cash value in a whole life or universal life policy as collateral and it was typically enough to close on the home.

True, it may make sense if you are a house flipper, but the two house flippers I know never take out a loan of any kind.

Same here, I have several friends that flip houses and they've never had a mortgage. Now they had a (rather large) line of credit to begin with but over time their cash on hand got large enough that they could do away with the line of credit and had no need for a loan.

[Shaggy Hiker]

Good point. There were two targets. The house flipping thing was really popular in certain markets, but the low down payments also targeted those who couldn't afford it. Technically, I got one of those mortgages, too, since I only had to put 5K down, which was about 5%, at the time, but it wasn't a percentage, it was just a flat amount. I did it because it was such a deal. Still, there were a fair number of people buying in overheated markets with the sole goal of selling a few months later on the assumption that the price would rise significantly during that time.

[szlamany]

It was really just the banks - only the banks. Not those taking out the mortgages. I know people who sold mortgages back in those days (and still do, although the action is much less).

The banks allowed bad mortgages to be sold. Then they were packaged up and re-sold to other kinds of less stable financial organizations. Then the banks sold more - the cycle continued...

The only every-day folk making money where the closers and the legal hacks that showed up on the day of closing - which was usually at your house.

Refinancing was the king 15 years ago - that blew up the bubble.

Lots of the equity that was built on was bravado that showed it's true ugly self when the market corrected.

We had an opportunity back then - it was discussed - to revalue the monetary system. TARP was built instead - re-lending the problem away doesn't work when the problem is no real equity.

[FunkyDexter]

Over here (UK) I'd say interest only was originally aimed at buy-to-letters but, as the market heated up, more and more got sold to folks on low incomes who couldn't afford a repayment mortgage and who were banking on the market going up - or at least not going down.

100% is a bit different. I don't think these were ever targeted at investors but largely started turning up as a vehicle for attracting first time buyers who couldn't afford a 25% mortgage as the market heated. They didn't arrive overnight either, they crept in bit by bit. As the 25% deposit disappeared out of reach for first time buyers the banks started introducing 15%, then 5% then 0%.

The key difference is that interest only was originally aimed at investors while zero deposit was aimed at fleecing domestic customers from the start.

[dday9]

What I don't understand is how people can justify not owning a home even after the market crash. I purchased my first home when I was 19 years old for $40,000. I had to come up with roughly $5,000 which at the time I was making tip hourly($2.15) and making roughly $400 a work week as well as about the same on the weekends from tips, it took me about 3 and 1/2 months to save up the amount that I needed while still paying for me and (at the time girlfriend, now she's mah wife!) to live. The inspection went through fine, I got the loan that I needed, and we closed within a month. The loan was larger because of my lack of credit, I think that it was like 5.5%, but even then that is not bad. This was in 2010.

Granted I was living in a very bad neighborhood, but I was also building equity and developing an asset where as a lot of my friends were renting(even today many are still renting). Fast forward a couple of years and I had enough to purchase a better home in a better neighborhood and I've been where I'm at ever since, we recently sold our first home too. Unfortunately because of the neighborhood I didn't make any money off of the sell, but at the same time it did serve its use as collateral on a larger loan.

[dday9]

But I'm pretty proud of myself, I have two loans right now: my house which is a 5 year balloon mortgage which I intend on refinancing before the balloon pops and my business which is a small line of credit.

My car is paid off and I don't owe any student loans. I also didn't finance my furniture, well I did on my first house, but that was paid off in a year. I also do not have any credit cards.

[Shaggy Hiker]

I expect to be down to no loans by July.

There's good reason not to own a house. For one thing, I don't believe you can get anything out here for under $50K, and most houses are over twice that. So, you buy some place and then you are kind of rooted. I had moved a considerable distance (hundreds of miles, minimum) every few years up until I bought my house. Now, it just wouldn't be so easy to move. I'm not trying to, either, so that's not an issue, but it IS a calculation. For one thing, the amount of stuff has expanded to fill the available area. When I moved to Florida, all my stuff fit in my (tiny) car. When I left Florida, I shipped a couple boxes, but everything else fit in my (even tinier) car. When I moved from Lewiston, ID, I needed a mid-sized moving truck. When I moved to my house, I needed the truck, plus a dozen trips by other vehicles. Now....if I have to move again, I think I'll just take some camping equipment and sell the house as is. I don't even want to deal with it.

Still, if you don't expect to stay in one place, buying doesn't make a whole lot of sense. If you live in an area where you couldn't possibly afford a house that would suit you, buying doesn't make a whole lot of sense. So, there are plenty of reasons not to buy, for some people.

[dday9]

I know that the housing market, like in California, is ridiculous. Even then, if I were to move to California then I would likely purchase a mobile home and park it outside of the city. I found a few single wide mobile homes for sale in San Diego's craigslist ranging from $3,000 - $6,000, if you take into consideration a park fee of probably $300 - $500 a month, I'd still coming out ahead as opposed to renting. That whole time I'd save money until I could afford a down payment on a home and if I'm unable to sell the mobile home then I'd just scrap it for about $1,000.

[Gruff]

First day of Marriage. Debt.

Two months Divorced. No Debt.

Today. No Debt.

Hmmmm.

[szlamany]

One of my boys just played volley ball with Ward Hines on a beach in Mexico - played on his team!

[dday9]

The Steeler?

[szlamany]

Yup!

[dday9]

Sweet!

[dday9]

By the way Shaggy, I found this on FaceBook:

[Shaggy Hiker]

That state has too many roads for it to be divided up like that. Now, in our case, there is only one highway that runs N-S through the state. There is a second route, which I biked a couple years back, but most of that wasn't paved. We're still too backwoods to split into multiple states, though.

[dday9]

A lot of the roads there is nothing. Like Hwy 165 from Iowa to Alexandria has 1 "major" town and that is Kinder, the only reason why it is "major" is because of the Indian casino.

[Shaggy Hiker]

When I first moved to Idaho, I missed a turn. I thought I was still on Hwy 55, though it got narrower and narrower. Eventually, the pavement ended. I was beginning to wonder what kind of backwoods place I was moving to...then I reached a private property sign, at which point I realized I must have made a mistake.

Many of our roads have no towns for a very long distance. We're a much bigger state, but there's not so much population.

A landslide during the winter closed one highway. The town at the end of the road was blocked from the outside world for a few months. Just a few weeks ago, road crews were able to dynamite a boulder and clear one lane for traffic to get through. The only other road into that town is closed by snow during the winter. It was getting desperate, I believe that after about three months without any traffic getting through they had finished off all the hard liquor and were down to just a few cases of beer. That town was seriously remote and had a tiny population, but they had a store stocked with more beer than you find in many cities.