Sobering statistics about IL property tax (Chicago, Highland Park: renting, condos, how much)

[damba]

Originally Posted by JonhE

Hi Damba, Thanks for the advice. Been looking at homes to buy recently. Regardless of what others have replied with, property taxes are having a big effect on prices. Wondering if demographics (age) is also starting to become a factor in the nicer areas. There are some good deals out there right now (in some cases one can purchase a home for the same price as 1998). Rents seem to be about $1000 more per month than you would get by purchasing. This is in the $450k-750k range.



Illinois suburbs still have some of the best high schools in the country so my thought is we might as well stay the extra 4 years. Is the rest of the country now becoming a buyers market as well? I missed out on an job opportunity in Austin about 4 years ago (homes there have gone up about 20-40% since). I will probably start to look at rentals now also.



5% commission on 500k is 25k (realtor fees) which is about 250 a month over 4 years. One would think that Illinois homes would not go down that much more in price.

FWIW, I have lived in the north suburbs for almost 20 years.

Like some other posters who have replied, I don’t follow your logic here. At the very least, you would have to stay a lot longer than your kids’ stint in HS here to recoup costs. Maybe your perspective is a little different because you have a fair amount of extra cash to play with making it less risky to only stay 4-5 years then try to sell(?)

[JonhE]

Simple math here. If we assume 1% appreciation on a 500k house per year for 4 years = 20k. The listing fees are 5% so ~$25k. Loss then is $5k over 4 years which is ~$100 per month in loss. Also remember principle is being paid down per month so that is more than covered. Renting as I mentioned is looking to be around $500-$1000 more than P&I and taxes per month. This is based on renting an equivalent 3 bedroom home in the areas I'm looking at.



Yes, if we assume Illinois depreciates 2% per year for 4-5 years, then yes, I see your point on rent vs buy. I should rephrase my question to ask if people think that homes in the north shore suburbs will lose value in the next 4-5 years.

[Hiruko]

Originally Posted by JonhE

Simple math here. If we assume 1% appreciation on a 500k house per year for 4 years = 20k. The listing fees are 5% so ~$25k. Loss then is $5k over 4 years which is ~$100 per month in loss. Also remember principle is being paid down per month so that is more than covered. Renting as I mentioned is looking to be around $500-$1000 more than P&I and taxes per month. This is based on renting an equivalent 3 bedroom home in the areas I'm looking at.



Yes, if we assume Illinois depreciates 2% per year for 4-5 years, then yes, I see your point on rent vs buy. I should rephrase my question to ask if people think that homes in the north shore suburbs will lose value in the next 4-5 years.

Residential mortgages are front-end loaded. Have you had a mortgage before?

I think North Shore home values will continue to tread water for at least another decade or two. That's my hunch based on generational changes.

[damba]

Originally Posted by JonhE

Simple math here. If we assume 1% appreciation on a 500k house per year for 4 years = 20k. The listing fees are 5% so ~$25k. Loss then is $5k over 4 years which is ~$100 per month in loss. Also remember principle is being paid down per month so that is more than covered. Renting as I mentioned is looking to be around $500-$1000 more than P&I and taxes per month. This is based on renting an equivalent 3 bedroom home in the areas I'm looking at.



Yes, if we assume Illinois depreciates 2% per year for 4-5 years, then yes, I see your point on rent vs buy. I should rephrase my question to ask if people think that homes in the north shore suburbs will lose value in the next 4-5 years.

You need to keep on researching. Don’t assume *any* appreciation would necessarily be involved. My area of Deerfield, walking distance to the metra with great schools nearby is mostly flatline like other parts of the north suburbs. Any fixer upper/entry level home won’t be getting you there in that short time frame for the reasons already mentioned. It’s not necessarily about depreciation either.

Take a look at how a mortgage is front loaded like Hiruko suggests too.

[JonhE]

It becomes a question of where values go from here.. Flat? not great, but okay. 1% per year? then that works. -2% per year or worse? Then yes, not worth it. Rent it.



Yes, mortgages are "front loaded". Okay, assume $400k loan. Payment #1 at 4% 360 month term is ~$575 per month that you are paying in principle, $1333 in interest. You do see that right? In my previous posts I mention that given my assumptions, you "lose" $100 per month over 5 years in realtor fees. But you do realize that $575 per month is paying down equity. I hope you understand this basic math.



I am telling you in my other posts that a house you can buy for $3000 per month in P&I and taxes would rent for $3500-4000. You do realize that $575 per month of that P&I payment goes to the principle of the loan? So, you are paying "rent" of $2425 per month. (interest and taxes that are no longer deductible). So, $1000+ cheaper per month that renting from a landlord. Yes, maintenance and other things are your responsibility.

[Hiruko]

Originally Posted by JonhE

I am telling you in my other posts that a house you can buy for $3000 per month in P&I and taxes would rent for $3500-4000. You do realize that $575 per month of that P&I payment goes to the principle of the loan? So, you are paying "rent" of $2425 per month. (interest and taxes that are no longer deductible). So, $1000+ cheaper per month that renting from a landlord.

You are going to spend so much more than "$1,000" more per month on other expenses through ownership.

I know someone who specifically purchased a $420k home in Morton Grove for her child to go to the public high school, and that house is now sitting on the market for more than 2 years for less than $350k. The house has been diligently maintained and neatly upgraded. Never in her wildest dreams did she think that this would happen, and she's been there for more than a decade.

Originally Posted by JonhE

Yes, maintenance and other things are your responsibility.

...and that's a lot. Depending on the age and condition of the house (and at $500k you are not walking into glorious top-of-the-line new construction) you are suddenly responsible for all utilities, landscaping, and other maintenance and repairs. It quickly gets out of hand. When renting you don't have to deal with most of that.

If you want to go buy and get yourself into a pickle like so many other people around here—go for it. If you increase your budget, I might have some options for you.

[fusillirob1983]

Originally Posted by Hiruko

You are going to spend so much more than "$1,000" more per month on other expenses through ownership.

I know someone who specifically purchased a $420k home in Morton Grove for her child to go to the public high school, and that house is now sitting on the market for more than 2 years for less than $350k. The house has been diligently maintained and neatly upgraded. Never in her wildest dreams did she think that this would happen, and she's been there for more than a decade.



...and that's a lot. Depending on the age and condition of the house (and at $500k you are not walking into glorious top-of-the-line new construction) you are suddenly responsible for all utilities, landscaping, and other maintenance and repairs. It quickly gets out of hand. When renting you don't have to deal with most of that.

If you want to go buy and get yourself into a pickle like so many other people around here—go for it. If you increase your budget, I might have some options for you.

Hiruko, I generally agree with you guys in explaining this situation to JonhE. That said, unless someone's doing a ton of upgrades/major projects, I find it difficult to understand how he'd be spending an additional $1k in expenses as a homeowner that he wouldn't as a renter. I can see $100-$200 per month depending on if he does his own landscaping, etc.

[damba]

Originally Posted by fusillirob1983

Hiruko, I generally agree with you guys in explaining this situation to JonhE. That said, unless someone's doing a ton of upgrades/major projects, I find it difficult to understand how he'd be spending an additional $1k in expenses as a homeowner that he wouldn't as a renter. I can see $100-$200 per month depending on if he does his own landscaping, etc.

Have you ever owned a home that was not ‘turnkey’ ready/brand new?

Hiruko is being polite in his recommendation and is spot-on, regardless of how the precise monthly dollar amount expense ‘overage’ shakes out.

The OP is not acknowledging the current market here at his price point in the north suburbs.

[fusillirob1983]

Originally Posted by damba

Have you ever owned a home that was not ‘turnkey’ ready/brand new?

Hiruko is being polite in his recommendation and is spot-on, regardless of how the precise monthly dollar amount expense ‘overage’ shakes out.

The OP is not acknowledging the current market here at his price point in the north suburbs.

No, I bought mine requiring minimal work to be done. Between that and less familiarity with the northern burbs market, I wasn't sure how far $500k would get him. I assumed that was at the lower end of the price range though.

[JonhE]

Can go higher in price, but around this price gets you a nice sized house. Property tax, maintenance, heating costs, etc are lower. Not a mansion for sure, but buys a well kept 2200 sq ft house. Most of the homes we are looking at have gone through price "adjustments" like the Morton Grove example above (this includes Lake Bluff, Lake Forest, Highland Park, Wilmette). How much lower in price do you expect things to get?