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Is "income" in the article net or gross? There is a huge difference.
Yah they don't say, but that is a great point because a lot of poor people dont pay any income taxes.
However, for most middle class people the largest single component of spending is taxes (of all forms), and housing is usually second place, with health care being third place, then food.
Also further complicating that is the fact that a large portion of the cost of housing and health care for the middle and upper classes is basically itself a form of taxation, due to the prices including subsidies that are used to benefit others.
It is very difficult to understand what the true cost of housing really is for the population unless you also understand what else they are paying for.
And if you know what else they buy, or pay for then you can possibly answer the question of whether they are over-spending on housing.
For example, where did this 30% guideline come from? It seems like it is an arbitrary number. How did the experts manage to determine what the threshold should be?
Just taking in one border to share the rent/house payment & utilities makes a big difference
Living in a tourist type area, might be able to rent to a border just seasonally
I always find it interesting that people say you should buy a home to avoid yearly rent increases (and therefore keep housing affordable). However, even discounting home maintenence costs, and assuming a fixed rate mortgage, the monthly cost of home ownership is far from stable. Property tax (and to a lesser extent, homeowners insueance) costs often increase year to year.
We've had our monthly payment go up by a few hundred dollars on our house in the last few years due to property tax hikes, and the county even has our house way undervalued (based on what our neighbors with the same floorplan have sold for). I guess the equity makes up for it in the long run, but not until we sell.
p.s. I am buying two new flannel shirts (for winter) this week, my first new (as opposed to used thrift store) shirts in 10 years. Couldn't resist the Early Black Friday price of $8 each, which is just $1 more than well-worn thrift store shirts.
Are you living in poverty? There is a middle ground. I would recommend you search for it.
Quote:
Originally Posted by tortoisegirl
I always find it interesting that people say you should buy a home to avoid yearly rent increases (and therefore keep housing affordable). However, even discounting home maintenence costs, and assuming a fixed rate mortgage, the monthly cost of home ownership is far from stable. Property tax (and to a lesser extent, homeowners insueance) costs often increase year to year.
We've had our monthly payment go up by a few hundred dollars on our house in the last few years due to property tax hikes, and the county even has our house way undervalued (based on what our neighbors with the same floorplan have sold for). I guess the equity makes up for it in the long run, but not until we sell.
If you were renting your house, the landlord would be getting the same property tax increases and passing the costs on to your monthly rent.
Affordability is an issue, no doubt. However a lot of people are choosing to pay well over the standard percentage because they prefer a nicer place and can afford it.
Also the metric typically omits transportation costs. In big cities many people pay little or nothing for transportation, and use that money for housing instead. (In those cases, if they're buying vs. renting, some of that goes to equity, which is almost as good as savings!)
I always find it interesting that people say you should buy a home to avoid yearly rent increases (and therefore keep housing affordable). However, even discounting home maintenence costs, and assuming a fixed rate mortgage, the monthly cost of home ownership is far from stable. Property tax (and to a lesser extent, homeowners insueance) costs often increase year to year.
We've had our monthly payment go up by a few hundred dollars on our house in the last few years due to property tax hikes, and the county even has our house way undervalued (based on what our neighbors with the same floorplan have sold for). I guess the equity makes up for it in the long run, but not until we sell.
In 36 states, property tax rates are higher on rental property than on owner-occupied homes. Renting is never a good way to reduce the take of property taxes.
I’m surprised it’s only 39 million buying too much house.
We’ve been through this many times. A modest house in a safe town with a strong school system with a short commute to work is a decent trade off between ROI in your personal finances versus quality of life. With today’s small household size, a 1960s starter home on a small lot that needs some sweat equity is fine. Everyone wants the new construction monster house on the huge lot. You’re way better off investing the difference in the market.
In high COL places, that housing could very well be a small condo since median household income in those regions won’t buy that small starter home. The school system is critical since that provides such a large advantage. It’s not the brick & mortar building or the teachers. It’s the peer group that all share a common educational and work ethic.
Yah they don't say, but that is a great point because a lot of poor people dont pay any income taxes.
They may not pay any FEDERAL INCOME TAX, but everyone pays taxes of many sorts. There is no escaping them.
Quote:
Originally Posted by phantompilot
However, for most middle class people the largest single component of spending is taxes (of all forms), and housing is usually second place, with health care being third place, then food.
Food and shelter are each expected to average about 30% of household income. But even the top 1% of income earners loses only 29% of those incomes to taxes of any kind.
Quote:
Originally Posted by phantompilot
For example, where did this 30% guideline come from? It seems like it is an arbitrary number. How did the experts manage to determine what the threshold should be?
Well, they ARE experts, after all. They are probably capable of looking at a lot of data and making some rational judgments about things. Is that what you do?
Is "income" in the article net or gross? There is a huge difference.
The standard reference would be to household income which is before taxes and other mandatory payments.
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