Sad (Chicago, Downers Grove, Glenview: school, high income, taxes)

[Avondalist]

Originally Posted by IrishIllini

Exactly. Building equity in your home is not to be understated. Renting is money down the drain.

This isn't always true. For example some suburban homeowners in the Chicago area can be expected to pay as much in yearly property taxes as someone in the city would pay in rent. Neither build equity, and neither are "money down the drain". Both are an exchange of cash for services and the rental of property (either the landlord's or public property such as roads). Of course, the homeowner will probably get more space, a nicer abode, and better services such as schools. So you get what you pay for.

Combine those property taxes with mortgage interest, and renting may come out ahead if you don't need the space and amenities, or don't plan to stay where you are past, as a rule of thumb, seven years.

What about the forced savings? That is a good argument for homeownership for those who struggle to save. However if you can save without being forced to, investing your cash in the stock market will realize greater returns than investing in real estate.

The best argument for homeownership is that people are not future oriented and will discount the cost of renting in their senior years, either because they don't realize they will make less money then or they don't realize inflation will keep raising rents.

So if you struggle to save money, rather than spend it, and you don't regularly spend time planning out your retirement, homeownership is indeed a "no-brainer" way to secure your future. However if can save money and do understand the costs of retirement as a renter, or better yet plan to buy later in life after accumulating money, then homeownership may not be the best. You could do better by renting for decades, taking advantage of the mobility to move from city to city in search of a higher wage, and then retiring to a less expensive place than the ones you worked in. All the while pumping up your IRA/401k with the money saved from not building equity. I understand this strategy works best for singletons or DINKs and is much harder for families. But it's not as clear-cut as saying you should always buy rather than rent.

[damba]

Originally Posted by Avondalist

What about the forced savings? That is a good argument for homeownership for those who struggle to save. However if you can save without being forced to, investing your cash in the stock market will realize greater returns than investing in real estate.

True, the higher returns are usually elsewhere, but investing in real estate (even just what you plan on living in) is still a decent way to diversify your portfolio. Many of my friends/work colleagues who got too scared early on to buy something before they had spouses/kids are kicking themselves now with no equity whatsoever to be able to put towards a decent family sized home in areas w/ the better schools. Even though their salaries are higher than when they started out lower and saddled w/ student debt, they need a lot more to even get skin in the game now.


Obviously though, there is no 'one size fits all'. Way too many variables.

[chet everett]

Originally Posted by Avondalist

This isn't always true. For example some suburban homeowners in the Chicago area can be expected to pay as much in yearly property taxes as someone in the city would pay in rent. ...

Here is an inexpensive condo building in unincorporated Oak Brook -- https://www.redfin.com/IL/Oak-Brook/.../home/18087395 The property taxes are barely 1% and even the HOA means the monthly out of pocket is under $500.

Here is a well priced 2 bedroom condo in Oak Park. While it is generally accepted that Oak Park has a relatively stiff property tax burden the numbers on this place still are just a tad over $600 for property tax and HOA -- https://www.redfin.com/IL/Oak-Park/5.../home/13268981

Even Evanston, not known for anything other than fairly steep property taxes, is not going to fit the scenario of "taxes higher than rent" -- at $170/mo you won't find a hot cot from some rip off AirBNB operator in Chicago's worst neighbor and even with $350/mo in HOA fees this is still just $520/mo, not even close to rent in the worst part of Chicago ... https://www.redfin.com/IL/Evanston/1.../home/77444571

Show me any apartment inside Chicago that compares well to these and guaranteed it will be in a neighbor that is literally overridden with negatives!

Mod cut.

[Avondalist]

Originally Posted by chet everett

Show me any apartment inside Chicago that compares well to these and guaranteed it will be in a neighbor that is literally overridden with negatives!

I said you get what you pay for. I did not claim you can rent a comparable property for less than you can buy.

There are many apartments in Chicago with rents less than $1000 per month and many houses in the Chicago area with property taxes above $12,000 per year.

[IrishIllini]

Originally Posted by Avondalist

This isn't always true. For example some suburban homeowners in the Chicago area can be expected to pay as much in yearly property taxes as someone in the city would pay in rent. Neither build equity, and neither are "money down the drain". Both are an exchange of cash for services and the rental of property (either the landlord's or public property such as roads). Of course, the homeowner will probably get more space, a nicer abode, and better services such as schools. So you get what you pay for.

Combine those property taxes with mortgage interest, and renting may come out ahead if you don't need the space and amenities, or don't plan to stay where you are past, as a rule of thumb, seven years.

What about the forced savings? That is a good argument for homeownership for those who struggle to save. However if you can save without being forced to, investing your cash in the stock market will realize greater returns than investing in real estate.

The best argument for homeownership is that people are not future oriented and will discount the cost of renting in their senior years, either because they don't realize they will make less money then or they don't realize inflation will keep raising rents.

So if you struggle to save money, rather than spend it, and you don't regularly spend time planning out your retirement, homeownership is indeed a "no-brainer" way to secure your future. However if can save money and do understand the costs of retirement as a renter, or better yet plan to buy later in life after accumulating money, then homeownership may not be the best. You could do better by renting for decades, taking advantage of the mobility to move from city to city in search of a higher wage, and then retiring to a less expensive place than the ones you worked in. All the while pumping up your IRA/401k with the money saved from not building equity. I understand this strategy works best for singletons or DINKs and is much harder for families. But it's not as clear-cut as saying you should always buy rather than rent.

Renters pay property taxes in the form of higher rents. It's not as if landlords are sitting around saying "damn, my property taxes went up $200 dollars this year...well, better just eat that and not charge an extra $25 a month in rent." Unless you have school-aged children, I personally see no benefit to living in the suburbs unless you NEED to have a yard with an attached two car garage. You could truthfully get that in the city, but to each their own. If your jobs requires you to be out in the suburbs for commuting reasons, then I can understand.

[chet everett]

To suggesting that there is some secret source of safe apartments that can be rented on the cheap would be a revelation the bargain hunters would love to hear about!

There is no way somebody shopping for a home with taxes of over a thousand per month could find something to rent for their family for the same amount -- to suggest otherwise simply shows a basic misunderstanding of the entire landscape for renting or purchase.

Saying you get what you pay for is very different than acknowledging the high taxes in some areas support local services that are neglected in other areas, and even that would have to tempered with sad fact that many unfortunate towns with poor history of fiscal responsibility and political clout suffer high taxes with subpar local services while desirable areas have relatively modest tax rates due to well planned mix of high value property and thoughtful local politicians to ensure responsible budgets for local schools, police , fire, etc...

[CGab]

Glad we sold our home in Illinois last year and got our before the housing prices fall again!

[My Kind Of Town]

Originally Posted by CGab

Glad we sold our home in Illinois last year and got our before the housing prices fall again!

If home prices fall in the Chicago metro area they are almost guaranteed to fall in NWI as well. NWI is highly dependent upon Chicago. Home prices have not risen at a greater rate over the past year in NWI when compared to the Chicago metro area. Also, Illinois is far outperforming Indiana over the past year:

http://www.zillow.com/il/home-values/

http://www.zillow.com/in/home-values/

[damba]

Originally Posted by My Kind Of Town

If home prices fall in the Chicago metro area they are almost guaranteed to fall in NWI as well. NWI is highly dependent upon Chicago. Home prices have not risen at a greater rate over the past year in NWI when compared to the Chicago metro area. Also, Illinois is far outperforming Indiana over the past year:

Illinois Home Prices & Home Values | Zillow

Indiana Home Prices & Home Values | Zillow

CGab's posts to C-D would indicate that she has the blinders on.

[jvr789]

Originally Posted by My Kind Of Town

If home prices fall in the Chicago metro area they are almost guaranteed to fall in NWI as well. NWI is highly dependent upon Chicago. Home prices have not risen at a greater rate over the past year in NWI when compared to the Chicago metro area. Also, Illinois is far outperforming Indiana over the past year:

Illinois Home Prices & Home Values | Zillow

Indiana Home Prices & Home Values | Zillow

Yes and no. If home prices fall in IL b/c the economy in Chicago tanks you are correct. That is also not good for NWI as Chicago is the economic generator of the greater region.

Now, if home prices in IL fall b/c state and local taxes increase that does not necessarily have any impact on home values in NWI. In fact, that could actually have the opposite impact as people can actually put more towards the actual cost of a house in Indiana vs. IL. (For same monthly payment, more goes toward your mortage and less goes to taxes in Indiana).

As someone who lives in NWI I certainly would never cheer for the demise of Chicago. Nope, I really like Chicago. However, overall the recovery in Chicago has been sluggish. Indiana is already over the last price peak but IL is not there yet. I hope the IL politicians can yet it together but I'm not betting on that.

Now, where you live in Hinsdale, things are great but unfortunately many of your IL neighbors are not doing so well....