patrick.net

HeadSet says

WookieMan says

Take out a $10k tax free equity loan

Why would anyone do that unless they are cash poor? My cash in the bank earns about 4% while equity loans are around 6%. "Tax free" has nothing to do with it.

Why spend your after tax dollars or capitals gains??? I think my point is obvious. I'm taxed around 20% federal alone. Varies year to year. The spread is 16% and I still get to keep the cash in the bank. Not sure what's confusing here. I'm losing 14-16% if I just pay the property as normal income. That $2k increase is costing you 3-4 times more than borrowing it and planning.

Borrow a tiny amount tax free to cover your new property tax rate for the next 5 years. Problem solved. Keep 1 years taxes liquid in a savings account and drop the next 4 years in a CD or a dividend yielding fund that will cover your interest. Your equity is now paying your taxes and you didn't have to earn more.

Also $2k is a trivial amount if you have a $1M valued house. That's like a direct tv subscription.

There's a reason I don't work much. 2nd I know the rules of the game to save me the most money. All legal. Live with 90% of your income coming in 3 months of they year. You'll HAVE to learn a lot. Point being you can have your taxes paid for you. You might be able to write it off if you itemize if you keep receipts for shit you already needed.

You should keep all receipts for anything really. My money is tied up in retirement funds to protect myself after the housing crash, but it's the reason I'm a millionaire already. I think outside the box.

From about 1870-1910, inflation in the US was minimal despite a boom in industrial capacity, population, etc. Didn't save the article, but basically it compared everyday items from bread, flour, lamp oil, coal, etc. and these staples barely moved.

All before the Fed was created by JP Morgan. State controlled banks for the win.

WookieMan says

Why spend your after tax dollars or capitals gains??? I think my point is obvious. I'm taxed around 20% federal alone. Varies year to year. The spread is 16% and I still get to keep the cash in the bank. Not sure what's confusing here. I'm losing 14-16% if I just pay the property as normal income. That $2k increase is costing you 3-4 times more than borrowing it and planning.

When you make payments on that loan, aren't you paying each installment with "after tax income?" Still cheaper to pay the $2k with "after tax income" up front than to make a series of "after tax income" payments that amount to the that $2k plus added interest.

HeadSet says

When you make payments on that loan, aren't you paying each installment with "after tax income?" Still cheaper to pay the $2k with "after tax income" up front than to make a series of "after tax income" payments that amount to the that $2k plus added interest.

Sure, but you invest the next 4 years of future taxes payments. If in the right situation you can write the loan off and the gains will out pace the after tax money and interest. By any metric it would be a 50-70% reduction in that new $2k property add on tax bill. Or just pay it with full after tax if you're so inclined.

I've found ways to avoid taxes as much as possible over the last decade. Our travel is not with after tax dollars. I didn't "work" this year to save us $30k in fed and state taxes. I still get cash work. The joys of not working is I can research this stuff hours a day/night and I'm essentially paid for it. I save our family $50k a year roughly sitting at this computer. I may not articulate what I'm doing well, but I make money for the lifestyle we have in a big way.

There aren't any situations where helocs are a good idea unless you're distressed and are trying a gamble to get out of it. Interest rates suck atm and your home is the collateral (with the risk of sinkiging equity value), can terms be any worse? Lol why not get 0% CC offers or take an emergency 401k loan.

mell says

Lol why not get 0% CC offers or take an emergency 401k loan.

You can't pay property taxes with a CC in any county I've lived in. There's no CC with 0% cash advances. 401k loans come out of your pay IF your employer even provides the ability to do it so no different than a HELOC.

A HELOC is a 2nd or 3rd lien position. Can't foreclose on you, so don't pay if you don't want to. It's the safest way to borrow money if you get hit with a tax bill increase and the mortgage goes up or if you own the home outright, cash to pay for it. If your house has equity, you'll eventually sell it and can pay the HELOC off whenever.

Again, you invest the extra you pulled out on the HELOC that wipes out the higher payment. Your property tax raise is erased. Again you're planning 5 years in advance in my scenario.

Either way, I'll state again $2k is trivial. I'm just pointing out a way to float the higher payment for 5 years with less impact on finances. Ultimately you need to move if they're bumping annual tax payments $2k. That's not normal at all unless in a $2-3M neighborhood in almost any state. If $2k makes you blink, I'd get out.

WookieMan says

Sure, but you invest the next 4 years of future taxes payments.

I knew this would boil down to that tired argument promoted by realtors and bankers who profit from one borrowing as much as possible. "Get an equity loan at 6% plus fees but make money by investing with an 8% return." Trouble is, you cannot borrow at current mortgage rates and invest in CDs, bonds, MMAs, or other risk-free investments that beat the mortgage rate. The follow on to my response is usually something like "If you were as skilled as me, you would find these high return investments." Oh yeah? Name them. I would be glad to take cash money out of my 4% and 5% accounts to put in a higher return.

WookieMan says

Either way, I'll state again $2k is trivial.

True, which is why that $2k was never the issue. Our discussion concerns the flawed logic of using a home equity loan to pay it versus using cash on hand.

HeadSet says

Oh yeah? Name them. I would be glad to take cash money out of my 4% and 5% accounts to put in a higher return.

No one is getting my point. You take out $50k and invest it. You cover your new $2k in taxes, with TAX FREE money. You saved yourself 20% if you make good money. Yes you have to pay the HELOC at 7-10%. But you invest the other $48k in the meantime.

Why would you pay 20-30% more on a $2k tax increase depending on income in federal taxes? That's the point. You're going to have to pay more either way, but you can reduce your tax burden doing what I'm saying. Tax free loan that you can potentially write off the interest if you itemize. This isn't complicated.

HeadSet says

Well now you have. My neighborhood is full of $1M plus homes who all got the $2k or so increase. Thing is, just 3 years ago these same homes were not $million homes. Now we are taxed like million-dollar homes. The mil rate here is 83 cents per hundred and I suspect the mil rate where you live is much higher.

Taxes on a 500K house in San Antonio is nearly 12K. In the county. It's a lot worse in the city limits.

AmericanKulak says

From about 1870-1910, inflation in the US was minimal despite a boom in industrial capacity, population, etc.

Boom? Weren't 1873-79 years of so-called "Long Depression"? Then there was the Panic of 1893 which kicked off another depression lasting until 1897-ish. This can explain the lack of inflation.

SoTex says

Taxes on a 500K house in San Antonio is nearly 12K. In the county. It's a lot worse in the city limits.

Mine will be about $16,000 out the gate after a $650k build. I'll appeal. I'll get it down to $12k. Just gotta do the work. I might get it lower. Networking. Got to know the right people and I know everyone in my region that can help me. Also being an ass hole when needed helps out. I thrive in that environment.

WookieMan says

Ultimately you need to move if they're bumping annual tax payments $2k. That's not normal at all unless in a $2-3M neighborhood in almost any state.

Oh yeah?
Here is where the `the taxes went up $1,131 per six months or $2262 per year:


On a house assessed at just over $1 million.



Now imagine comic Sam Kinison leaning over you as you sit close to the stage - "Taxes went up $2,000 from the last two years. But do you know what taxes will do in two more years if inflation is not under control? Do you? Huh? Do you? Huh? THERE GONNA GO UP ANOTHER TWO THOUSAND!!!"

HeadSet says

Oh yeah?
Here is where the `the taxes went up $1,131 per six months or $2262 per year:

That's not normal. Can you verify if there was a referendum? Most people fall asleep at the wheel in non-POTUS election cycles. The school probably had a referendum on the ballot in the spring likely.

This is why local politics far outweigh national politics. Your local school district is likely getting a building expansion with a bunch of useless shit.

Well, they must somehow offset the lack of SIT, so there you go.

WookieMan says

HeadSet says

Oh yeah?
Here is where the `the taxes went up $1,131 per six months or $2262 per year:

That's not normal. Can you verify if there was a referendum? Most people fall asleep at the wheel in non-POTUS election cycles. The school probably had a referendum on the ballot in the spring likely.

This is why local politics far outweigh national politics. Your local school district is likely getting a building expansion with a bunch of useless shit.

This is why we had a tax revolt resulting in passing of Prop13.

WookieMan says

Can you verify if there was a referendum?

No, remember that the taxes went up because the assessments went up (the mil rate actually decreased by a penny). This change was caused by inflation alone.

WookieMan says

SoTex says

Taxes on a 500K house in San Antonio is nearly 12K. In the county. It's a lot worse in the city limits.

Mine will be about $16,000 out the gate after a $650k build

Well, my $2k increase does not seem bad at all compared to that. At least Texas has no state income tax.

HeadSet says

Well, my $2k increase does not seem bad at all compared to that. At least Texas has no state income tax.

Yeah, Texas is one of the worst property tax states but no income tax. Older folks can freeze rate increases with some type of exception, I forgot what it's called. Homestead something something. So that helps some oldsters from getting thrown out on the street. But it's still BS if you ask me to tax people's homes. Rentals I could see maybe but not basic homeowners.

Each of my rentals went up about 2K over the past couple of years, similar to your situation.

So far, all is proceeding as I have forseen...

SoTex says

Yeah, Texas is one of the worst property tax states but no income tax. Older folks can freeze rate increases with some type of exception, I forgot what it's called. Homestead something something. So that helps some oldsters from getting thrown out on the street. But it's still BS if you ask me to tax people's homes. Rentals I could see maybe but not basic homeowners.

Each of my rentals went up about 2K over the past couple of years, similar to your situation.

You don't have kids I presume? That's 80% of property taxes. Senior exemption is an attempt to take it easy on those that for sure don't have school aged kids. It's not like they care about you being old, but they know you're not sending kids to school.

Outside of CA, most income state taxes are fine, from 0-5%. It's not that much money as it doesn't kick in right away in almost any state I know of. I'm going to eat a bear shit this year though. We overpay but shit, we're in the wheelhouse of big spenders, the amount we get taxed is retarded.

If the income tax went away I could employ 2-3 people no problem. Partially. I'd stop mowing my own lawn and hire someone. House cleaner. Other chores I do that I have no interest in doing. Clearing the driveway in the winter. Small projects around the house.

My wife employs 20 people in just her region. $80k/yr jobs working on roads. 3 months off. Let us spend our fucking money and don't take it from us. At least federally.

The effect of ending the federal income tax would be the same as the government printing a bunch of money and spending it...INFLATION. That's all that would happen. Adding $$ doesn't add supply. If we want America to prosper, we need more supply of more things. It's as simple as that.

The easiest way to get rich is to own assets and/or means of production and then being able to limit the supply. Just sit back and watch things go up up up.

AmericanKulak says

So far, all is proceeding as I have forseen...

...but not according to the Housing Experts of PatNet.

DemocratsAreTotallyFucked says

AmericanKulak says

So far, all is proceeding as I have forseen...

...but not according to the Housing Experts of PatNet.

You cats live in dip shit areas that haven't been burned yet. It's coming. The exodus is coming. We already went through it and are having a building boom. The people that stayed, did so. No one built and now they are. Took us about 15 years at this point. You guys are year 5 best case. The path is not pleasant. You have a decade before you realize how fucked you are.

WookieMan says

The path is not pleasant. You have a decade before you realize how fucked you are.

Wookie, please clarify and expand. What do you mean about "dip shit areas" and "year 5" ? ? ?

.

AD says

Wookie, please clarify and expand. What do you mean about "dip shit areas" and "year 5" ? ? ?

CA specifically. People keep saying "foreign buyers" will keep the market afloat. Prop 13 and people won't sell.

People are moving out of CA. They did it in IL and it was a 15 year process. CA is in year 5. I think TX and FL are just at the start. FL more boomers dying and those not filling in the vacancies. I think NY is dying as well. Not sure what year they're in. I think CO might die too. You can't move there into the mountains, which is 80% the reason most people move there for.

What I'm saying is there's a lot of migration in the country. You can work anywhere and make the same amount of money. The dip shit areas are where the states that are oppressive, those people move to them. Think Boise, Austin, Nashville. The prices will crash in those places at some point.

WookieMan says

You can work anywhere and make the same amount of money.

I can't.

Lawler: Mortgage Rates Have Surged Since the Federal Reserve Cut Interest Rates Last Month

From housing economist Tom Lawler:

Folks who expected that mortgages rates would decline when the Federal Reserve began cutting its federal funds rate target range have been dazed and confused over the last month and a half. Since the day before the Fed’s 50 bp reduction in its funds rate target on September 18, 30-year MBS yields have surged by 84 to 96 bp, while mortgage rates have jumped by 72 to 89 bp. At the same time intermediate- and longer-term Treasury yields have risen 53 to 67 bp.

There are two main reasons MBS and mortgage rates have risen by more than Treasury rates over this period. First, implied interest rate volatility has surged, as many market participants were caught off-guard by the string of unexpectedly strong economic releases (and slightly higher inflation releases) following the Fed’s rate decision. For example, the BofAML MOVE index, a measure if implied interest rate volatility derived from one-month options on Treasuries across the yield curve, increased from 101.58 on September 17 to 130.92 on October 28, its highest reading since October 30, 2023. (Mortgage investors effectively write a prepayment option to home borrowers, and as such higher implied interest rate volatility increases the premium over Treasuries that investors require to compensate them for prepayment risk.)

And second, MBS option-adjusted spreads, which were at the low-end of the “no Fed MBS intervention” range just prior to the Fed’s action, have since moved higher.

Based on an assessment of various measures, my best is that the neutral real interest rate in the US is between 1 ¾% to 2%. One of course needs to add inflation/inflation expectations to that range. If/when the Fed were to achieve its 2% inflation target, then the neutral nominal interest rate would be 3 ¾% to 4%.

Factor in a normal yield curve (longer rates higher than short rates), and a more normal spread from the 10-year yield to 30-year mortgage rates, and you can see why there is a new normal range for 30-year mortgages.

See from June 2023: Could 6% to 7% 30-Year Mortgage Rates be the "New Normal"? and an update in August 2023: The "New Normal" Mortgage Rate Range

https://calculatedrisk.substack.com/p/lawler-mortgage-rates-have-surged