Talk to me about taxes (Chicago: loan, buy, salaries)

[spicy_guy]

Originally Posted by damba

Most people would pause before placing so much of their cash in a non-liquid asset (e.g. extremely high priced CA real estate). Buying anything around the Bay area would do just that. Unless your household income went up quite a lot, you would be not necessarily hedging anything by buying there.

Perhaps you know something about the CA RE market, property taxes and overall COL situation in 20 years that I don't when you are going to try to sell the CA home? <rhetorical>

Please focus on my comment above in the thread regarding school comparison and COL. You make plenty of money to be able to afford a really nice house here in a nice suburb, unless you are heavily in debt.

Never been in debt. But the taxes worry me. But if someone tells me, its actually worth it, I would definitely buy.

Thanks for the write-up.

[wjj]

Originally Posted by spicy_guy

Never been in debt. But the taxes worry me. But if someone tells me, its actually worth it, I would definitely buy.

Thanks for the write-up.

I have lived in the Lake County side of Buffalo Grove for 30 years. The big plus is the school system. District 96 and Stevenson High School are at the very top in the state and Stevenson is in the top tier in the country. If you look at the breakdown in the real estate tax bill, about 75% goes to the schools. The other big plus in BG in general is all of the parks and open space, including an extensive bike/walking path system.

If you are on the Cook County side of BG, it may not be worth it since the schools are definitely a notch or two lower.

RE taxes are relentless in the Lake County side of BG. During the housing crisis, my home dropped about 25% in value, yet my real estate taxes rose every single year. The taxing districts just maxed out their rates to make up for the lower assessed value of the property base. Home prices have not recovered (still down about 10%+ from 2006 levels) but since taxes kept rising, the real estate tax rate (RE tax/home value) has risen quite a bit. As you point out, this creates a problem since real estate taxes keep rising further depressing home price recovery. There are many homes that are being sold for less (sometimes a lot less) than the current owner paid for them. It's a vicious circle.

You do get decent value for the taxes in the Lake County side of BG, but not nearly the value we had 10 years ago (i.e., Stevenson is no better today than it was 10 years ago but the tax rate I pay to District 125 is much higher now than it was in 2006). The village is pretty careful with how they spend money and if they even consider any reckless spending, there is an activist streak in residents who quite quickly, effectively, and publicly stand up and quash any such fantasies (see the redevelopment of the village campus plan that was crushed last year).

[RJA29]

Originally Posted by spicy_guy

Never been in debt. But the taxes worry me. But if someone tells me, its actually worth it, I would definitely buy.

Thanks for the write-up.

Never been in debt, not even a house?

A 1MM+ house with 200K salary is quite a stretch, IMO.

[spicy_guy]

Originally Posted by RJA29

Never been in debt, not even a house?

A 1MM+ house with 200K salary is quite a stretch, IMO.

Yes, never. I don't own a home now. I have been renting for the past 12 years.
Two cars paid off with cash. No loans. Well afraid of debt :-). I use credit cards for points. Not actually for "credit".

[spicy_guy]

Originally Posted by wjj

I have lived in the Lake County side of Buffalo Grove for 30 years. The big plus is the school system. District 96 and Stevenson High School are at the very top in the state and Stevenson is in the top tier in the country. If you look at the breakdown in the real estate tax bill, about 75% goes to the schools. The other big plus in BG in general is all of the parks and open space, including an extensive bike/walking path system.

If you are on the Cook County side of BG, it may not be worth it since the schools are definitely a notch or two lower.

RE taxes are relentless in the Lake County side of BG. During the housing crisis, my home dropped about 25% in value, yet my real estate taxes rose every single year. The taxing districts just maxed out their rates to make up for the lower assessed value of the property base. Home prices have not recovered (still down about 10%+ from 2006 levels) but since taxes kept rising, the real estate tax rate (RE tax/home value) has risen quite a bit. As you point out, this creates a problem since real estate taxes keep rising further depressing home price recovery. There are many homes that are being sold for less (sometimes a lot less) than the current owner paid for them. It's a vicious circle.

You do get decent value for the taxes in the Lake County side of BG, but not nearly the value we had 10 years ago (i.e., Stevenson is no better today than it was 10 years ago but the tax rate I pay to District 125 is much higher now than it was in 2006). The village is pretty careful with how they spend money and if they even consider any reckless spending, there is an activist streak in residents who quite quickly, effectively, and publicly stand up and quash any such fantasies (see the redevelopment of the village campus plan that was crushed last year).

The more I read about it, the stronger the feeling that, no point in paying high taxes for no return of true value.

[chet everett]

Originally Posted by spicy_guy

The more I read about it, the stronger the feeling that, no point in paying high taxes for no return of true value.

I am among the most pessimistic of the posters here when it comes the fiscal irresponsibility that has but Illinois at the bottom of the heap economically of states but when it comes to personal financial priorities one truly does need to consider the alternatives.

As a former landlord I well know what sorts of rent I would charge for a family sized home in town served by desirable schools. The tenants I had absolutely would have been better off buying the places when you consider the historically low rates available for mortgages, the relative boost to one's taxes that comes from paying property taxes and mortage interest, as well as the potential for appreciation in nice areas when one buys a place that is on the affordable end in an otherwise desirable neighborhood.

The alternatives could certainly include living in a low cost apartment complex, but the satisfaction that comes from having a much quieter, more spacious place to live is something that has a tremendous appeal and the value of such living is such that few families would ever consider the situations fungible. The fact is even when you rent some portion of your housing dollars is flowing back to local units of government but the bias, in terms of positive results, seems to strongly favor home owners over renters -- the majority of kids performing at the highest level in schools, as well as families enjoying the benefits of things like nice libraries, park districts and municipal recreation are overwhelmingly coming not from crowded rental complexes but single family detached homes.

[damba]

Originally Posted by wjj

You do get decent value for the taxes in the Lake County side of BG, but not nearly the value we had 10 years ago (i.e., Stevenson is no better today than it was 10 years ago but the tax rate I pay to District 125 is much higher now than it was in 2006).

Isn't 'value' somewhat relative though? It's not like the schools got worse. If anything, the fact that Stevenson (and may of the feeder districts) are still very good (recognized nationally) should solidify a decision to purchase a home in that area. (Hint: buy maybe buy a starter house now while prices are still low to flat)

If the majority of the property taxes went to how the village spent their money I would be much more concerned.

cheers

[damba]

I suggest you consider Chet's post, and think again in context about what I wrote about your fantasy of striking it rich in CA flipping a house you haven't even bought someday. Even my much more well off relatives/friends out there (arguably, with more access to high salaries of tech-based careers) have issues with the CA housing market.

IMNSHO you may have wasted money renting in Chicago for the last 12 years unless you have seen that money grow significantly elsewhere in other investments.

Originally Posted by spicy_guy

The more I read about it, the stronger the feeling that, no point in paying high taxes for no return of true value.

[damba]

Originally Posted by RJA29

Never been in debt, not even a house?

A 1MM+ house with 200K salary is quite a stretch, IMO.

Exactly. And that's just the cost of housing, not looking at CA's overall insanity.

Is the OP a troll or naive?

[wjj]

Originally Posted by damba

Isn't 'value' somewhat relative though? It's not like the schools got worse. If anything, the fact that Stevenson (and may of the feeder districts) are still very good (recognized nationally) should solidify a decision to purchase a home in that area. (Hint: buy maybe buy a starter house now while prices are still low to flat)

If the majority of the property taxes went to how the village spent their money I would be much more concerned.

cheers

I agree with you. There is still good value to be found in BG, especially in the neighborhoods that were built in the 1970s like Strathmore. I just don't think the value is as good today as it was 10 years ago when homes were worth 10-15% more than they are today and real estate taxes were 30% lower while school performance is the same, albeit outstanding the entire time.

You can buy a lot of house in BG with an income of $200K at today's historically low mortgage rates (my first mortgage was at 17.5% - hard to believe but that was the market in the early 1980s). Being able to lock in 3.5% for 30 years was unheard of between the early 1950s and this decade. It won't last, so I personally would take the plunge. Higher real estate taxes are a fraction of what the additional interest would be on a 7% loan, which was about the norm over the previous 25 years.