Michigan homes no longer savings bastion

mlive.com ^ | 3/11/07 | Sarah Kellogg

[kjo]

Thanks for your words. As long as the welfare cliental in Detroit, Flint and Saginaw continue to vote overwhelmingly for Democrats nothing is going to change.

We had the most important governors' election in our history last year, a conservative Republican against a big tax, big spending liberal and the liberal won.

I have five more years before I retire, I'm otta here. Most I know plan on moving at some point. Michigan's university grads leave immediately upon getting their diplomas.

The State has become a huge welfare suckhold.

[L98Fiero]

"Generally, paying off your house mortgage has a better rate of return than investing in many other things."

Depending on the interest rate. If your interest rate is low, I can't see how this can be a better use of cash, strictly from an investment standpoint.

[machman]

If Michigan really missed much of that boom, housing is far more affordable there.

No house is affordable when you don't have a job.....

Plus, compared to where I live now, and many other states, Michigan has very high property taxes. My house I live in now is worth 50% more than the one I lived in in Michigan, but my property taxes are less than half......

[Graybeard58]

Similar story here. My house has increased in value by about 300% in the last 12 years, while my taxes increased by about 15%.

I don't have a mortgage and I never considered my house as an "investment", it's a place to live.

[carolinalivin]

When deciding to pay off the mortgage, you should also figure the net cost of borrowing the money. If your rate is 6% and you are in a one-third tax bracket, the cost of the money is 4% because of the interest deduction. If you pay two and one half times the cost of your home and pay off the mortgage, you can deduct the actual purchase price from that amount if you pay interest only. Also, you have some bucks in your pocket monthly, that would usually go to the bank.

Lastly, if you have a mortgage when you retire and a good retirement income, the mortgage can put you in a lower tax bracket and reduce some of the tax exposure on your social security income.

Results may vary. See a planner before you buy into "generally" for your own situation.

[Fireone]

In most cases, I think "turning over the keys to the banker"
is a result of poor planning.
People who buy houses they can afford are keeping them. Basing your buying power on two full time incomes is a fallacy. Lenders are partly to blame, as they are too eager to demonstrate how you "can afford" X amount for a house pmnt.
Just because your household income is $120K right now, doesn't mean you can afford a house payment equal to 2/3 of that amount. Job status changes rapidly in these times.

[carolinalivin]

You seem to have several hundred thousand in your home with no mortgage and you don't see it as an investment? It's amazing what's happening for you, or your heirs, that you don't acknowledge. I'm sure they will appreciate your living in their "treasure chest."

[carolinalivin]

We've seen some wild and wooly times in the lending business for the last four years. There is a major movement afoot to do some clean-up, especially in the sub-prime market. Unfortunately, change and regulation usually follows the curve. Many buyers are using impulse and advertising to make their decisions, rather than information and thought and thus all the foreclosures.

[Graybeard58]

I'm sure they will appreciate your living in their "treasure chest."

It's my home. When my wife and I are dead it will be the property of our children. They can dispose of it however they want.

It's amazing what's happening for you, or your heirs, that you don't acknowledge.

How then am I not acknowledging my heirs?

If I wanted to "not acknowledge my heirs" I might get a reverse mortgage, which I won't do.

[maryz]

It's not news that Michigan finds itself in a one-state recession,

Gee, Granholm's doing a bang-up job, isn't she? (I devoutly hope Deval Patrick here in MA won't surpass her!)

There was a piece on her in the WSJ a while back. I can't find it in opinionjournal.com, but I did find a follow-up. Of Taxes and 'Treason' Michigan's governor explodes after reading The Wall Street Journal:

. . . Last month the state legislature buried the Democratic Governor's top legislative priority, a grandiose proposal to raise taxes on insurance companies, banks and thousands of small businesses that private studies said would have cost up to 20,000 jobs. Ms. Granholm's plan was widely criticized, including in these columns in March and in an op-ed article on the opposite page last Thursday by state legislator Rick Baxter, a Republican, and Hillsdale College Professor Gary Wolfram.

Ms. Granholm was not pleased, going so far as to denounce the op-ed as "treasonous for the state of Michigan." The authors' high crime? Exposing Michigan as a high tax state and criticizing Ms. Granholm for wanting to raise taxes. Her choice of words was no inadvertent slip of the tongue, by the way--a Howard Dean-like temporary loss of sanity. The Governor has used the "t" word repeatedly and has even suggested that Mr. Baxter "should be removed from office." . . . .

[carolinalivin]

My point was that your position is ironic. You have a lot of value sitting in your home doing nothing. You have no mortgage tax deduction, perhaps you don't need one. There are many things you could do with some of your equity to enhance your retirement or build wealth. Since you don't see these assets and equity as an investment, it is a great investment for your children. The fact that you will leave the house to them, makes it an investment. Thus, the irony.

I wish you well. I hope your home is in a trust to protect your children from probate and capital gain tax. I hope you don't have to go into medicaid and incur a bill that will require your children to sell the home in order to pay back for your care.

If you looked at your home as an investment, for you or your children, you might get some advice on how to avoid these problems. If you have already, I'm sorry for being so preachy.

[Kieri]

In Michigan, we have what's known as the "Headlee Amendment." It was passed in 1978 to stop HUGE escalations in property taxes in exchange for our sales tax going from 4% to 6%. The Headlee Amendment restricts property tax increases to the CPI or 5%, whichever is LESS.

We're fighting our assessment this year, mostly because our house is new. We were overassessed *after* the deadline for our paperwork was in; this is also the first year we've had the Homestead property tax credit in our new place.

There's going to be a line out the door of the township hall this year...

[Kieri]

You are right. I live in upscale Bloomfield Hills and my assessed value has risen continuously for the past nine years. This year it is up 3.3% and, too boot, they (The local Gov't) managed to gerrymander several millage proposals through, a fact that will raise my taxes another 15-20% next year. BTW, The selling prices in this area are down at least 15% over the past two years,

I'm feeling the same pain here in Jackson County. Our house is 18 months old and they just upped our assessment (not SEV) by $24,000!! They're trying another end run around Headlee again.

And yes, we will be protesting at the township offices next week, along with the rest of the county.

[Popocatapetl]

In the Phoenix area, the brilliant plan to get around the bursting housing bubble is to make cheaper, "no-frills" cracker box houses. Brilliant.

You would think that they would instead combine lots, build far more expensive, higher quality houses that needed lots of time consuming detail work.

Oh well.

[Graybeard58]

The problems you mentioned are taken care of but I appreciate the advice anyway.

The reason I haven't thought of my house as an investment was that it's a home to live in for me and my wife,it is an investment for the kids as you pointed out. I just hope it's a long time before they see the fruits of it.

When we moved to this house I never thought we would consider moving again. Over the years I have become increasingly disgusted with the political climate here (Illinois) and we are looking around and thinking of moving to a different state.

I am retired but my wife still works, her job is of a nature that she can live in anywhere in the U.S. We have children and grand children in Illinois, Missouri and Arizona (And a great grand son in Az. also)

We don't want to get too far from them and are thinking about Missouri, Oklahoma and Kansas.

Illinois is one of the very few states that has no concealed carry law and I don't expect that to change in my life time. How's the political climate in the Carolinas?

[DCPatriot]

You go ahead and use skewed statistics derived from the State Realtors Association.

Fact is, home prices are down in the vast majority of counties in every State. Inventory is way up...interest rates are still favorable...yet sales prices are down. Subprime 100% LTV mortgages are fast becoming an endangered species.

Builders are offering free options, taking contingent contracts and offering bonuses to realtors.

They don't do that in a 'up' market.

BTW, I love the current real estate market because it demonstrates the 80/20 rule perfectly. 80% of the business is done by 20% of the agents.

The state of the real estate market is between your ears.

[carolinalivin]

Sounds good.

I'm similar, but my wife dragged me off the couch and back to work.

Actually, I love the business, especially since I've become somewhat of a financial planner.

We have bought four homes in the last 10 years, all in socal. Doing very well. We used some equity to buy the last two and we never go over 75% loan to value.

I worked 28 years in prisons and I always had a good income, but I never had more than 1 house. I'm from WVA where if you had your house you we're doing okay.

My wife taught me that we could own more than 1 at a time and now I suffer from I wish I knew then what I know now syndrome.

Best wishes!

[carolinalivin]

You are continuing to not provide a source.

The state association in california has a track record of integrity and providing useful service for decades. This report is trackable through loan and county records, so go ahead and prove what a propaganda machine CAR is. Your disparaging remark only highlights your willingness to comment without fact.

Provide a source for your original comment, which you have meandered away from, or please stop attacking somone and an association you seem to know nothing about.

20% do 80% of the business, so what? Here's a stat for you and I have a source. Once a day some realtor will spout off in front of God and everyone on the internet and then attack others when they are asked for their source. You are the proof for today.

[TCats]

"That's my point... If your house value is going up, so do your taxes..."

I think you are missing my point. I've owned my home, free and clear, for 10 years. The real value in the market is about 15% more than I paid. My taxes (And reflected in the Assessments) have risen over 60% in that time-frame and they will take a bigger jump next year. My property values will not.

[DB]

You can always get the mortgage back if it benefits you at the time...

The worst thing I see people do is rent longterm.

The next worst thing I see people do is pay on a mortgage while putting away a few hundred dollars a month into a savings account. The return on investment is far higher paying off the mortgage instead. Adding 10% to a mortgage payment can cut the mortgage payback time in half... So by adding 10% you can typically take off 15 years of payments...