What are people's ball park monthly housing expenses?

I own a 1bed now, bought in 2003. Mortgage + tax + maint ~2200. Nice and affordable...

Shopping for a 2bdrm/2bath in the 700-850 price range, and plan on putting at least 20% down.

For example, places in the 750 price range seem to have taxes of about 10k. So, 150k down, finance 600 at 6.5. Monthly mortgage (3800) + tax (800) + maint (300). About 5k.

Most of the places we've seen, and we've probably seen 30, dont seem worth 5k a month.

Even if we put down 250k, and financed 500k, means a mortgage payment of 3150. Total payment of 4200. A more reasonable payment, but now I've got 1/4 mil wrapped up in an asset I'm not convinced will see significant capital appreciation in the next 5 years.

Anyways, out of curiosity, how many people's monthly payments are 5k+? I'm not to bullish on the housing mkt, and might just sit tight and see what Bernanke has in store for us...

Thanks.

It's all about what you're comfortable with. Maybe you'll be better with a monthly of 4000.

kindof depends on your income, no? if you bring home $20K per month (i certainly don't), $5K is an acceptable housing expense. if you bring home $8K, it probably is too much.

what i would probably do: rent out the 1BR...if it's nice, you could probably get rent close to covering your expenses on the unit. then i'd rent a 2BR, say for $3K. let the renter of your 1BR pay your mortgage, invest the $2K difference between renting and owning the 2BR, and invest the $150K down payment.

not saying i would do this forever, but maybe for a year or two until you have a better feel for what direction the market is heading.

Don't forget that the $4200 payment is deductible, while the rent you pay is not. If maintenance is $300/m, then $3900 is your mortgage and tax payment. As your know, maintenance cannot be deducted on Sch A. when you own and live there (only Sch E when you rent to tenant).

So $3900 is your mortgage and tax payment. If you are in the 28% tax bracket ($74,201-154,800 for single and $123,701-188,450 for married), your after tax deduction cost is $3900 x .72 = $2808 + $300 maint = $3108 to own.

If you pay $3000 in rent vs $3108 to own, I'd rather own.

If you end up living there short term, it might not be worth owning if you consider closing costs on both ends. If your time horizon is 5 years I think those costs would be offset by potential appreciation.

It doesn't have to be "significant" appreciation to make it worth it. How much do you expect your $250,000 to grow if you invest it elsewhere?

If your $700,000 condo only appreciates 2% per year for 5 years, you have roughly gained $70,000 on your $250,000 down payment. Even at 1% over 5 years, your $250,000 down payment has earned $35,000. And don't forget that is tax free if you live there more than 2 years.

A minimal property value gain would offset your closing costs on both ends and somewhat offset your gain from investing your money elsewhere.

For a $5000 payment (-$300 maint) = $4700 x .72 = $3384 + $300 maint = $3684 total monthly payment after tax deduction.

That's a difference of $684/m or $8208 /yr of owning vs renting. I'd probably rent for $3000 and save the difference in this situation, assuming my income stays the same. But still that difference is offset even if there is only 1-2% appreciation per year.

Conclusion - It's better to own in this rent vs own comparison only if you make the $250K down payment.

In terms of putting down $150K vs $250K, that extra $100K saves you $684/m in mortgage costs. Can you find an investment that earns you more per month? I doubt it (if so let me know). If not, put that extra $100K down. Your monthly expenses will be more reasonable.

The tax deductability of property taxes and interest is often over emphasized. Chances are that if you can afford monthly payments on a $800K condo you are also triggering the AMT, which will wipe out a good portion of those deductions.

I would be a lot more conservative when figuring out deduction credits and use a 15% rate rather than a 28% rate.

Original poster here:

AMT is a reality, only getting worse for 06. I understand the intrinsic leverage provided by mortgages, as well as tax advantages...

We can definitely afford the payments, an 800k place for us it would be a back-end ratio of 29% ((total housing + minimum debt)/monthly income).

Shopping for places we couldnt afford would be a waste of everyone's time. Its not so much being comfortable with the payment as it is percieved value.

The places that would cost us 5k+ a month are not 2.5 times bigger, nor 2.5 times 'nicer' than our current place. Thats part of the problem.

Just wondering how many face 5k+ monthly costs. What type of place did you come from, and what type of place did you trade up into.

Thanks.

I know this comment is somewhat off topic from what are asking, but unless you are buying waterfront, or a place without any clear defects [e.g., location, view, etc.] I would NOT buy around here for the forseeable future. There is an avalanche of supply coming to market in Hoboken and Jersey City in the new construction area. The only way that you may be immune to a drastic downdraft is if you own an elite property that will be attractive to an upscale buyer under any market conditions. Any other places are going to be hit hard. If you can find a place with a monthly "nut" that you can tolerate, and has no defects/drawbacks, go for it. Any other analysis must assume that you will shave at least 15% off the top of current prices, or you are being reckless in your planning.

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sounds like you're answering your own question. stay put until you absolutely can't live in a 1BR anymore. sounds like you have a good deal going, and the longer you are paying only $2200 per month, the more cash you'll have to save/invest for your next place.

do you foresee a 2BR condo as your long-term housing solution? do you foresee yourself moving into a house someday?

if you see yourself in a house sometime in the next 5-10 years, skip the interim step....you'll have plenty of money to invest and you won't be tied to any risks in the hoboken market. it sounds like you bought your current place at a price much lower than current market rates, so even if the market drops 10%, you'll be insulated.

just my $.02, seems like you are a pretty financially savvy guy anyway.

The tax deductability of property taxes and interest is often over emphasized. Chances are that if you can afford monthly payments on a $800K condo you are also triggering the AMT, which will wipe out a good portion of those deductions.


does the AMT eliminate the mortgage interest deduction
and or property tax deduction?

is anyone absolutely certain?

first of all amt phases out roughly if your agi is over 350K. mortgage interest rate is always fed deductible. IF you have to pay amt - there's a formula for calculation of deductible part of property tax (it varies...hard to say - but you can only deduct part of it). that's from my accountant.