Bad Spending Habits All Around Me...

So I am back living in the house I grew up in; a big town just outside of New York City.

The house had been empty for years...Not because it's in a bad neighborhood.

Empty because the cost of maintaining this house is too high.

Old-world construction is very strong and sturdy, but the cost of heating + cooling this place is extreme.  It's the kind of house that OK during the cool months, but feels hotter than the outdoors during the summer, and colder than outside when the weather gets frosty.

And then there is the property tax.  Extremely onerous, and it never goes away.  And if the bill goes unpaid for a long time, as it has here, a lien can happen, then a tax sale...💰😭💸😭💸

Student-loan debt is pure evil.  Many years ago, when I was really struggling, I defaulted, and "they" were able to access my bank account and take every penny I had.  It was less than $1,000, and they just took it without warning.  I wasn't able to pay my rent.  It was hell.

Losing control with credit-card debt? MUCH worse.  Did that when I was young and stupid, but eventually get my act together and paid it all down to $0.

But credit-card debt is unsecured. A bank can't take your home away from you, no matter how much credit-card debt you have.  BIG difference.

So my cousin decided to move into this house and give living here a shot.  Made sense to her, because she landed a great nursing job in NYC.  Great pay, A+ benefits and all the overtime she wants. Only problem was that she lived in Massachusetts. This house solved that.

So now my cousin has two places that she calls home, in two different states.  She commutes back and forth a lot, but the 3-hour drive goes by fast, especially on weekends.

My mother (RIP) spent lots of money on repairs and renovation.  Other members of my extended family pitched-in too.  While empty, thieves and/or squatters did bad things.

There are young children here, but the house is big, and the walls are thick.  Noise is contained, and the kids have plenty of room play, without disturbing anyone. The situation here is cool and calm and drama-free, which is very, VERY important to me. After all I've been through over the past 22 years, I have no tolerance for ugly behavior of any kind. ZERO TOLERANCE!

There is, however, a nagging concern here: my cousin and her husband are both shopaholic-spendaholics.  There is more footwear dumped all around this house than I have EVER seen in any home.  There must be at least 300 pairs of shoes...In every corner, and every room.  Moreover, there are more daily deliveries from Amazon than I used to see in the retail outlet I managed years ago.  Stacks of boxes, all shapes and sizes, and from all over the world, waiting outside, every day. Crazy....😱📦🥴📦😱📦😵‍💫📦😱

The mother of my child was REALLY GOOD at wasting money, and doing so in the most despicable way. Tantamount to just flushing it down the toilet.  So yeah: these things bother me...😑😒😐🫤

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New York City Rent Is Too High!

NYC Skyline

It’s been more than two decades since I decided to give up the humble and often humiliating life of a struggling New Yorker and move out of the city.  I was living in a tiny basement apartment in Jackson Heights, Queens, working in Manhattan, but with an income that made living on America’s most fabulous island impossible.

From a May 18, 2023 CNN article:

"... The median cost of renting an apartment in Manhattan was $4,241 in April. That’s up 8% from a year ago and up 1.6% from March, when rents hit a record high of $4,175.

A one-bedroom apartment had a median rent of $4,200, up 5% from last year; while a two-bedroom apartment had a median rent of $5,500, up 11% from a year ago. A studio apartment rents for a median price of $3,235, up 13.5% from last year..."

So, on this two-decade anniversary of me moving out of NYC Housing Hell, here is my top 10 list of reasons why I don’t like NYC:

1)  >>  The Rent Is Too Damn High!  <<

2)  There is dog poo EVERYWHERE!  Why do New Yorkers think it’s OK to leave feces all over the place, so that we can all step in it and drag it into our homes?  DISGUSTING!  Sometimes I think I’m the only one who hates this.

3)  NYC Subway I:  It’s way too crowded during rush hours.  If you can’t find a seat, you’ll stand.  And if you’re lucky, the guy or gal who is packed into a subway car and standing next to you -- and I mean so packed that they are right in your face -- didn’t bother to brush their teeth that morning…

4)  NYC Subway II: In the dead of winter, the air in underground platforms is colder than the air outside, and hotter than the outdoors during the oppressive heat of mid-summer.  Lovely.

5)  NYC Subway III: Rats and Roaches.  Nice.  And the rats are brazen.  One time, I caught one literally spitting in my direction, and looking me dead in the eyes while doing so…

6)  NYC Subway IV - More disgust: I was moving between subway cars one morning, trying to find a seat, and found a MASSIVE pile of human feces in-between the cars. Almost stepped in it. Awesome.

7)  Residential and Commercial Roach Problems: Trying to eradicate cockroaches is pretty much pointless.  They are too hardy. Too resilient. Too evil. I’ve gotten a free meal in my favorite restaurant on more than one occasion, because they couldn’t get rid of them.

8) I love the city, but not the people.  The typical New Yorker is a negative, rude, nasty, putrid piece of junk.  Too much schadenfreude.  Not enough community (with the exception of the 9/11 terror attacks, when, during a long mountain-bike ride around three boroughs, I witnessed thousands of ordinary city folk gather at their local fire house to cheer and salute the heroism of New York City’s intrepid firefighters.)

9) The cops: Not all bad, of course, but enough are so bad that they engender much displeasure for all the cops.

10) When my mom retired from her job, and bought herself a new car as a retirement preset, she donated her old diesel workhorse to yours truly.  And I was quickly reminded how bad NYC roads are.  On one beautiful spring morning, I wasn’t able to avoid a huge pothole, and BANG!  Had to replace a rim.  With labor, it cost me $400 to replace, and the replacement was used! 

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Calling a Super Bubble: Front Row With GMO's Jeremy Grantham

An honest and insightful video interview: Calling A Super Bubble: Front Row with Jeremy Grantham, co-founder and chief investment strategist at investment management firm Grantham, Mayo, & van Otterloo (GMO), headquartered in Boston, MA.  This clip is a little over 37 minutes:

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New Home Prices Lowest In Three Years

New Home Prices Lowest In Three Years; report produced by the good folks at Nightly Business Report (NBR):

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Homeowners Are Sitting On A Record Amount Of Cash — And Not Tapping It

Homeowners Are Sitting On A Record Amount Of Cash — And Not Tapping It; a home-equity  segment produced by the good folks at Nightly Business Report:

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Should You Prepay Your 2018 Property Taxes?

Should You Prepay Your 2018 Property Taxes?; segment by the exceptional folks at Nightly Business Report:

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California Housing Crisis

California Housing Crisis; segment by the good folks at Nightly Business Report:

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Becoming A Landlord In The USA Is Easier Than Ever

From Nightly Business Report: Across the country, small investors are becoming owners of rental properties via a simple Internet process...

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Why A Severe Housing Shortage Means Reduced Wages For Workers

Why A Severe Housing Shortage Means Reduced Wages For Workers; segment by the good folks at PBS NewsHour:

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Housing Crisis 2.0 Coming Soon Thanks To Wall Street

Housing Crisis 2.0 Coming Soon Thanks To Wall Street; segment by the good folks at The Young Turks:

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A Strategic Default on Your Mortgage May Cost You More Than You Think

I was listening to some business news the other day. According to the well respected economist who was being interviewed, folks who have been walking away from their home loans in response to owing more on their home than their home is worth, have been helping to fuel consumer spending. The money that was being used to pay the mortgage has been freed up to be spent on other things. Great news for this fledgling economic recovery, but going the strategic default route should never be taken lightly. Not only will your credit score being ruined for years, you may end up with a massive tax bill from the Internal Revenue Service (IRS).

Here's a clip from a great WSJ personal finance article:

"...Americans considering walking away from an unaffordable mortgage: Beware of taxes.

Though not every homeowner who's underwater on a mortgage need worry, many are finding that a foreclosure or other form of housing loss can lead to a big tax obligation.

Maxine McDaniel walked away from her Loveland, Colo., home in January. Now the 59-year-old nurse faces a potentially huge tax bill.

In Ms. McDaniel's case, the 59-year-old in January abandoned the 4,300-square-foot Loveland, Colo., home she and her late husband built. After her husband's death in July 2008, Ms. McDaniel, who earns about $34,000 a year as a home-health nurse, couldn't maintain the $3,000 monthly payments necessary on her nearly $500,000 interest-only mortgage. So she stopped making them and moved in with an uncle.

Now, she's bracing for the next blow: an Internal Revenue Service form detailing as much as $150,000 in debt canceled by the bank when it took control of the house. The canceled debt is a form of income, says the IRS—meaning she'll owe taxes on it.

'I had no clue this would happen,' says Ms. McDaniel, who, with her husband, had refinanced at least three times, including one cash-out loan. That transaction caused her problems because, while canceled debt originally used to buy or build a house can be exempted from tax filings, debt used for other purposes cannot. 'I just thought I'd get out from under the house and that would be that,' she says.

As the U.S. economy continues struggling with the fallout of the debt-induced housing crisis, millions of homeowners like Ms. McDaniel are discovering that their decision to walk away from a mortgage could result in tax bills running into the thousands or tens of thousands of dollars.

The upshot: anyone weighing whether or not to seek a mortgage modification—or debating whether to abandon a house that is worth less than the mortgage—should consider the tax treatment carefully before making a move. The same holds for any form of consumer debt that a bank ultimately cancels, including credit-card balances or an auto lease.

Federal and state tax laws have long viewed canceled debt as income because consumers who borrow money to buy a house—or who pull money out of their house to buy cars and such—and then don't pay it back 'wind up ahead of where they were,' says an IRS spokesman.

Thus far this year, Michele Knight, a CPA with a high-end clientele in Keystone, Colo., has had five clients owe taxes tied to houses and another five tied to credit cards and auto leases. 'They're calling me in tears and saying, 'What do you mean I owe taxes?'" she says. 'I never would have expected it.'

Dianne Corsbie, a White Plains, N.Y., financial planner, says about 5% of her 200-client practice owes taxes because of a foreclosure, most tied to investment properties. In Napa, Calif., Duane Carey, owner of a Ranch Tax Service, says every fifth person he sees 'comes in angry, holding one of these 1099s.'

Overall, the IRS estimates that individual taxpayers will have filed nearly 3.6 million tax returns for 2009 that include income from canceled debt. That's down a bit from 2008, but up 17% from 2007. The numbers include taxes due on primary homes, vacation and rental property, credit cards, auto leases and other canceled debts. The IRS projects the numbers to rise in coming years.

Part of that rise will likely come as the government expands its mortgage-modification program, including a call in March by the Obama administration for banks to reduce principal as a way to help people remain in their homes. That reduction could lead to tax obligations.

At first the government's mortgage-modification program focused on primary mortgages, which are tied to the purchase or construction of a primary residence, and which are eligible for exemption under a 2007 Congressional act aimed at helping homeowners avoid the tax implications of a foreclosure.

That act—the 2007 Mortgage Forgiveness Debt Relief Act—exempts taxpayers from as much as $2 million in forgiven debt. But the debt had to be acquired before Jan. 1, 2009—and had to have been used solely to buy, build or remodel/repair a primary residence.

The government's new, expanded modification programs include short sales, in which a bank agrees to accept as full payment less than the value of the mortgage balance; deed-in-lieu transactions, when a homeowner gives the house to the bank instead of repaying the mortgage; and second mortgages such as home-equity lines of credit.

In many of those instances, say Treasury officials, homeowners used mortgage money to fund everything from tuition and medical bills to vacations and cars and even the down payment on a second home or investment property. That debt, however, isn't eligible for exemption.

Sometimes the tax bills are so high that people can't afford to pay. In such a situation, the IRS will allow taxpayers to apply for an installment-payment plan.

Some homeowners can avoid the taxes completely if they can prove insolvency, in which the total value of debt exceeds total assets. But even that could leave some owing taxes.

IRS rules stipulate that a taxpayer can escape taxes up to the extent of insolvency, meaning that if one's liabilities are $500,000 and assets are $300,000, the $200,000 difference is the extent of the insolvency. But if the person has $250,000 in debt canceled, then $50,000 is taxable income.

'People think their house was underwater, so they're insolvent and can get out of owing taxes,' says Arthur Auerbach, a member of the Individual Income Tax Technical Resource Panel at the American Institute of Certified Public Accountants. 'But it doesn't work that way...'"

If you visit WSJ online to read the full story, be sure to read the comments. Lots of insight there, as usual. Enjoy!

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