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JayB

Map of Misery, Part Deux

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Seattle may have increasing appeal as a destination, but I'm not seeing much of a resurgence in the Northwest as a place to earn outside the normal Aerospace, Timber, Tech and maybe BioTech. All of those are cyclical.

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The important thing is that aerospace, timber, biotech, and tech are not on the same cycles.

Let's not forget the number one growth industry in the US last year--medical. We have a strong med industry (especially cancer treatment) here as well.

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Seattle may have increasing appeal as a destination, but I'm not seeing much of a resurgence in the Northwest as a place to earn outside the normal Aerospace, Timber, Tech and maybe BioTech. All of those are cyclical.

 

You can pretty much count-out biotech as a driver of elevated home prices. Capital intensive? expensive? Yes. Mass employer capable of elevating average pay rates region-wide or even citywide - no. Not now, not ever - at least not in Washington.

 

Even in the highest sliver of the non-executive strata in Biotech (the Senior Scientists and whatnot)- which number in the hundreds, at most, in Washington - I'd be mighty surprised to very many pay-packages in excess of $100K, which is far less than you need to be bringing home to afford a home in King-county with anything other than suicide financing. The average guy working in a lab is probably working on a payscale roughly equivalent to that of the average supermarket employee, and will either have to change careers or change locations in order to get within reach of the average one-bedroom condo, much less a SFH.

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You can pretty much count-out biotech as a driver of elevated home prices. Capital intensive? expensive? Yes. Mass employer capable of elevating average pay rates region-wide or even citywide - no. Not now, not ever - at least not in Washington.

 

Ahh... I guess Amgen distorted my perspective. 5,000 employees, average salary ~$100k. Big enough to dominate a suburb or two.

 

All business is cyclical.

 

thanks for that gem. The government services industry isn't terribly cyclical, look at DC

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Average salary is one thing, median is another. No way the median is over $100K unless the entire operation is staffed by senior scientists and execs.

 

Might also be helpful to compare and contrast Amgen with any commerical biotech operation in the PNW.

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Jayb –

 

I am somewhat confused by your spin on this. Bush economic expansion and the increased opportunity for financing have worked together to bring home ownership to record highs. Since business cycles haven’t been eliminated a down turn was certainty. Right now there is nothing to suggest that the benefits have been overtaken by the costs.

 

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Average salary is one thing, median is another. No way the median is over $100K unless the entire operation is staffed by senior scientists and execs.

 

Median ain't too shabby there:

Median-Salary-by-Job---Employer-Amgen-Inc.-United-States_USD_20070326072330.jpg

 

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Those jobs are at or near the top of the skill-set echelon in most biotech companies, and the average of those medians is way under $100K. Include all of the AA-degree-or-less-requiring "Jr Production QC Tech" and admin jobs and you end up even further south of $100K.

 

 

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The average guy working in a lab is probably working on a payscale roughly equivalent to that of the average supermarket employee, and will either have to change careers or change locations in order to get within reach of the average one-bedroom condo, much less a SFH.

 

Or get married and have a two income family. I would not be able to afford my home if I did not have her income as well.

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Those jobs are at or near the top of the skill-set echelon in most biotech companies, and the average of those medians is way under $100K. Include all of the AA-degree-or-less-requiring "Jr Production QC Tech" and admin jobs and you end up even further south of $100K.

 

 

You got to have a Ph.D. to get a decent wage in that industry. Otherwise you're a peon paid peanuts.

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The average guy working in a lab is probably working on a payscale roughly equivalent to that of the average supermarket employee, and will either have to change careers or change locations in order to get within reach of the average one-bedroom condo, much less a SFH.

 

Or get married and have a two income family. I would not be able to afford my home if I did not have her income as well.

 

D.I.N.K. :wave:

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I'd be mighty surprised to very many pay-packages in excess of $100K, which is far less than you need to be bringing home to afford a home in King-county with anything other than suicide financing. The average guy working in a lab is probably working on a payscale roughly equivalent to that of the average supermarket employee, and will either have to change careers or change locations in order to get within reach of the average one-bedroom condo, much less a SFH.

 

a hundred k isn't "far less" than what's needed to finance a standard 30 year fixed for an average price house in king county. Plus, keep in mind that the dual income household isn't anomalous nowadays.

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I'd be mighty surprised to very many pay-packages in excess of $100K, which is far less than you need to be bringing home to afford a home in King-county with anything other than suicide financing. The average guy working in a lab is probably working on a payscale roughly equivalent to that of the average supermarket employee, and will either have to change careers or change locations in order to get within reach of the average one-bedroom condo, much less a SFH.

 

a hundred k isn't "far less" than what's needed to finance a standard 30 year fixed for an average price house in king county. Plus, keep in mind that the dual income household isn't anomalous nowadays.

 

If by "finance" you mean "afford." we may have different understandings of the word.

 

Some Simplified Numbers:

 

Gross Salary: $100K

Medicare: ~$1500

Social Security: ~$6K

Federal Taxes: ~ 14K

 

Net Salary: $78,500. Monthly Take Home: $6541.

 

Monthly Payment on 30 year fixed for $425K (assume ~5% downpayment) at 6.1% ~$2600/mo

Property Taxes on $450K, ~$5000, ~416/mo

Total Montly Obligation before Federal tax subsidies for homeowners kick in: $3166.

 

$3166/6541 = ~48% of monthly take home pay. This doesn't include PMI, homeowners insurance, maintenance, repairs, utilities, etc.

 

I'd figure roughly $11K/year in interest/property-tax subsidies for the first few years of the mortgage when the amount of principal being paid off is negligible, but I'm willing to bet that these don't help the average household cover the check at the end of each month. Toss in car payments, auto insurance, health insurance, homeowners insurance, utilities, other debt, groceries, gas, etc and you are no longer looking at a situation that's consistent with my personal definition of the term "afford." YMMV.

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If by "finance" you mean "afford." we may have different understandings of the word.

 

Some Simplified Numbers:

 

Gross Salary: $100K

Medicare: ~$1500

Social Security: ~$6K

Federal Taxes: ~ 14K

 

Net Salary: $78,500. Monthly Take Home: $6541.

 

Monthly Payment on 30 year fixed for $425K (assume ~5% downpayment) at 6.1% ~$2600/mo

Property Taxes on $450K, ~$5000, ~416/mo

Total Montly Obligation before Federal tax subsidies for homeowners kick in: $3166.

 

$3166/6541 = ~48% of monthly take home pay. This doesn't include PMI, homeowners insurance, maintenance, repairs, utilities, etc.

 

I'd figure roughly $11K/year in interest/property-tax subsidies for the first few years of the mortgage when the amount of principal being paid off is negligible, but I'm willing to bet that these don't help the average household cover the check at the end of each month. Toss in car payments, auto insurance, health insurance, homeowners insurance, utilities, other debt, groceries, gas, etc and you are no longer looking at a situation that's consistent with my personal definition of the term "afford." YMMV.

 

You will not pay 14K if you itemize - at least $24 K is deductible for interest on that loan, plus the real estate taxes. You'll pay that amount in some of King County, but not everywhere. In Bellevue I only pay around 3600. Also, for each dependent you get a 3000K deduction before taxes and $1000/child after taxes.

 

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The deductions on the interest on a $425K 30-year fixed at ~6% generates a tax savings of ~$8500 if you assume that a $100K salary lands you in the 28% bracket.

 

http://www.dinkytown.net/java/MortgageTaxes.html

 

Unless the assumptions built into that thingy are off. If not, assuming $11K in federal subsidies may have been a bit on the generous side.

 

 

 

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The deductions on the interest on a $425K 30-year fixed at ~6% generates a tax savings of ~$8500 if you assume that a $100K salary lands you in the 28% bracket.

 

http://www.dinkytown.net/java/MortgageTaxes.html

 

Unless the assumptions built into that thingy are off. If not, assuming $11K in federal subsidies may have been a bit on the generous side.

 

 

 

Have you ever owned? And filled in a 1040?

 

 

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No - but where's the error?

 

I think that most back of the envelope type calculations assume that the mortgage interest deduction will generate a tax benefit equal to roughly ~30% of interest paid for the average person in the first 10 years of a 30 year fixed, and progressively less each year thereafter.

 

0.3*25K = 7500, not too far off from the results generated by the calculator.

 

Whatever the actual value is, I doubt it's sufficent to render a $425K mortgage something that I'd consider "affordable" once you stack the rest of the typical household's fixed monthly expenditures on top of the payments.

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No - but where's the error?

 

I think that most back of the envelope type calculations assume that the mortgage interest deduction will generate a tax benefit equal to roughly ~30% of interest paid for the average person in the first 10 years of a 30 year fixed, and progressively less each year thereafter.

 

0.3*25K = 7500, not too far off from the results generated by the calculator.

 

Whatever the actual value is, I doubt it's sufficent to render a $425K mortgage something that I'd consider "affordable" once you stack the rest of the typical household's fixed monthly expenditures on top of the payments.

 

The error? I know what I make and have made over the years and what I've paid in taxes and it's nowhere near 14K/100K.

 

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~14K = gross federal taxes on 100K if married filing jointly.

 

Read the first post you responded to and you'll see an estimated tax benefit of ~11K for the mortgage interest/property tax deduction. Might have been confusing since I referred to it as a subsidy rather than as a deduction.

 

The other point was that I'd be surprised to learn that the folks who service the mortgage will allow a borrower to deduct the estimated tax benefit from the monthly payments and send them the difference when the tax refund check arrives. E.g. you need to have the cash in hand each month to pay the monthly expenses associated with owning the property.

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