Thinking of moving from the city to the suburbs amid the pandemic? 5 financial factors you should consider first


Sick of being cramped inside a small apartment where you now not only live, but work and teach your kids, too? You’re far from alone these days.

But buying a home and moving to the suburbs is far from a fool-proof decision from a financial perspective, even in an era of rock-bottom mortgage rates.

Many city dwellers have taken a newfound interest in suburban and rural living as the coronavirus pandemic has transformed our daily lives and living spaces. Sales of new and existing homes have skyrocketed in recent months thanks to a combination of pent-up demand from the spring and city residents entering the market in search of more space.

“We’ve been speculating about increasing interest in the suburbs and rural areas since the start of the pandemic,” Redfin economist Taylor Marr said in a recent report from the real-estate brokerage firm. “Now we’re seeing concrete evidence that rural and suburban neighborhoods are more attractive to homebuyers than the city, partly because working from home means commute times are no longer a major factor for some people.”

Redfin
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found that home prices are up 11.3% year-over-year in rural areas and 9.2% in the suburbs. In urban areas, meanwhile, prices are up just 6.7%.

But the price of the home and the interest rate you can get on a mortgage are just two of the financial factors that buyers need to consider before renting a U-Haul to live the suburban life. Here are five other factors to consider when calculating the cost of such a move:

Buying a home may be cheaper, but property taxes can be higher

Property taxes accounted for more than 30% of all the tax revenue that state and local governments collected from Americans in fiscal year 2017, according to the right-leaning Tax Foundation. Property taxes are the single largest form of state and local tax revenue, the think tank said.

Though property taxes can go as low as a median of $200 in some places, the five counties with the highest median property tax bills are in suburbs surrounding New York City, according to Tax Foundation data. The 2018 median bill in these counties — Bergen and Essex in New Jersey and Nassau, Rockland and Westchester in New York — exceeded $10,000.

It’s important to keep the tax burden in context, said Jared Walczak, the Tax Foundation’s vice president of state projects. “All-in suburban property costs tend to be lower than those in prosperous downtowns, but the property tax itself may be higher. This is certainly true for some of the wealthiest suburbs of cities like New York and Philadelphia, but isn’t necessarily true across the country.”

Still, he added, “even if property taxes are higher, overall taxes are lower in the suburbs. For instance, both New York and Philadelphia impose high municipal income taxes that neighboring jurisdictions lack.”

Median property tax bills in some Illinois counties and Bay Area counties of California can range between $6,000 and $7,000, according to Tax Foundation data.

A bigger living space can mean higher utilities, water and garbage bills

Be ready to potentially pay more in utilities if you are living in the suburbs with more space to heat or cool — especially if you are working from home and running fans, computers, appliances and other electronics during the work day.

Here’s an object lesson from ConEd,
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a utility provider for New York City and the suburban Westchester County to the north of the city.

A typical New York City customer paid a $94.25 electric bill in July, according to spokesman Allan Drury. Meanwhile, a Westchester customer paid $112.99. That’s not even a $20 difference, but the costs add up. From January to July, the typical Westchester customer paid almost $135 more for electricity alone, the ConEd data show.

It’s not a hard and fast rule that suburbanites will pay more, Drury noted. It comes down to energy usage, and someone in the city could use more power than someone in the suburbs.

There’s also the water bill and other possible expenses like fees for garbage removal. Those may or may not be included in town services. The average monthly water bill in the U.S. is around $70, according to Move.org, a website with tips on moving and listings for moving companies. Trash removal can range from $30 to $50, according to Homeadvisor.com.

City-dwellers need to remember they already pay for these services in a certain way, said Alison Bernstein, president and founder of The Suburban Jungle, a real estate firm that focuses on moves out of cities into suburbs. Client demand is up 500% year-over-year from the second and third quarter of last year compared to this one, she noted.

Water bills and garbage fees might just be wrapped up into the rent and common charges people pay in the city. Prospective buyers eyeing a particular house should ask about monthly utility costs to get a better sense of the incidental costs, Bernstein said.

Owning a home means your responsible for its maintenance and upkeep

The downside of owning your home is you will no longer have a building super or landlord to handle fixing the leaking pipes and chipped paint — or pay for it.

“The amount of money that any homeowner should budget for annual upkeep and maintenance is anywhere between 1% and 4% of the value of the home,” said Dana Menard, founder and CEO of Twin Cities Wealth Strategies, a financial advisory firm based in Maple Grove, Minn.

In other words, for a home worth $320,000, you can expect to pay between $3,200 and $12,800 a year on maintenance, Menard said.

But that can easily go much higher depending on where you live. In more expensive parts of the country, the cost of hiring people to fix your home will naturally be higher. For instance, a 2018 report from real-estate website Zillow
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and services marketplace Thumbtack found that homeowners in Portland, Ore., paid $3,800 annually on average for services like house cleaning and appliance repairs. Comparatively, folks in Miami only pay $2,570 on average.

And if you choose to buy a home in a neighborhood with a homeowners’ association, you may face added costs for maintenance services such as lawn care as part of your HOA fees.

Leaving the city can mean relying more on cars and commuting

Between public transit and tightly clustered neighborhoods, you don’t need a car in many major cities. (That’s part of the allure for some who don’t want to deal with parking rules.) But in the more spread-out suburbs, life without a car could be trickier — especially if you’ve got kids in tow.

A move to the suburbs might also mean getting a second vehicle, depending on a particular family’s work schedule and lifestyle needs. People need to figure out what’s best for them, said Bernstein. “Anything can work, you just have to plan ahead and factor that into your life.”

If it means buying a car, people should realize the new and used market isn’t what it was a couple months ago, said Michelle Krebs, executive analyst at Cox Automotive, the parent company of brands including Kelley Blue Book.

Around March and April, many car makers trying to move new vehicles off the lot were offering 0% financing for the life of the loan to buyers with excellent credit.

“People grabbed those. As inventory has dwindled down, those deals have started to dry up,” Krebs said. In July, a new vehicle cost $38,378, which is up from $37,629 at the same point last year. Between supply chain woes and new social distancing protocols at automotive plants, Krebs thinks inventory will stay low for the rest of the year — and that won’t give dealers a lot of leeway to haggle.

“The normal channel for used cars has also been disrupted,” Krebs said. For example, drivers are not trading in their vehicles and lenders are giving cash-strapped drivers forbearance on loans, which means cars are not being re-possessed.

Earlier in August , the average price of a used car was $20,212, the second consecutive week where the price exceeded $20,000. The average used car price hasn’t broken the $20,000 mark in the years Krebs has been tracking the number.

More space can mean buying more furniture and décor

Owning a bigger house will eventually mean needing furniture to fill the additional rooms. And many first-time homeowners find themselves in a trap where they can’t resist buying that furniture right away.

Doing so could be a huge mistake though, Menard said. “Many people make the mistake of pulling out the credit card to take care of it quickly,” he said. Because many homeowners don’t think to budget for those impulsive purchases, they often don’t have the funds to cover the credit card balance.

Therefore, buying the fixings to spruce up your new abode with credit cards can “ultimately add an additional 25% to 50% of costs,” Menard said, once the interest rate on the credit card is factored in. Currently, the average annual percentage rate for credit cards is 16%, according to CreditCards.com.



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Moving? What you should know about doing it in a pandemic


Moving is stressful enough without throwing a pandemic into the mix.

Many Americans may be forced to consider moving as some federal foreclosure and eviction moratoriums have expired. In the first week of July, 32% of Americans did not make a full, on-time housing payment, according to a nationally representative survey by the website Apartment List. Others may relocate to save money, be closer to loved ones or simply leave a densely populated area.

If you’re considering moving, here’s what to know from a financial standpoint, as well as tips to make moving day safer.

Budget for extras

Aside from the usual expenses like buying boxes, renting a van or hiring movers, plan for extra costs because of the pandemic.

You may need to buy heavy-duty supplies to deep-clean your old place, for example, or to sanitize your new accommodations. If you are moving out of a rental unit, some landlords may ask you to pay for professional cleaners or take the cost out of your security deposit.

The Big Move: I work in Silicon Valley, but my job is now remote. I can finally live somewhere cheaper. Where should I go?

Moving across county or state lines? Check what the quarantine requirements are in your new location, says Jean Wilczynski, a certified financial planner and senior wealth adviser at Exencial Wealth Advisors in Old Lyme, Connecticut. You may have to pay for quarantine accommodations like a hotel or Airbnb if your new apartment or home is not move-in ready, she says.

If you are receiving unemployment benefits, check the rules on how your benefits carry forward in your new location and what the taxes are if it is a new state, Wilczynski says. You can typically find this information on your state’s Department of Labor website, she says.

Also see: Relocating? Ask these 6 questions to find the place that’s right for you

If you are unemployed or your income has dropped as a result of the pandemic, you can also check whether you qualify for moving assistance by calling 211.

You might not be able to really get to know your new place until you’re living there, so prepare yourself (and your wallet) for surprises like leaky faucets or broken appliances. Landlords and real-estate agents may offer only virtual tours. And if you can see the new accommodations in person, you may be required to sign a waiver, wear a mask and avoid touching anything while in the house.

Stay safe during the move

How to move safely depends on whether you are doing it yourself or using movers. Current guidance from the Centers for Disease Control and Prevention suggests that the main way the coronavirus spreads is through respiratory droplets, says Lindsay Slowiczek, pharmacist and drug content integrity manager at Healthline.com. That’s why wearing a mask and staying away from people is important to slow the spread of the virus, she says. Sanitizing surfaces is also an extra precaution worth taking.

Moving yourself

If you’re renting a moving truck, companies like U-Haul offer contactless pickup and drop-off options. Slowiczek suggests sanitizing the door handles, steering wheel, radio and the metal tongue on the seat belt in the rental van.

Using movers

Before picking a moving company, check its website or call and ask about its safety practices in response to the pandemic, Slowiczek says. Ask whether the movers wear masks and gloves during the move.

On moving day, she suggests being prepared with a plan to limit interaction with movers and maintain social distancing. This includes packing as many things as you can yourself, or consider using a self-pack moving container as Slowiczek did for her own recent move.

The Big Move: I’m tired of renting in Manhattan, but love living in New York. Is now the time to buy if the city is supposedly dead?

If the movers will pack the truck, create a schedule for the movers. For example, ask them to start with a particular room as you stay in another. This is also particularly useful if you live with family members who are vulnerable or immunocompromised, she says. Try to limit their involvement with the move as much as possible.

“Plan out the way [the movers] are going to move through the house,” says Slowiczek. “If possible, move all of [your boxes] to one area in your home so they don’t have to come throughout your house as much.”

Keep hand sanitizer or soap handy during the move so that you and the movers can use it periodically, she says. (Check on the FDA website that your brand of hand sanitizer is methanol-free, Slowiczek adds). After the move, use disinfectants registered with the Environmental Protection Agency to clean surfaces or furniture.

“Just using the product as-is is not enough — read the instructions on how long it should be wet on the surface,” Slowiczek says.

More from NerdWallet:



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The mistakes to avoid when moving to a state with lower taxes and why low mortgage rates are a double-edged sword


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Thinking about moving to a state with lower taxes? Here are the mistakes to avoid


If you’re contemplating moving to a different state, taxes may be a deciding factor. This column explains how to evaluate the tax picture in states you may be considering.

If your intent is to relocate to a lower-tax state, it may seem like a no-brainer to move to one that has no personal income tax. No! To avoid an expensive misstep, you must consider all the taxes that can potentially apply to residents — including property taxes and death taxes.

As you know, Texas is “famous” for having no personal state income tax while Colorado has a flat 4.63% personal state income tax rate. So, if you have a healthy income, you might reasonably think it would be much cheaper tax-wise to live in Dallas, Texas than in Colorado Springs, Colorado. Maybe not!

The property tax rate on a home in some Colorado Springs locales is about 0.49% of the property’s actual value, as determined by the county assessor. Say you move to one of these areas and buy a $500,000 home. Your annual property tax bill would be about $2,450, which is a really low number. Say your taxable income is $200,000. Your Colorado state income tax bill would be $9,260. Your combined property tax bill and state income tax bill would be about $11,710.

According to the Dallas Central Appraisal District’s online property tax estimator, the annual property tax bill on a $500,000 home in some City of Dallas locales would be about $21,200, or about $17,800 if you’re over 65 or a surviving spouse. You would have no state income tax bill, so the relevant number for comparison to Colorado Springs is about $21,200, or $17,800 if you’re over 65 or a surviving spouse.

In most areas within both Colorado Springs and Dallas, the combined state and local sales tax rate is 8.25%, so no difference there.

Mixed message conclusion: Much-higher property taxes in Dallas could overwhelm the no-state-income-tax factor. But if you have a really high income, the no-state-income-tax factor could lead to the opposite conclusion. Unless you would buy a really expensive home. That could put Colorado Springs back into the number one position, due to the much-lower-property-taxes factor.

Avoid the worst states to die in

With the ultra-generous $11.58 million federal estate tax exemption for 2020 (effectively doubled if you’re married), most folks are currently free of any federal estate tax worries. Events and politics could change that. Or not. Who knows?

That’s the good news. The bad news: For 2020, 17 states and the District of Columbia impose their own estate tax or inheritance tax. Maryland imposes both. Exemptions from these state death taxes are far below the ultra-generous federal estate tax exemption. So, if you have a healthy estate and move to the “wrong” place, your estate could be completely exempt from any federal estate tax hit (under the current rules) but badly exposed to a significant state death tax hit. Not good!

What’s the difference between an estate tax and an inheritance tax? Good question. An estate tax is charged against your entire taxable estate, regardless of who the beneficiaries of the estate may be. An inheritance tax is only charged against inheritances received by certain categories of beneficiaries.

With those thoughts in mind, here’s the state death tax picture for 2020 in alphabetical order.

Connecticut

The top estate tax rate is 12%. For 2020 a $5.1 million exemption is allowed. The exemption is scheduled to increase to $7.1 million for 2021 and $9.1 million for 2022. Above $15 million of estate tax value, the tax rate drops to 0%.

Hawaii

The top estate tax rate is 20%. For 2020 a $5.49 million exemption is allowed.

Illinois

The top estate tax rate is 16%. For 2020, a $4 million exemption is allowed.

Iowa

No estate tax, but an inheritance tax ranges from 5% to 15%, depending on the size of the estate and the beneficiary in question. For 2020, a $25,000 exemption is allowed.

Kentucky

No estate tax, but an inheritance tax ranges from 4% to 16%. Members of the most-common class of beneficiaries (surviving spouse, child, parent, etc.) are exempt. Tiny exemptions are allowed for members of other classes of beneficiaries.

Maine

The top estate tax rate is 12%. For 2020, a $5.8 million exemption is allowed.

Maryland

A good choice for folks who love to pay taxes, because Maryland has both an estate tax and an inheritance tax. The top estate tax rate is 16%. For 2020, a $5 million exemption is allowed. The separate inheritance tax is imposed at a 10% rate, with the taxable amount based on how closely related the beneficiary is to the decedent (that would be you).

Massachusetts

The top estate tax rate is 16%. For 2020, a $1 million exemption is allowed.

Minnesota

The top estate tax rate is 16%. For 2020, a $3 million exemption is allowed.

Nebraska

No estate tax, but an inheritance tax is imposed with a top rate of 18%. Surviving spouses are exempt. For 2020, exemptions range from $10,000 to $40,000, depending on the relationship between the beneficiary and the decedent (you).

New Jersey

No estate tax, but there’s an inheritance tax with a top rate of 16%. Surviving spouses, parents, grandparents, and direct descendants are exempt.

New York

The top estate tax rate is 16%. For 2020, a $5.85 million exemption is allowed.

Oregon

The top estate tax rate is 16%. For 2020, a $1 million exemption is allowed.

Pennsylvania

No estate tax, but the inheritance tax rate ranges from 4.5% to 15%, depending on the relationship between the beneficiary and the decedent (you). Surviving spouses are exempt.

Rhode Island

The top estate tax rate is 16% For 2020, a $1,579,922 exemption is allowed.

Vermont

The estate tax rate is a flat 16%. For 2020, a $4.25 million exemption is allowed.

Washington

The top estate tax rate is 20%. For 2020, a $2.193 million exemption is allowed.

Washington, D.C.

The top estate tax rate is 16%. For 2020, a $5,762,400 exemption is allowed.

Other states have no death taxes

States that are not listed above have no estate or inheritance taxes for 2020. Keep that in mind!

Another example

As stated earlier, you must look at the whole tax picture before concluding that you’ll be moving to a state that has lower taxes in your specific circumstances. For example, Washington State has no personal state income tax. Terrific! But it has an estate tax that could cost big bucks if you die there, and the combined state land local sales tax rate can be as high as 10.4% So is Washington really a low-tax state? Maybe not for you. In contrast, Florida has no personal income tax, no death taxes, and relatively low sales taxes in many jurisdictions.

The bottom line

Consider all applicable taxes before concluding that moving to another state will actually save taxes in your specific situation. Finally, consider the distinct possibility that some states may raise taxes in response to lower tax revenues and higher spending due to the COVID-19 mess. I think that’s more likely to happen in already-high-tax states than in lower-tax states. Just my opinion.



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My boyfriend is buying a house and does not want me to have equity. I’m moving in with him and selling my home — what should I do with the proceeds?


Dear Moneyist,

My boyfriend and I are planning on moving in together. We each have one child and are planning on one more together. There is a large income disparity (in his favor). He is purchasing the home, and does not wish for me to have equity in the house. I completely understand his reasons and have no desire to fight him on that. I will be selling my current home to move with him.

The Moneyist: ‘I’m having a hard time understanding how earning over $200,000 a year is too much to qualify for a decent stimulus check’

What is the best way for me to contribute to our new life together, while also making sure that I have an investment for myself later should I need to purchase my own home, or something for my child(ren) to inherit after I am gone? I don’t want to help pay the mortgage if I’m not receiving equity. I’m more than happy to pay for other things.

With no home equity, I will not be building savings in that way. Does it make sense to take my current home profits after the sale and put it in a separate money making account for the future? We both love each other and are comfortable with this arrangement, I just want to be sure that I am also protecting myself just as he is, while also helping to contribute to our new household.

Anonymous

Dear Anonymous,

You are asking the wrong question.

Your letter stopped me in my tracks here: “I will be selling my current home to move with him.” Stop. Don’t sell this home unless you absolutely have to, and I see no reason in your letter why you should sell to move in with a man who does not wish to buy a home together, especially given that you are planning to have children together. It’s a red flag.

The Moneyist: I filed a joint tax return with my estranged wife because she is a gambler and her finances are a mess. But I got NO stimulus check — what can I do?

I’ll leave the relationship to you, but I urge you not to give up your financial independence and your home. If this relationship does not work out and you sell your home, you will be in a tricky situation and you will rue the day you ever sold it. If you do stay together, you and your children will be living in his home. That’s not a good outcome for you or your child.

Assuming you keep your home and have a tenant, it’s fair for you to pay a set amount every month toward rent in your boyfriend’s home, but if that feels weird or creates a low status/high status situation in your relationship, or doesn’t feel right to you, listen to your gut. It will be your best guide on how to proceed. Don’t move in if something feels wrong about this.

The Moneyist: I didn’t get my stimulus check because I owe back child support. It’s not fair. My stepchildren rely on me — what can I do?

You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com. Want to read more?Follow Quentin Fottrell on Twitterand read more of his columns here.

Would you like to sign up to an email alert when a new Moneyist column has been published? If so, click on this link.Hello there, MarketWatchers. Check out the Moneyist private Facebook
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group where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.





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