Who buys high end homes? (Austin, Georgetown: real estate market, rent, mortgage)

[pdxtech]

I have seen a lot of homes in SW Austin (ZIP 78746) crossing
$215/sq. foot price levels. I was wondering who buys such homes if we
leave out the (much demonized) out of state investor?
What kind of jobs in Austin support the high end of real estate?
Is there a dependence on High Tech companies? Or are we really
looking at some kind of a "real estate bubble" localized to that
zip code? Any feedback would be appreciated.

[GreenPlastic]

We just sold our home for $275/sq ft in the 78703 area code. Most of our neighbors are/were doctors, lawyers and entrepeneurs. Some of the longtime residents are professors and teachers. A lot of people in the area seem to be using equity in their current homes to buy more expensive ones. There also seems to be an influx of out of state business people who are using real estate gains to buy nicer homes here.

[Austin97]

Originally Posted by pdxtech

I have seen a lot of homes in SW Austin (ZIP 78746) crossing
$215/sq. foot price levels. I was wondering who buys such homes if we
leave out the (much demonized) out of state investor?
What kind of jobs in Austin support the high end of real estate?
Is there a dependence on High Tech companies? Or are we really
looking at some kind of a "real estate bubble" localized to that
zip code? Any feedback would be appreciated.

Depending on the size of the home 215/sq ft may not be that expensive. In my area homes are around 450K+ (but under 175/sq ft), most of the people are doctors, business owners or high tech.

Im my cul de sac we have 3 business owners, 2 doctors, 2 high tech, 1 retired, 1 stock broker

[Taterhead]

But the property tax on a 450k home is killer on you in Texas. What happens to all of you when you retire? that homestead exemption doesn't help much. My kids live in Austin and we really want to retire there to be close the them, but the property tax is a big issue for us.

[pdxtech]

Originally Posted by Taterhead

But the property tax on a 450k home is killer on you in Texas. What happens to all of you when you retire? that homestead exemption doesn't help much. My kids live in Austin and we really want to retire there to be close the them, but the property tax is a big issue for us.

Taterhead, I fully agree with you. If you get a 30 year conventional
fixed rate mortgage at 6.25% (typical today), and pay a 3% property tax
on your home, you actually have a 9.25% mortgage. Remember though
that the loan has a fixed principal based on the day you financed your loan
(if you buy a 400k home with a 320k mortgage, the 320k is fixed
over the life of the loan). But, as your property value appreciates, so
does the property tax portion. So, your "mortgage" gets more and more
expensive over time. If you have no income, it hurts more because
your property tax is more like paying rent to the county, whether you have
a job or not!

So, the higher the property value is, the more it hurts you in property
taxes. Also, the higher end homes will not appreciate much over time
for the same reason. Is this a correct assumption?

[Taterhead]

Originally Posted by pdxtech

Taterhead, I fully agree with you. If you get a 30 year conventional
fixed rate mortgage at 6.25% (typical today), and pay a 3% property tax
on your home, you actually have a 9.25% mortgage. Remember though
that the loan has a fixed principal based on the day you financed your loan
(if you buy a 400k home with a 320k mortgage, the 320k is fixed
over the life of the loan). But, as your property value appreciates, so
does the property tax portion. So, your "mortgage" gets more and more
expensive over time. If you have no income, it hurts more because
your property tax is more like paying rent to the county, whether you have
a job or not!

So, the higher the property value is, the more it hurts you in property
taxes. Also, the higher end homes will not appreciate much over time
for the same reason. Is this a correct assumption?

Exactly,

We would buy the home outright, so no morgage paymemts. My husband hates the fact that we would own our home and still be paying almost a morgage payment in taxes per month just to be near the kids. We are looking seriously at Tennessee for that reason alone.

[pdxtech]

Originally Posted by Taterhead

Exactly,

We would buy the home outright, so no morgage paymemts. My husband hates the fact that we would own our home and still be paying almost a morgage payment in taxes per month just to be near the kids. We are looking seriously at Tennessee for that reason alone.

Here is a suggestion. Find out how much you would pay every month in
property taxes. Let us say it comes to $1000. Find out how much
state income tax you paid last year on a per month basis. Let us say
another $600. Then, the first $1600 of your rent is free if you move to
Texas and rent (there is no state income tax)! It almost seems like the
laws are written in Texas to favor renting than owning, is that correct?

[pdxtech]

Originally Posted by pdxtech

Here is a suggestion. Find out how much you would pay every month in
property taxes. Let us say it comes to $1000. Find out how much
state income tax you paid last year on a per month basis. Let us say
another $600. Then, the first $1600 of your rent is free if you move to
Texas and rent (there is no state income tax)! It almost seems like the
laws are written in Texas to favor renting than owning, is that correct?

Oh, and I forgot, if you were planning to buy your 400K home outright,
put that money in a 5% FDIC insured account, it would earn you
20K a year, which is another $1670 a month. For $3270 a month,
you can rent a really good place in Austin with NO DEPENDENCE
on the real estate market and liquid assets that are 100% safe.

[Taterhead]

Well we want to own not rent, my husband says the no state income tax is no big deal once you retire anyways. We weren't looking at buying 450K home BTW, it would have been more like 200-300K in either Georgetown or Cedar Park (we liked those areas best).

[Taterhead]

Actually, to put it into perspective, as I said, we were looking at spending around $250,000 for a home in texas. The annual property taxes would be around $6,000. That's more than we pay in property taxes on a $600,000+ valued home and state income taxes on an annual income of over $120,000 a year, combined (in Arizona). After we retire, we're looking at an annual income of substantially less than that.