Why aren't any PA counties among the highest property taxes? (Pittsburgh: home, buyers)

[UKyank]

I am just saying that when calculating taxes paid as a percentage of home value, it would seem that the most accurate picture would be using 2002 values only. Most homes (not across the board, but I would bet the majority), have increased in value since 2002 which would artificially drive down the % of property tax that is paid in the area.

For example, someone bought a house in an up and coming neighborhood. 2002 assessed value was $100,000. 10 years later that neighborhood is highly sought after and the value of the home is $200,000. Just because that home value doubled in real world terms, that shouldnt equate to the tax percentage going down by half and then using that data to say the area is low on property taxes, when you have no idea when other areas have done their assessments and such.

(yes, i know the calculations for how reassessment actually works is a lot more involved, but was just trying to be simple with the example).

[ML North]

Originally Posted by UKyank

Just because that home value doubled in real world terms, that shouldnt equate to the tax percentage going down by half and then using that data to say the area is low on property taxes, when you have no idea when other areas have done their assessments and such.

But we're not talking in absolute terms. For comparing the relative tax burden among several areas, all of which are subject to the same tax assessment method, I don't think it makes much of a difference whether you're using median assessed value in the base year or median market value in any other year. The exception would be areas that have experienced significant appreciation or depreciation relative to the median, and we're not considering any such area.

Also, for comparing among areas with different tax assessment calculations, I think you have to use market values. Some counties (e.g. Westmoreland) have artificially low assessed values, but high millage rates. Therefore, the ratio of real estate taxes to the assessed value would be high compared to areas with higher assessments and lower millage rates, even if the property had the same market value and was subject to the same dollar amount of property taxes. To circumvent such complications, I thought it was appropriate to use market values when comparing the tax burdens in different areas on a relative basis.

[BrianTH]

Originally Posted by UKyank

A much more meaningful comparison among cities would be the actual assesed value at time of tax calculation compared to taxes paid, rather than using current home values compared to taxes paid, which is not really useful at all to compare different metro areas

Meaningfulness depends on the kind of question you are trying to answer.

In this case, if you are trying to understand what the tax rate is as a percentage of assessed value, you need the numbers you are suggesting, although it would likely be easier just to look up the tax rate in question.

But because the relationship between assessed values and current prices can vary so radically depending on the nature of the tax scheme in the relevant jurisdictions, I'm not sure why you think that is the only, or most, meaningful question. Personally, I think property taxes paid as a percentage of current income is the most useful basis for comparison if the question is how taxes are affecting the affordability of home ownership in a given set of locations.

(especially if 2006 year is used which would arguably be the apex of home values in the US).

That is part of why I prefer using current income as the basis. We don't really know how the drop in home prices in many jurisdictions would have affected taxes paid as a percentage of home value (although it is unlikely to have hurt Pittsburgh's ranking--just the opposite), since that depends in part on the assessment scheme in place in each jurisdiction. Incomes are going to be a lot less volatile (they may have been affected by the recession, but not to the point of there being 50% drops and such).

[gg]

Originally Posted by BrianTH

You can also lose 50% or more of your investment. Your own home really should not be an investment vehicle. Investments should be diversified, and your own home isn't a diversified investment. If you want to make diversified investments in real estate, and don't have a gigantic portfolio (like university-endowment big), you should use REITs.

One thing for sure, you have quite an ego trying to tell me about investments. Too funny. I am starting to think this has to just be a joke. It has to be. At least no one could possibly take your posts seriously. You are the king of all posters for volume. I will give you that. Sort of a shame because you really are so sheltered from reality and don't have any understanding real estate. Guess that is what you get if you are full time on this forum with really nothing else going on.

Good luck in your endeavors.

[BrianTH]

Originally Posted by UKyank

Most homes (not across the board, but I would bet the majority), have increased in value since 2002

It has been all over the map, which is how they won their court case requiring a reassessment.

For example, someone bought a house in an up and coming neighborhood. 2002 assessed value was $100,000. 10 years later that neighborhood is highly sought after and the value of the home is $200,000. Just because that home value doubled in real world terms, that shouldnt equate to the tax percentage going down by half and then using that data to say the area is low on property taxes, when you have no idea when other areas have done their assessments and such.

Say you have one house assessed at $100,000, with a market value of $200,000. Actual taxes paid are $3000/year. You have another house in another nearby jurisdiction, with a market value of $200,000, and an assessment of $200,000. Actual taxes paid are again $3000/year.

It isn't necessarily obvious we should say taxes on the first house are twice as high as taxes on the second house.

What this is really pointing out is that prospective buyers and long-time owners may see these issues a bit differently. Buyers really just care about the taxes paid as a percentage of current prices. Long-time owners may care less about current prices.

Again, this is a good argument for looking at taxes paid as a percentage of income. Of course there will still be people who bought a long time ago and haven't seen the same income gains as the area in general, but no single measure can take care of every single contingency.

[BrianTH]

Originally Posted by h_curtis

One thing for sure, you have quite an ego trying to tell me about investments.

I'd say you'd have to have quite the ego to think that you are the only person in the world who knows anything about investing.

And here is the thing about arguments from personal authority: it is very rare for a person with true personal authority to be unable to explain themselves in a persuasive way. If all you can do is keep repeating "Respect my authoritah!", people are going to start suspecting that maybe you are not as much of an authority as you are claiming to be.

[UKyank]

Originally Posted by BrianTH

Personally, I think property taxes paid as a percentage of current income is the most useful basis for comparison if the question is how taxes are affecting the affordability of home ownership in a given set of locations.

This I agree with.

I was just thinking hypothetically if using the other ratio of tax to home value comparison, say if SanFrancisco did their assessments last year and someone had a $500,000 home and the taxes paid would be $7500, you would say that their ratio of tax to home value in that market was 1.5%.

Now say you wanted to compare things in Pgh. You take a $500,000 valued home and find they are paying $6,000 in property taxes which is a 1.3% ratio, you say, look, Pgh is the better bargain with taxes. But in reality, if that home was assessed at say $375,000 in 2002, then in actuality SanFran is cheaper, but a graph or whatever using current home values would show differently. (of course if things werent ever going to be reassessed anytime soon here then it would be cheaper until that was done, but it is slated to be done hence why i think the data is skewed in regard to that ratio as we have no idea how recently other metros have done assessments.)

Of course my ignorance on the entire issue could have just shown through with the above example

[BrianTH]

Originally Posted by UKyank

But in reality, if that home was assessed at say $375,000 in 2002, then in actuality SanFran is cheaper, but a graph or whatever using current home values would show differently.

This is the part I don't follow. Taxes are higher as a percentage of the 2002 house price, but I can't buy the Pittsburgh house at $375,000 in 2011, so how is that information the most relevant information for me? And we don't even know what the SF house cost in 2002 anyway, so you are comparing apples to oranges.

I think what you are basically saying is that you can't get the statutory tax rate from these charts. That is correct, but you should: (A) just look up the statutory tax rate if you need to know it; and (B) understand that your taxes paid are a function of the statutory tax rate and assessment scheme, not the statutory tax rate alone.

I might note that an awful lot of people do talk about statutory tax rates as if they were independently meaningful. To me that is a big mistake--for any practical purpose, you always need to understand both the tax rate and the tax basis, never just the tax rate. In this case, statutory property tax rates have no practical meaning independent of the assessment scheme.

[UKyank]

Because the graphs charts etc are all using current home values to tax amounts from who knows what year (wash county was like 1981) to come up with a ratio as a basis of comparison among different areas.

[BrianTH]

Originally Posted by UKyank

Because the graphs charts etc are all using current home values to tax amounts from who knows what year (wash county was like 1981) to come up with a ratio as a basis of comparison among different areas.

The graphs are using current home values and current taxes paid. The assessment schemes and the statutory tax rates used to get to those taxes paid could be all over the place, and undoubtedly are. But even if the assessment is old because of the way the local taxes work, the taxes actually paid are current.