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Old 09-24-2014, 03:40 PM
 
26,591 posts, read 52,323,935 times
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Quote:
Originally Posted by darkeconomist View Post
One problem is that, in California since 1978, home prices went from 5 digits to high 6 or low 7s. The mechanism failed to account for the price explosion.
... and they also went down.

In my neighborhood in East Oakland the price of the home next to me went up to 510k in 2007 and then was sold at foreclosure for 80k.

People think Real Estate always goes up... this is not true and I've been through several reversals.

The crash took away 20 years of appreciation almost overnight.
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Old 09-24-2014, 04:20 PM
 
2,553 posts, read 2,006,214 times
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Quote:
Originally Posted by Ultrarunner View Post
... and they also went down.

In my neighborhood in East Oakland the price of the home next to me went up to 510k in 2007 and then was sold at foreclosure for 80k.

People think Real Estate always goes up... this is not true and I've been through several reversals.

The crash took away 20 years of appreciation almost overnight.
I'm not saying it always goes up. But, in general, the growth over time in California has far outpaced anything that could be considered "normal." Even for Oakland, the location of your counter-example, the median home is selling no cheaper than at its peak from 2005-2007.

Let's make some generalizations for the sake of getting some numbers to chew on. Say you bought a home in 1978 worth $40k. Say it was in Sunnyvale, CA. It could be priced north of $900k. Inflation only puts us at $145k. Okay, given that inflation isn't the most useful metric here, but it does put things in perspective.
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Old 09-24-2014, 05:06 PM
 
26,591 posts, read 52,323,935 times
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Quote:
Originally Posted by darkeconomist View Post
I'm not saying it always goes up. But, in general, the growth over time in California has far outpaced anything that could be considered "normal." Even for Oakland, the location of your counter-example, the median home is selling no cheaper than at its peak from 2005-2007.

Let's make some generalizations for the sake of getting some numbers to chew on. Say you bought a home in 1978 worth $40k. Say it was in Sunnyvale, CA. It could be priced north of $900k. Inflation only puts us at $145k. Okay, given that inflation isn't the most useful metric here, but it does put things in perspective.
Your pretty close... I looked at a home in Rancho bordered by Cupertino in 1982 for 65k and today, an untouched original cinder-block home in that neighborhood is 700k... many are higher and these have had extensive upgrades/additions.

The valley is a special place in that it attracts people from every corner of the world and it still is a place where people do succeed beyond their wildest dreams.

My God-sister is one... she took a summer intern between junior and senior year from Cupertino High School at a little start up called Apple Computer... she was employee #130???

Upon graduating High School she went full time and her father a valley defense contractor engineer told her to max out on everything she could at work including company stock.

Here is a nice young lady with only high school that had enough Apple stock to buy her Campbell home and every time she needed money she just sold some stock... new car, honeymoon, etc...

She is not alone and many of her friends have similar stories...

Another example is in 1958 a builder built identical subdivisions in Oakland and Cupertino... 3 bedroom split level homes... the ones in Oakland had a panorama view and sold for 27k... the identical Cupertino homes sold for 24k... fast forward to 2014... both homes are sold... the one in Oakland sold for 550k and the one in Cupertino sold for 1.3m... both still had the original lino floors and Formica counters...

I'm always fascinated by Real Estate... and location is very important and the story of two identical homes is an example...

To make it more interesting the Cupertino home during the crash was still about a million and the Oakland home was down to 300k
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Old 09-24-2014, 07:13 PM
 
33,046 posts, read 22,072,092 times
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Originally Posted by Ultrarunner View Post
Not an issue in my City... Oakland and many nearby communities have rent control, licensing, tenant hearing boards, etc. to address this.

Caifornia is just...weird. You've got Prop 13 and, as far as I am aware, the only rent controls outside NYC. it was Prop 13 that led to the backlash that created those rent controls.
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Old 09-24-2014, 10:11 PM
 
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Quote:
Originally Posted by freemkt View Post
Caifornia is just...weird. You've got Prop 13 and, as far as I am aware, the only rent controls outside NYC. it was Prop 13 that led to the backlash that created those rent controls.
Some just say unique... or as California goes... so goes the nation
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Old 09-24-2014, 11:55 PM
 
2,388 posts, read 2,956,746 times
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Quote:
Originally Posted by darkeconomist View Post
One problem is that, in California since 1978, home prices went from 5 digits to high 6 or low 7s. The mechanism failed to account for the price explosion.
California is not exceptional. New York, Boston and DC all have similar issues with housing prices. NJ recently instituted a 2% annual cap on property tax rises for reasons similar to those in CA and MA has had a similar law since the 80s.

From what I've seen the property tax breakdown is usually the same - ~50% to school district, 25% to the municipality, 25% to the county (this last part depends on what services the county is providing). School districts are too often the biggest burden when it comes to property taxes in a lot of major metros. Still, if I bought a house 10 years ago and in that time the value of my house has doubled that's great for me but it doesn't mean that the cost of running the city or a school district has doubled.

Even for local govt's i'm not sure how much of a difference the property tax cap makes. The average homeowner sticks around for 13 years. At that point the property gets reassessed. The problem isn't that there's a cap on annual increases - it's that the cap is considerably less than inflation. If a house was assessed at $70,000 in 1975 ($700/yr) then the 2% brings in just over $1,500 today. If it was 3% the city would be getting just over $2,200 . . . but again, that's only for the small portion of properties that haven't changed hands since 1975.
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Old 09-25-2014, 05:47 AM
 
33,046 posts, read 22,072,092 times
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Quote:
Originally Posted by drive carephilly View Post
California is not exceptional. New York, Boston and DC all have similar issues with housing prices. NJ recently instituted a 2% annual cap on property tax rises for reasons similar to those in CA and MA has had a similar law since the 80s.

From what I've seen the property tax breakdown is usually the same - ~50% to school district, 25% to the municipality, 25% to the county (this last part depends on what services the county is providing). School districts are too often the biggest burden when it comes to property taxes in a lot of major metros. Still, if I bought a house 10 years ago and in that time the value of my house has doubled that's great for me but it doesn't mean that the cost of running the city or a school district has doubled.

Even for local govt's i'm not sure how much of a difference the property tax cap makes. The average homeowner sticks around for 13 years. At that point the property gets reassessed. The problem isn't that there's a cap on annual increases - it's that the cap is considerably less than inflation. If a house was assessed at $70,000 in 1975 ($700/yr) then the 2% brings in just over $1,500 today. If it was 3% the city would be getting just over $2,200 . . . but again, that's only for the small portion of properties that haven't changed hands since 1975.

Caps on annual increases in assessments or property taxes make a BIG difference.

A study in Michigan around 2000 estimated that 'taxable value' (which is what is capped in Michigan, assessments are not capped but the taxable value is, and of course the actual property taxes are levied on the taxable value rather than the assessed value) for rental property ('nonhomestead property') was approx 25 percent higher than for comparable owner-occupied homes (homestead property).

Similar to other states with caps, the assessment and the taxable value are reset to actual sale price at sale; the shorter average holding period of rental property causes rental properties on average to reset more frequently than owner-occupied homes.
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Old 09-25-2014, 07:32 AM
 
26,591 posts, read 52,323,935 times
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Quote:
Originally Posted by drive carephilly View Post
California is not exceptional. New York, Boston and DC all have similar issues with housing prices. NJ recently instituted a 2% annual cap on property tax rises for reasons similar to those in CA and MA has had a similar law since the 80s.

From what I've seen the property tax breakdown is usually the same - ~50% to school district, 25% to the municipality, 25% to the county (this last part depends on what services the county is providing). School districts are too often the biggest burden when it comes to property taxes in a lot of major metros. Still, if I bought a house 10 years ago and in that time the value of my house has doubled that's great for me but it doesn't mean that the cost of running the city or a school district has doubled.

Even for local govt's i'm not sure how much of a difference the property tax cap makes. The average homeowner sticks around for 13 years. At that point the property gets reassessed. The problem isn't that there's a cap on annual increases - it's that the cap is considerably less than inflation. If a house was assessed at $70,000 in 1975 ($700/yr) then the 2% brings in just over $1,500 today. If it was 3% the city would be getting just over $2,200 . . . but again, that's only for the small portion of properties that haven't changed hands since 1975.
Plus the voter approved assessments which can be substantial...
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Old 09-25-2014, 06:40 PM
 
2,553 posts, read 2,006,214 times
Reputation: 1348
Quote:
Originally Posted by drive carephilly View Post
Still, if I bought a house 10 years ago and in that time the value of my house has doubled that's great for me but it doesn't mean that the cost of running the city or a school district has doubled.
No, it doesn't. But that assumes that the whole area hasn't skyrocketed; cheap areas must exist. In California, especially in the metros, that assumption hasn't held. City services have exploded in cost in part because there is no cheap place to farm employees from. Also, because people have come to expect more from cities (and politicians have, far to often, acquiesced because they'll be out of office long before the problem comes to a head).
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Old 09-25-2014, 06:42 PM
 
Location: southern california
55,668 posts, read 74,646,551 times
Reputation: 48187
things will not stay like there are. people dont want to commute 2 hours each way with gas at $5.00 a gallon.
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