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Old 04-11-2012, 11:19 AM
 
Location: Conejo Valley, CA
12,460 posts, read 20,035,115 times
Reputation: 4365

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Prop 13 doesn't make up for high property costs, not to mention the lower property taxes in California (compared to say Texas) are made up for by higher income taxes.

Sunshine tax? I wonder what they call it in NYC, Boston, etc.... Urbanized areas, because they are built out, always cost more so long as the economy is growing. Development is eased by the flat nature of Dallas/Fort-worth, but as the area develops you'll start to see prices spike in the urbanized cores and the well connected suburbs.

Anyhow, buying a decent home here for the median family isn't really "doable", its only doable for those that have incomes that are noticeable higher than the median. Therefore, price support at current levels depends on a higher income cohort moving into the area.

Anyhow, the "sunshine tax" or whatever you want to call it is hardly worth it. I wish I never moved back to California, but at the moment I'm stuck here.
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Old 04-11-2012, 12:45 PM
 
699 posts, read 1,340,189 times
Reputation: 194
In most cases, it's at parity to rent or buy, even with a paltry down payment.

Do you think rents are going to decline any time soon?
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Old 04-11-2012, 12:49 PM
 
1,631 posts, read 4,214,455 times
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Quote:
Originally Posted by rooch View Post
Jealous of me? Sheesh--I'm pissed about taxes and small housing that costs an arm and 3 legs!

While it's beautiful out there (moreso than Dallas and the north burbs)--it's also a pretty penny!
Ok, all that is true. I just have a soft spot for my home, where I grew up and where all of my friends still are. Everything else aside from money related issues is why I miss it. That, and I prefer earthquakes to tornadoes.
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Old 04-11-2012, 02:53 PM
 
Location: Conejo Valley, CA
12,460 posts, read 20,035,115 times
Reputation: 4365
Quote:
Originally Posted by OpenSky View Post
In most cases, it's at parity to rent or buy, even with a paltry down payment.
I don't see that around here, there is only parity if you ignore things like maintenance costs and opportunity costs.

But my comment had little to do with real estate being overpriced in relation to rent, but rather the high cost of housing in "coastal" California in general.

Quote:
Originally Posted by OpenSky View Post
Do you think rents are going to decline any time soon?
The recent upward pressure on rents is new, they have been declining in real terms since around 2007. Though, my rent hasn't increased one bit.

Anyhow, yes rents should decline, at least in real-terms, as more multi-unit developments come online in the next 1-2 years.
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Old 04-11-2012, 04:42 PM
 
699 posts, read 1,340,189 times
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Quote:
Originally Posted by user_id View Post
I don't see that around here, there is only parity if you ignore things like maintenance costs and opportunity costs.
I am ignoring those things, but I'm also not factoring in tax savings from interest deductions (and for those not subject to AMT, property tax deductions). I think the two reasonably wash, given maintenance is a guess and can be partially hedged with a home warranty, and the interest deduction is (for now) a real and measurable offset. In other words, if you banked the interest deduction, it'd likely pay for any un-hedged maintenance + the annual cost of the warranty.

Hell, I've only owned for a year and my payments dropped 10% with a no-cost refi late last year. And if I press my case hard enough with the assessor, I might see a few more points on top of that come July. And that payment will never, ever go up (short of the 2% max on the prop tax). My housing costs are hedged, for all intents, forever.

On the other side, one of my brothers has been forced to move at the end of his lease three times in the past four years due to the landlord either defaulting or deciding to live in the investment property. Renters have to live with a lack of control on that front, and often shoulder moving costs as a result.
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Old 04-11-2012, 08:19 PM
 
Location: Conejo Valley, CA
12,460 posts, read 20,035,115 times
Reputation: 4365
Quote:
Originally Posted by OpenSky View Post
I am ignoring those things, but I'm also not factoring in tax savings from interest deductions (and for those not subject to AMT, property tax deductions). I think the two reasonably wash, given maintenance is a guess and can be partially hedged with a home warranty, and the interest deduction is (for now) a real and measurable offset.
There are two issues with maintenance. On one hand there are more or less regular maintenance items and the amortized costs can be estimated over a 10~20 decade period. There are issues with the tax issues as well, for one they don't apply equally to people and your average person doesn't benefit much from them. Their marginal tax rate is too low and the size of their itemized deduction wouldn't be much larger than what they'd get otherwise (e.g., standard deduction).

But perhaps most importantly, these two items move in opposite directions! That is, your maintenance costs usually increase the longer you own your home and your deduction decreases the longer you own your home. So for them to "wash" long-term, the tax deduction would have to be noticeably larger than the maintenance costs the first 10 years or so.

Regardless, generalizing about this is pretty useless, one needs to do the calculations for their particular situation.

Quote:
Originally Posted by OpenSky View Post
My housing costs are hedged, for all intents, forever.
They are partially hedged, there is maintenance, insurance and prop 13 can change at any time. But your "hedge" can work against you as well, if housing costs decline then you'll be stuck with a higher housing bill.

Quote:
Originally Posted by OpenSky View Post
Renters have to live with a lack of control on that front, and often shoulder moving costs as a result.
Sure, but if you pay attention to this before you sign the lease you can usually avoid issues like this. Moving costs are minimal.

Another issue are the transaction costs. Even if owning and renting are at parity, it takes years of owning before you make up for the transaction costs associated with buying. Yet, most younger workers have little assurance that they will be gainfully employed in the area for 5+ years.

Anyhow, like I said, I wasn't trying to make any claim about rent vs own, just that in general the housing costs in "coastal" California aren't worth it. This area is terrible for young middle-class families.
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Old 04-12-2012, 01:12 PM
 
Location: Living on the Coast in Oxnard CA
16,289 posts, read 32,270,302 times
Reputation: 21891
I for one love to own. Sure it is a personal decision and risk is involved with the decision. I can't call the rental company to fix anything and with a 50 year old home you can have plenty to fix. Also we are upgrading our home so their are costs associated with that and money that we may never see again. Still our goal is to stay in the home and hopefully pay it off in another 13 years or so. My wife work at a hospital and love what we do. It looks like we will retire from healthcare in the next 30 years.

My thoughts on owning: Owners are more or less care takers of a place that they call home. Someday someone else will be taking care of the home that you called your own. We don't own it so much as it owns us. It is a cost center that takes money and does not offer a return untill it is sold, and that does not always pan out as many have found these past 4 or 5 years. I find little hope of recovering the cost associated with buying the home since we do not plan to sell. The time I spend repairing and upgrading is also lost as I have to use my time and money to do everything. Saying all of that I will end with, I love doing it. We love our home and find it more of a hobby than an investment. It gives us a sence of stabillity for us and more importantly for our kids.
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