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Old 05-24-2010, 10:42 PM
 
58 posts, read 105,754 times
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your calculations are wrong. You cannot predict home appreciation but you predict tax increase. I would think that towns with high taxes will be the first to bankrupt or cutback on expenses. On the other hand lower tax towns have more of an upside. In short, you speculate but the tax situation might be unpredictable. So the question to what house you can afford is neither. Better rent and let the landlord worry about tax increases!
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Old 05-24-2010, 11:11 PM
 
Location: Montgomery County, PA
2,771 posts, read 5,993,214 times
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Quote:
Originally Posted by ordinar View Post
your calculations are wrong. You cannot predict home appreciation but you predict tax increase. I would think that towns with high taxes will be the first to bankrupt or cutback on expenses. On the other hand lower tax towns have more of an upside. In short, you speculate but the tax situation might be unpredictable. So the question to what house you can afford is neither. Better rent and let the landlord worry about tax increases!
I did the calculations both with the assumption that taxes in both towns grow at the same rate, and with the assumption that they continue on their current trajectories. That's where I get my range of differences in appreciation from.

It's theoretically possible that you could get some kind of reversal where the higher taxed town's taxes grow at a slower rate than the higher taxed town, resulting in the gap closing (and hence a kind of mean reversion where neither choice is better in the long term). However, I don't think this is the case here. I think instead that those who live in high tax towns are less "tax sensitive" (or more willing to accept a large tax bill/less willing to shop around for lower taxes).

I agree that renting is a pretty sensible thing to do if you're living around the NY metro. Prices skyrocketed during the bubble, but not so rents. The glut of "shadow inventory" has added to the availability of rental property that is suitable for a young family.
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Old 05-25-2010, 06:27 AM
 
Location: Edison, NJ
89 posts, read 428,950 times
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I generally agree with the OP, but the problem with a young family renting is that they're not building any equity whatsoever. As time goes by, wouldn't it be more difficult for that young family to purchase a home if they continue to rent? That's a sincere question, I'm not a finance person... And, let's say they continue to rent into their 30's and 40's, what are their living options as retirement looms?
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Old 05-25-2010, 11:07 AM
 
Location: Coral Springs
143 posts, read 396,763 times
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Elford,
Again you must CONSIDER public schools! Believe me- even in a place like Milburn where taxes are astronomical, the homes have not lost the % of value in downturn as other areas. Because many people would rather use a good public school system (esp if >1 kid) than go for low taxes and end up having to pay for private.
It is true you have to look at taxes & the running of the town in general. But schools count a lot!
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Old 05-25-2010, 11:46 AM
 
Location: Coral Springs
143 posts, read 396,763 times
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One more thing, many Essex county towns or Northern Union County towns have excellent transportation options to NYC. Depending on where you live this is a significant cost for commuters- so some may pay more in property taxes for the convenience (or lower cost of) with respect to commuting. It is cheaper to live in Sussex County for example, but I have friends who spend many hundreds of $$ per month on gas, not to mention hours of their lives on the roads every day.
I do agree though with your overall point -you cannot judge cost of home ownership by selling price alone- there are other factors to consider with property taxes being one of the bigger items to look at.
BTW, right now Mountainside taxes will spike thanks to our state aid for schools going to ZERO (last year aid was about 4% of budget), not sure about WO although I do not think they are abbott so they probably got cut too.
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Old 05-25-2010, 11:49 AM
 
Location: NJ
17,578 posts, read 44,062,868 times
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Quote:
Originally Posted by mdpesq View Post
I generally agree with the OP, but the problem with a young family renting is that they're not building any equity whatsoever. As time goes by, wouldn't it be more difficult for that young family to purchase a home if they continue to rent? That's a sincere question, I'm not a finance person... And, let's say they continue to rent into their 30's and 40's, what are their living options as retirement looms?
But it could be cheaper to rent so that person could be investing those savings and that could be used to eventually buy.
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Old 05-25-2010, 12:15 PM
 
60 posts, read 194,702 times
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Default Fyi

FYI.. I just received a notice that WO is going to be doing reassessments. It has been a number of years since the last one, but I am really worried as to what our taxes will be after the assessment.
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Old 05-25-2010, 04:03 PM
 
Location: Montgomery County, PA
2,771 posts, read 5,993,214 times
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Quote:
Originally Posted by mdpesq View Post
I generally agree with the OP, but the problem with a young family renting is that they're not building any equity whatsoever. As time goes by, wouldn't it be more difficult for that young family to purchase a home if they continue to rent? That's a sincere question, I'm not a finance person... And, let's say they continue to rent into their 30's and 40's, what are their living options as retirement looms?
They could be building equity in something besides a house by investing that money. Depending on what they do with that money, and what happens to house prices, it could be easier for them to buy later.

We're used to thinking that house prices are going to go sky high because of our experience in the last two years, but 2000-2006 are an anomoly, not the norm. Historically, housing doesn't appreciate by very much.
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Old 05-25-2010, 04:19 PM
 
Location: Montgomery County, PA
2,771 posts, read 5,993,214 times
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Quote:
Originally Posted by dedemoving View Post
Elford,
Again you must CONSIDER public schools! Believe me- even in a place like Milburn where taxes are astronomical, the homes have not lost the % of value in downturn as other areas. Because many people would rather use a good public school system (esp if >1 kid) than go for low taxes and end up having to pay for private.
It is true you have to look at taxes & the running of the town in general. But schools count a lot!
The effect of schools is difficult to measure, and quite frankly, for the purpose of this analysis, I don't think it's useful information. I'm trying to assess the impact of property taxes on long term wealth accumulation.

The claim that places with higher property taxes have better school systems is simply incorrect. Millburn's effective property tax rate is 1.6% compared to 3.6 and 3.0% for East Orange and Irvington according to nj by the numbersNew Jersey by the Numbers - NJ.com

I don't understand the point of your claim that Millburn hasn't lost as much value as other towns. Besides the fact that this seems demonstrably false on a perusal of the numbers (e.g. see Trulia which shows y.o.y declines of 17% for Millburn and similar numbers for nearby towns), I don't understand whether you are trying to suggest that:

(a) this makes the town less sensitive to market swings (which I'm trying to ignore for the purpose of my analysis -- I'm looking at long run expectations and not volatility or risk adjusted returns) or
(b) are you trying to assert that some towns will catch all of the upside and none of the downside of a price move (which I don't believe) or
(c) are you getting into the game of trying to speculate on which town will enjoy better appreciation ? I have pointed out, is very difficult to do, is not a simple matter of picking the town that is considered the most desirable today, and is not part of my analysis. I agree that the long term outlook of a town is important to consider for any buyer, however, it is not something I wish to address here.

Regarding your point about transportation costs -- this is really about the desirability of the neighborhood. People pay more for a more desirable neighborhood. A place where your monthly payment will be $2500 a month is, as far as the market is concerned, as desirable as another place where the monthly payment is the same (here I'm assuming that the market is driven by short term affordability, but that seems a pretty reasonable assumption given recent observations about the market). Given two places that are equally desirable by this measure, the one that has more of that $2500 going into mortgage payments and less of it into tax bills will leave you better off in the long run.

Last edited by elflord1973; 05-25-2010 at 04:28 PM..
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Old 05-25-2010, 05:05 PM
 
Location: West Orange, NJ
726 posts, read 1,831,493 times
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West Orange is not an Abbott District btw. Obviously Mountainside has better schools, perhaps not better programs but a better environment because of its location.
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