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In our area, you can also contest the assessed value of your home. Makes no difference. The assessments have been going down while taxes on the same homes have been going up. If the local government needs more money (and they do right now), they come after the homeowners for it.
Overall, regardless of what your house is worth, your property taxes will be going up to compensate for what your town has lost in investments, sales tax revenue, state funding and to make up the gap in pension funds devastated by the 2008 crash.
The cries of "How can my taxes be going up when my house is worth less??!!" are only going to get louder.
That is where California's Prop 13 comes in. The state is limited on how much they can tax that assessment.
Unfortunately, at times we have the wrong people deciding on how the state/county/city limited tax revenue is spent. Right now, they are cutting things that don't really save much money but is an attempt to get people to think taxes need to be increased. The public worker salary/benefit information that is now available is putting pressure on the state to cut operating expenses instead.
For many, it's not tax issues. They're not willing to buy and take a loss. Thus they build the expected loss into the price hence the downward pressure on prices. People don't want to sell houses for less than they were purchased and plenty of people are underwater so it's very difficult for them to do even if they wanted to.
Real estate is an interesting beast. The prices just don't easily adjust to the market clearing rate.
2. Annual income. After taxes we have....uh....our tax bracket has the potential to take a MAJOR hit in income taxes if-- as it should and really must-- the government RAISES taxes on the "wealthy" (big range in that adjective) to what? 40%? 50%? More? No idea what our annual after tax income will be.
3 reasons why buyers aren't willing to buy right now:
1. They think the market might continue to go down.
2. They think the market might continue to go down.
3. They think the market might continue to go down.
According to that Diagram we are at 1990 prices today...... We'll that's what they were predicting anyhow.
The reason people are not buying is because they cannot get loans. So many people now have bad credit and lenders are much more strict than they used to be. People either cannot or feel as though they cannot get a loan to buy a house.
Furthermore, everyone fears that if they buy a house today it may go down in price, even though homes are more affordable now then they have been in at least 20 years.
You'll see people start to buy homes since rents are increasing significantly and it is once again becoming more expensive to rent then buy. Once rent hits a certain peak, you'll see people begin to turn back to homeownership.
In California, it does not work that way. Thanks to Prop 13 (A great law) the county is limited to the rate and the assessed value has to be accurate. You have the ability to fight it and you will win if comps show a decreased value. I have been buying properties over the last couple of years and my county reassessed at the purchase price and makes it retroactive to the close date. They are bound by law to do that.
With that, the county(and to some extent the state and cities as they get some of it too) has to adjust the budget to fit tax revenue, not adjust tax revenue to fund the budget. Prop 13 rules!!
I'll grant you that Proposition 13 in California has served to keep property taxes from running wild, so to that extent I agree that it's a good thing. But it is deeply flawed in terms of fairness because it rewards staying put and penalizes buying a new place (in which case the assessment gets suddently raised to the purchase price level). I have friends who have been in their home since 1969. They love Prop. 13 because they have had only very modest increases in property taxes since its passage. But why should their behavior (staying put) be rewarded by government? It is no more meritorious than moving frequently and buying new houses.
One huge irony here is that California is a high-tax state except for property taxes. (And remember I am agreeing that the relatively modest property taxes are a good thing.)
I'll grant you that Proposition 13 in California has served to keep property taxes from running wild, so to that extent I agree that it's a good thing. But it is deeply flawed in terms of fairness because it rewards staying put and penalizes buying a new place (in which case the assessment gets suddently raised to the purchase price level). I have friends who have been in their home since 1969. They love Prop. 13 because they have had only very modest increases in property taxes since its passage. But why should their behavior (staying put) be rewarded by government? It is no more meritorious than moving frequently and buying new houses.
One huge irony here is that California is a high-tax state except for property taxes. (And remember I am agreeing that the relatively modest property taxes are a good thing.)
One of the big problems prior to 1978 is the assessor set the value of the house, seemingly indiscriminately. Whenever they needed money, they would just raise the assessed value of the house. Not only was it an unrealized gain that was now taxed but it wasn't a valid value. It was arbitrary, based more on how much money they needed than how much the house was worth.
There was also corruption, some neighborhoods, presumably in the assessors back pocket, got lower assessments.
So to combat all of this, they rolled back prices to some point (I don't remember to what year) and said the maximum it can be increased is 2% annually. And, it would get reassessed when there was a property transfer (sale). House prices took off a lot more than 2% so that is why we have the inequality.
Perhaps the annual increase should be based on inflation. The problem there is you are still taxing people on unrealized gains. It isn't the homeowner's fault that inflation is running amok (when it does run amok). In fact, one of the benefits of home ownership is a safeguard against inflation.
So, the complaining comes from the new buyers. But at least they know what their expense is going to be and they can predict what it will be over the years. They signed the contract. Contrast that to the old system where all properties were assessed together. Not many people would like a $1000 property tax go to $3500 in 2 years. There is no way to forecast expenses.
I have property that is under assessed. And I have 2 properties that I bought the last two years that is full value. I am paying quite a bit more property taxes on those. But at least I knew exactly what the tax was and what it will be. It was my decision to purchase.
One of the big problems prior to 1978 is the assessor set the value of the house, seemingly indiscriminately. Whenever they needed money, they would just raise the assessed value of the house. Not only was it an unrealized gain that was now taxed but it wasn't a valid value. It was arbitrary, based more on how much money they needed than how much the house was worth.
There was also corruption, some neighborhoods, presumably in the assessors back pocket, got lower assessments.
So to combat all of this, they rolled back prices to some point (I don't remember to what year) and said the maximum it can be increased is 2% annually. And, it would get reassessed when there was a property transfer (sale). House prices took off a lot more than 2% so that is why we have the inequality.
Perhaps the annual increase should be based on inflation. The problem there is you are still taxing people on unrealized gains. It isn't the homeowner's fault that inflation is running amok (when it does run amok). In fact, one of the benefits of home ownership is a safeguard against inflation.
So, the complaining comes from the new buyers. But at least they know what their expense is going to be and they can predict what it will be over the years. They signed the contract. Contrast that to the old system where all properties were assessed together. Not many people would like a $1000 property tax go to $3500 in 2 years. There is no way to forecast expenses.
I have property that is under assessed. And I have 2 properties that I bought the last two years that is full value. I am paying quite a bit more property taxes on those. But at least I knew exactly what the tax was and what it will be. It was my decision to purchase.
I agree with your facts and explanations, and I would even agree that the former system was terrible enough to say the present one is much better. However, I still maintain that knowing in advance what your property taxes will be, as valuable as that is, does nothing to remedy the fundamental unfairness of the following hypothetical situation. Let's suppose two identical homes in comparable condition across the street from each other. Same size lots. But homeowner A bought in 1980 and has lived there ever since, but homeowner B bought in 2002. Since those two homes are worth the same amount, the owners should be paying the same property taxes. But they're not. Whatever happened to equal protection of the law?
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Proposition 13 pros and cons
