Author Topic: Living in a place where house values have gone crazy  (Read 14340 times)

neo von retorch

  • Magnum Stache
  • ******
  • Posts: 3328
  • Location: SE PA
    • Fi@retorch - personal finance tracking
Re: Living in a place where house values have gone crazy
« Reply #50 on: June 03, 2016, 07:17:29 AM »
My house in Montgomery County, PA near Philadelphia was worth $315k and had $11,000 a year in taxes.

Jeebus - I feel lucky. My taxes in Bucks Co. are about 1.5% of my property value. (For now... previous owner lived there over 30 years...)

abiteveryday

  • Stubble
  • **
  • Posts: 130
  • Location: Seattle
Re: Living in a place where house values have gone crazy
« Reply #51 on: June 03, 2016, 07:24:31 AM »
My house is worth $550k with taxes around $3k annually.   Guess we have it pretty good out here.   Between that and no state income tax, no wonder everyone is moving here.

nereo

  • Senior Mustachian
  • ********
  • Posts: 10309
  • Location: la belle province
    • Here's how you can support science today:
Re: Living in a place where house values have gone crazy
« Reply #52 on: June 03, 2016, 07:47:04 AM »
I'm just popping in to say I envy your property taxes.  We live down the road in London.  Our house is valued at about $290,000, and our property taxes are $3700.  For which we get abysmal services!   ...
Heh.. Naperville, Illinois. House valued at $380,000, and property tax is $8400
My house in Montgomery County, PA near Philadelphia was worth $315k and had $11,000 a year in taxes.

Wow!!!
This just reinforces my belief that you never really escape housing costs, even if you decide to pay off your mortgage in full.  It seems common that, after just 20-30 years property taxes are more than the original mortgage payments.

I consider myself very luck right now.  Condo valued at $265k (purchased lower); our 2016 property taxes are just over $2800.

ShoulderThingThatGoesUp

  • Magnum Stache
  • ******
  • Posts: 3057
  • Location: Emmaus, PA
Re: Living in a place where house values have gone crazy
« Reply #53 on: June 03, 2016, 07:49:44 AM »
My house in Montgomery County, PA near Philadelphia was worth $315k and had $11,000 a year in taxes.

Jeebus - I feel lucky. My taxes in Bucks Co. are about 1.5% of my property value. (For now... previous owner lived there over 30 years...)

Yeah, don't move to Cheltenham Township. Up here I am paying maybe around 2% but I'm in a borough so I pay very low rates for water and trash.

nereo

  • Senior Mustachian
  • ********
  • Posts: 10309
  • Location: la belle province
    • Here's how you can support science today:
Re: Living in a place where house values have gone crazy
« Reply #54 on: June 03, 2016, 08:43:45 AM »
Except in California where property taxes are fixed at 1% of the purchase price and can only go up a tiny % of that amount per year and never reappraised for taxes no matter how much the value increases. There are people there who bought years ago cheap and now have $500/year taxes on houses valued around a million $$'s. My house is around $500k but prop tax is less than $2k/year. If I had kept my first house (bought from Mom and able to keep her tax rate) it would be worth about the same and my prop taxes would have been $350/year. 

ETA this is one reason it's been hard for me to decide whether to sell or not. Low prop taxes that I know won't increase much coupled with low utilities (total less than $100/month) means cheap living in a HCOL area. But..... So.Much.Equity.

Ah, yes... the great Prop 13.  I lived in California for 9 years (always as a renter), and it was a bit shocking how people who had purchased small beach-side bungalows in the 1960/70s $30k paid almost nothing in property tax even though their home was now valued at over $1MM.  My landlord was one such person, and my monthly rent for a detached carriage house was considered 'cheap' at $1650/mo for a 2bd/1bath.   As long as he didn't sell he continued to pay peanuts in taxes, and my rent largely supported his entire retirement.  He could sell and be a millionaire but then couldn't afford to live there anymore.  It was a weird "catch-22".

I don't think anyone ever expected Prop 13 to have the lasting repercussions it has had.

Mr. Green

  • Handlebar Stache
  • *****
  • Posts: 1919
  • Age: 35
  • Location: Wilmington, NC
Re: Living in a place where house values have gone crazy
« Reply #55 on: June 03, 2016, 10:03:10 AM »
My house in Montgomery County, PA near Philadelphia was worth $315k and had $11,000 a year in taxes.
That's insane. I sure hope they don't collect income taxes on top of that.

nereo

  • Senior Mustachian
  • ********
  • Posts: 10309
  • Location: la belle province
    • Here's how you can support science today:
Re: Living in a place where house values have gone crazy
« Reply #56 on: June 03, 2016, 10:11:51 AM »
another thing Prop 13 has is the ability to transfer your prop tax rate/basis to a new home if you sell. It's only good one time and you have to be 55 or older. So the house-rich person can sell, get their millions in equity and then buy a lower cost place and carry over their $500/year prop taxes. It was put in place to allow seniors the ability to downsize without having to deal with newer higher prop taxes. I don't think when Prop 13 began in 1973 people could imagine how high house values would go in Cali.and what the long term impact would be.

I did not know that about Prop 13.  At least there's some method for empty-nesters to downsize their home, but in my landlord's case us renters just became his (rather large) source of income.
Not that it matters but Prop 13 was passed in '78, not '73. 
And I agree that, at the time, I don't think anyone realized California would more than double in size over the next 30 years and spawn and dominate the entire tech industry, and become a global wine powerhouse.  In the 1970s the idea that California would soon have a greater GDP than Russia or Canada would have seemed insane.

ShoulderThingThatGoesUp

  • Magnum Stache
  • ******
  • Posts: 3057
  • Location: Emmaus, PA
Re: Living in a place where house values have gone crazy
« Reply #57 on: June 03, 2016, 11:01:31 AM »
My house in Montgomery County, PA near Philadelphia was worth $315k and had $11,000 a year in taxes.
That's insane. I sure hope they don't collect income taxes on top of that.

Pennsylvania collects 3.07%, local municipality and school district each collect 0.5% unless you live in a "city" as legally defined in which case it can be more, especially in Philadelphia. Sales tax is 6% unless you live in Philadelphia or Allegheny County (Pittsburgh).

Pennsylvania's overall tax burden is not that bad in most places; I was living in a special case, the dark blue rectangle just above the word "Philadelphia" in this image - darker blue is a higher tax burden in this map of all the municipalities in the Philadelphia area.


Axecleaver

  • Magnum Stache
  • ******
  • Posts: 3366
  • Location: New York
Re: Living in a place where house values have gone crazy
« Reply #58 on: June 03, 2016, 01:18:09 PM »
OK, time for some one-upsmanship! NY is a special case due to how we pay for Medicaid with property taxes. As a result, very poor counties in NY (where there are more poor folks on Medicaid) end up with wildly perverse property tax rates, accounting for over half the property tax which is paid. Incidentally, this reduces property values dramatically.

By way of example, the median home value in Binghamton, NY is 85k. You would pay $4959/year for that home, or 5.8%. In Erie County, you would pay $4766 per year for a median home worth 73k, where the tax rate is an astonishing 6.47%. This is on top of state income tax of 7% and sales tax of 8%.

http://www.empirecenter.org/wp-content/uploads/2015/03/PropertyTax2013.pdf

projekt

  • Bristles
  • ***
  • Posts: 282
Re: Living in a place where house values have gone crazy
« Reply #59 on: June 04, 2016, 07:09:07 AM »
Sort of reminds me of when my parents were down here in GA visiting from NY, and my mother-in-law was complaining about property taxes at dinner. Then she asked my parents what they pay. After hearing the number, which was at least 4x what she was paying on a smaller house, she was pretty quiet.

wenchsenior

  • Handlebar Stache
  • *****
  • Posts: 2128
Re: Living in a place where house values have gone crazy
« Reply #60 on: June 05, 2016, 06:12:09 AM »
OK, time for some one-upsmanship! NY is a special case due to how we pay for Medicaid with property taxes. As a result, very poor counties in NY (where there are more poor folks on Medicaid) end up with wildly perverse property tax rates, accounting for over half the property tax which is paid. Incidentally, this reduces property values dramatically.

By way of example, the median home value in Binghamton, NY is 85k. You would pay $4959/year for that home, or 5.8%. In Erie County, you would pay $4766 per year for a median home worth 73k, where the tax rate is an astonishing 6.47%. This is on top of state income tax of 7% and sales tax of 8%.

http://www.empirecenter.org/wp-content/uploads/2015/03/PropertyTax2013.pdf

Ugh. We pay 4K/year on 2 houses worth<200k and people think that's crazy, but there's no income tax. We briefly considered a move to NY state years ago. Very very very briefly.

capital

  • Bristles
  • ***
  • Posts: 451
Re: Living in a place where house values have gone crazy
« Reply #61 on: June 05, 2016, 06:29:52 PM »
Housing prices... AKA how to artificially raise your net worth while screwing over the next generation from buying property...  I'd be okay buying a place and not having the value change.  Or at least change by something reasonable.  So many places are just impossible to live in these days, i.e. San Fran or many major cities where the price of a one bedroom apartment is through the roof!

But how do you, as an individual homeowner, 'artificially raise' the value of homes in your area?
I don't see much that a single homeowner can do to change the situation.

For the record, I've lived in SF and while I could not afford to buy a home there, it was not 'impossible' to live there.  Just expensive. Such has been the story of desirably and affluent cities throughout the last several hundred years.
Individual homeowners artificially raise the cost of homes by lobbying their city government to downzone their neighborhood or to prevent large housing developments from being built. As a result, in situations where demand increases (such as a strong local job market), prices of house-land bundles will skyrocket, but more land-efficient forms of housing (such as apartment buildings or townhouses) will not be built to compensate, and instead the price of existing homes will skyrocket.

raygor

  • 5 O'Clock Shadow
  • *
  • Posts: 5
  • Location: Piedmont CA
Re: Living in a place where house values have gone crazy
« Reply #62 on: June 08, 2016, 04:59:22 PM »
I find this discussion interesting as I have been looking at my home as a possible escape plan. The problem is the rest of the family enjoys living here, while I'm pretty miserable.

We bought our home for 765k in 2007. It's about to be valued again, because we are planning to refi, but Zillow and such value it around 1.1 million now. A house around the corner, (albeit on a larger lot, larger home, nicer inside) went on the market for 1 mil, was zillow valued around 1.3, and sold for 1.6 million. I get the feeling that the market is peaking, and would really love to sell and move to a cheaper area to get a good sized house with some acres. Even with a house at 400k, with a mortgage we could live years off of savings while setting up a new life, and work remotely.

Goldielocks

  • Walrus Stache
  • *******
  • Posts: 6251
  • Location: BC
Re: Living in a place where house values have gone crazy
« Reply #63 on: June 08, 2016, 08:56:20 PM »
Guitar Stv

Home prices in our area have gone up 47% in the last 12 months.   47%.  Yikes.
But -- that does not mean taxes automatically go up.   The city actually reduced our taxes this year.

Why?

Property taxes in most of Canada work by taking the (city budget) / (Total value of all property)  x (Value of your property)

So,  if your home increases by 30% in one year, but the other property average 40%, your will have LESS property tax next year, as you declined compared to the AVERAGE. (Unless the city votes for an overall increase).

The maximum increase on your city tax bill should be 20% per year.  If it is ever more than that,you can ask to defer the extra tax increase.  Therefore the cities try to limit large single year jumps.  But that would mean your property jumped 15%+ higher than the average home increase.



GuitarStv

  • Senior Mustachian
  • ********
  • Posts: 13588
  • Age: 38
  • Location: Toronto, Ontario, Canada
Re: Living in a place where house values have gone crazy
« Reply #64 on: June 09, 2016, 06:10:54 AM »
Guitar Stv

Home prices in our area have gone up 47% in the last 12 months.   47%.  Yikes.
But -- that does not mean taxes automatically go up.   The city actually reduced our taxes this year.

Why?

Property taxes in most of Canada work by taking the (city budget) / (Total value of all property)  x (Value of your property)

So,  if your home increases by 30% in one year, but the other property average 40%, your will have LESS property tax next year, as you declined compared to the AVERAGE. (Unless the city votes for an overall increase).

The maximum increase on your city tax bill should be 20% per year.  If it is ever more than that,you can ask to defer the extra tax increase.  Therefore the cities try to limit large single year jumps.  But that would mean your property jumped 15%+ higher than the average home increase.

Property taxes in Toronto aren't calculated by what the budget is.  We have a set tax rate (which is actually pretty low) and that rate is multiplied by the appraised value of your home.  You did remind me that there is a cap on how much the increase can be each year, so it'll be a couple years until we're paying the full increase at least.

Goldielocks

  • Walrus Stache
  • *******
  • Posts: 6251
  • Location: BC
Re: Living in a place where house values have gone crazy
« Reply #65 on: June 09, 2016, 07:06:38 AM »
Guitar Stv

Home prices in our area have gone up 47% in the last 12 months.   47%.  Yikes.
But -- that does not mean taxes automatically go up.   The city actually reduced our taxes this year.

Why?

Property taxes in most of Canada work by taking the (city budget) / (Total value of all property)  x (Value of your property)

So,  if your home increases by 30% in one year, but the other property average 40%, your will have LESS property tax next year, as you declined compared to the AVERAGE. (Unless the city votes for an overall increase).

The maximum increase on your city tax bill should be 20% per year.  If it is ever more than that,you can ask to defer the extra tax increase.  Therefore the cities try to limit large single year jumps.  But that would mean your property jumped 15%+ higher than the average home increase.

Property taxes in Toronto aren't calculated by what the budget is.  We have a set tax rate (which is actually pretty low) and that rate is multiplied by the appraised value of your home.  You did remind me that there is a cap on how much the increase can be each year, so it'll be a couple years until we're paying the full increase at least.
Double check that set tax rate (mill rate),  all the other municipalities that I lived in, the mill rate is recalculated each year, adjusting (downward) for the average price increases. Then the city needs to vote in a budget increase to increase the mill rate.

(okay, provincial tax portions are not voted in as increases, but same type of math applies).  Go back 5 years and look up the mill rate to compare it to.  I noted this because it was so different in california, and I reasearched Prop 13's strange impact there when looking to buy.

GuitarStv

  • Senior Mustachian
  • ********
  • Posts: 13588
  • Age: 38
  • Location: Toronto, Ontario, Canada
Re: Living in a place where house values have gone crazy
« Reply #66 on: June 09, 2016, 07:25:06 AM »
Guitar Stv

Home prices in our area have gone up 47% in the last 12 months.   47%.  Yikes.
But -- that does not mean taxes automatically go up.   The city actually reduced our taxes this year.

Why?

Property taxes in most of Canada work by taking the (city budget) / (Total value of all property)  x (Value of your property)

So,  if your home increases by 30% in one year, but the other property average 40%, your will have LESS property tax next year, as you declined compared to the AVERAGE. (Unless the city votes for an overall increase).

The maximum increase on your city tax bill should be 20% per year.  If it is ever more than that,you can ask to defer the extra tax increase.  Therefore the cities try to limit large single year jumps.  But that would mean your property jumped 15%+ higher than the average home increase.

Property taxes in Toronto aren't calculated by what the budget is.  We have a set tax rate (which is actually pretty low) and that rate is multiplied by the appraised value of your home.  You did remind me that there is a cap on how much the increase can be each year, so it'll be a couple years until we're paying the full increase at least.
Double check that set tax rate (mill rate),  all the other municipalities that I lived in, the mill rate is recalculated each year, adjusting (downward) for the average price increases. Then the city needs to vote in a budget increase to increase the mill rate.

(okay, provincial tax portions are not voted in as increases, but same type of math applies).  Go back 5 years and look up the mill rate to compare it to.  I noted this because it was so different in california, and I reasearched Prop 13's strange impact there when looking to buy.

http://torontoist.com/2014/01/everything-you-ever-wanted-to-know-about-property-taxes/

Huh.  It looks like you're right on this one.  What a weird way to calculate property taxes.  Thanks!  Maybe the tax increase will be much less than I was expecting.

frugalnacho

  • Magnum Stache
  • ******
  • Posts: 3329
  • Age: 36
  • Location: Madison Heights, Michigan
Re: Living in a place where house values have gone crazy
« Reply #67 on: June 09, 2016, 08:12:04 AM »
Our property taxes in TO are very low percentage-wise . . . but the change in valuation of our home will mean that we end up paying about 4 grand now instead of 3 which is annoying.  We can afford it, but it's like a brand new nice bike every year.  :P

Really? The property tax increases in michigan are capped at either 5% or the rate of inflation, whichever is less.  If it's a transfer of ownership the taxes get reset based on purchase price, but if it's the same owner the taxes can't increase that rapidly.  What if the toronto bubble goes even crazier and your home value shoots up over $1M? You just suck up the new $7k tax bill?

GuitarStv

  • Senior Mustachian
  • ********
  • Posts: 13588
  • Age: 38
  • Location: Toronto, Ontario, Canada
Re: Living in a place where house values have gone crazy
« Reply #68 on: June 09, 2016, 08:24:28 AM »
Our property taxes in TO are very low percentage-wise . . . but the change in valuation of our home will mean that we end up paying about 4 grand now instead of 3 which is annoying.  We can afford it, but it's like a brand new nice bike every year.  :P

Really? The property tax increases in michigan are capped at either 5% or the rate of inflation, whichever is less.  If it's a transfer of ownership the taxes get reset based on purchase price, but if it's the same owner the taxes can't increase that rapidly.  What if the toronto bubble goes even crazier and your home value shoots up over $1M? You just suck up the new $7k tax bill?

In the last couple posts, goldielocks has corrected my understanding of taxes.  It looks like they are may not go up significantly at all.

frugalnacho

  • Magnum Stache
  • ******
  • Posts: 3329
  • Age: 36
  • Location: Madison Heights, Michigan
Re: Living in a place where house values have gone crazy
« Reply #69 on: June 09, 2016, 08:48:03 AM »
Our property taxes in TO are very low percentage-wise . . . but the change in valuation of our home will mean that we end up paying about 4 grand now instead of 3 which is annoying.  We can afford it, but it's like a brand new nice bike every year.  :P

Really? The property tax increases in michigan are capped at either 5% or the rate of inflation, whichever is less.  If it's a transfer of ownership the taxes get reset based on purchase price, but if it's the same owner the taxes can't increase that rapidly.  What if the toronto bubble goes even crazier and your home value shoots up over $1M? You just suck up the new $7k tax bill?

In the last couple posts, goldielocks has corrected my understanding of taxes.  It looks like they are may not go up significantly at all.

Nice.  Time to increase your restaurant budget by $1,000. 

GuitarStv

  • Senior Mustachian
  • ********
  • Posts: 13588
  • Age: 38
  • Location: Toronto, Ontario, Canada
Re: Living in a place where house values have gone crazy
« Reply #70 on: June 09, 2016, 09:12:18 AM »
Our property taxes in TO are very low percentage-wise . . . but the change in valuation of our home will mean that we end up paying about 4 grand now instead of 3 which is annoying.  We can afford it, but it's like a brand new nice bike every year.  :P

Really? The property tax increases in michigan are capped at either 5% or the rate of inflation, whichever is less.  If it's a transfer of ownership the taxes get reset based on purchase price, but if it's the same owner the taxes can't increase that rapidly.  What if the toronto bubble goes even crazier and your home value shoots up over $1M? You just suck up the new $7k tax bill?

In the last couple posts, goldielocks has corrected my understanding of taxes.  It looks like they are may not go up significantly at all.

Nice.  Time to increase your restaurant budget by $1,000.

Why would I need to spend a thousand dollars a year on restaurants?  :P  That would keep me nicely supplied in bike wheels though . . .

frugalnacho

  • Magnum Stache
  • ******
  • Posts: 3329
  • Age: 36
  • Location: Madison Heights, Michigan
Re: Living in a place where house values have gone crazy
« Reply #71 on: June 09, 2016, 09:19:41 AM »
Our property taxes in TO are very low percentage-wise . . . but the change in valuation of our home will mean that we end up paying about 4 grand now instead of 3 which is annoying.  We can afford it, but it's like a brand new nice bike every year.  :P

Really? The property tax increases in michigan are capped at either 5% or the rate of inflation, whichever is less.  If it's a transfer of ownership the taxes get reset based on purchase price, but if it's the same owner the taxes can't increase that rapidly.  What if the toronto bubble goes even crazier and your home value shoots up over $1M? You just suck up the new $7k tax bill?

In the last couple posts, goldielocks has corrected my understanding of taxes.  It looks like they are may not go up significantly at all.

Nice.  Time to increase your restaurant budget by $1,000.

Why would I need to spend a thousand dollars a year on restaurants?  :P  That would keep me nicely supplied in bike wheels though . . .

Because you have free money now.  You mentally budgeted it for taxes, but now you don't need it for taxes.  What else are you gonna do with it, invest it?

Goldielocks

  • Walrus Stache
  • *******
  • Posts: 6251
  • Location: BC
Re: Living in a place where house values have gone crazy
« Reply #72 on: June 09, 2016, 09:38:28 AM »
Our property taxes in TO are very low percentage-wise . . . but the change in valuation of our home will mean that we end up paying about 4 grand now instead of 3 which is annoying.  We can afford it, but it's like a brand new nice bike every year.  :P

Really? The property tax increases in michigan are capped at either 5% or the rate of inflation, whichever is less.  If it's a transfer of ownership the taxes get reset based on purchase price, but if it's the same owner the taxes can't increase that rapidly.  What if the toronto bubble goes even crazier and your home value shoots up over $1M? You just suck up the new $7k tax bill?
Two years ago I had a 20% increase then dropped next year.. All because of the assessed valuation being out of whack for the prior decade.

jambongris

  • Stubble
  • **
  • Posts: 219
  • Age: 33
  • Location: Ottawa, Ontario, Canada
Re: Living in a place where house values have gone crazy
« Reply #73 on: April 05, 2017, 09:01:03 AM »
My wife and I purchased a home in our neighbourhood about six years ago for just under 400,000.  We got the new home value estimate yesterday in the mail . . . and they're trying to tell me that our house is now valued at 650,000.  I thought it was total bullshit, but I've been combing through the available information of nearby homes and it actually appears to be about right.  I'm not super happy since our property taxes are going to go up by more than 30% over the next couple years due to this.

We like lots of stuff about where we live . . . but an extra couple hundred grand would make a big difference to our retirement options and plans.  What's the tipping point for you regarding when it makes sense to sell a home that has appreciated a whole bunch?

It hasn't been a full year since you posted this but it looks like house prices in Toronto aren't showing any signs of slowing down; +33% in the last year. Incredible.

GuitarStv

  • Senior Mustachian
  • ********
  • Posts: 13588
  • Age: 38
  • Location: Toronto, Ontario, Canada
Re: Living in a place where house values have gone crazy
« Reply #74 on: April 05, 2017, 05:58:01 PM »
My wife and I purchased a home in our neighbourhood about six years ago for just under 400,000.  We got the new home value estimate yesterday in the mail . . . and they're trying to tell me that our house is now valued at 650,000.  I thought it was total bullshit, but I've been combing through the available information of nearby homes and it actually appears to be about right.  I'm not super happy since our property taxes are going to go up by more than 30% over the next couple years due to this.

We like lots of stuff about where we live . . . but an extra couple hundred grand would make a big difference to our retirement options and plans.  What's the tipping point for you regarding when it makes sense to sell a home that has appreciated a whole bunch?

It hasn't been a full year since you posted this but it looks like house prices in Toronto aren't showing any signs of slowing down; +33% in the last year. Incredible.

Yeah . . . they've been doing huge yearly increases since we bought our home (actually, they were doing it for about ten years before we bought our home too).