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<p>Sigh. Mini, you need to take Econ 101 again. In fact, it is the high property taxes inside the urban areas, coupled with intolerable crime, which cause the flight from the cities. There is no such thing as “artificially low” taxes. And kluge, what do you expect from a government school that is run de facto by the teachers’ union?</p>
<p>Re Richmond: my mistake - I assumed that a neighborhood with houses in that range would be among the “good ones”. Obviously, i forgot that home values do not necessarily generate high revenues with the caps. </p>
<p>Re doubling every 5-7 years. Wouldn’t a doubling of value require only an increase of just over 10% to 14.5% per annum? </p>
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<p>Wyogal–the article, and Mini, are discussing Cal, which does have artificially low property taxes.</p>
<p>Mini, I was thinking all the same stuff. Another thing I noticed in the article was that each family had a mortgage which just fit under the total monthly income. If the income went higher, the mortgage went higher, as if you have to buy more if you have more.</p>
<p>And all the houses sound big to me. Four bedrooms? That’s one and half more than we have!</p>
<p>I think I read a statistic that only 16% of Californians can afford to buy an average priced house. I don’t know if they were looking at mean or median for average. It is not good that so many people can not afford a house especially in an aging society.</p>
<p>One way to afford retirement is to get costs under control. With a house (paid off) and tax breaks for elderly home owners…many people have a big part of their costs reduced at retirement. But Tennants will continue to suffer the cost increases of rent…over the smaller maintenance inflation of an owned home. Condo owners are in a separate boat and depending on association fees closer to tennants than single house owners.</p>
<p>Wyogal - You obviously know NOTHING about California, where crime rates are often higher in rural areas (like outside Fresno and Bakersfield), and where Prop 13 reduced and then froze property taxes in 1978, and where private, charter academies are failing despite “creaming” (see “California Charter Academy”). And now, where, exactly, is the flight from these cities? Last time I looked, population was increasing in virtually all of them.</p>
<p>Wyogal–property taxes in CA are the same percentage of your house’s value whether you live in the inner city or in the burbs. </p>
<p>I also think the low property taxes, combined with low interest rates (and new types of loans such as interest only) have helped push the housing prices to extremes around here. If it were just up to me, we would be cashing out and moving to Mini’s neighborhood 
. Two families that we know well are moving to Bainbridge Island–is that anywhere near you Mini?–we’ll probably be up in the area visiting next summer! </p>
<p>Even though we didn’t play the real estate game well at all, cashing in and moving elsewhere (to a place where public education is supported, for instance) seems like an attractive option. But H seems to be rather fond of his job here . . . Good golly, the houses on our block are selling for between $500K and $600k now (in our Bay Area Bargain neighborhood), and the school district is decent (but lacking in many things) up through middle school and not so good at the high school level, hence our choice to switch to Catholic school at the high school level. Our district also is one of the lowest funded districts (per pupil) in our county, due to some bizarre formula the state uses to dole out money called “revenue limits.” That’s what one of our local school board members was telling us at our last PTA meeting. Ugh.</p>
<p>Oh, I should mention, the $500k houses on the block are the tiny two bedroom starter homes . . . though if you luck out and find a really trashy small house here, you may be able to snag it for $450k! – We live in one of the lowest priced decent neighborhoods around here . . .</p>
<p>“Two families that we know well are moving to Bainbridge Island–is that anywhere near you Mini?–we’ll probably be up in the area visiting next summer!”</p>
<p>Houses on Bainbridge are about 50% higher than they are where I live. Our schools are supposedly excellent (I really wouldn’t know, and I’m not always sure I know the difference between good schools and bad ones). Our house - with five bedrooms (to be fair, we took the garage and converted it into a large bedroom, and a massage studio) has tripled in value since 1991, and is now worth less than half that of the starter houses on your block. </p>
<p>Warning though - we send no kids to HYPS unless they are athletes.</p>
<p>The government is talking about capping the mortage deduction to loans of $300,000 or less. The first $250,000-500,000 tax- free capital gain on housing is also being looked at. The government wants to get rid of the AMT. </p>
<p>Real estate is not really the great deal that people make it out to be. It works because of tax incentives and leverage. There are some people that would like to get rid of many of those tax incentives. </p>
<p>Leverage is a two-way street. We’ve only seen the one-way street. The two-way street has lots of pile-ups.</p>
<p>Property taxes around 3% are too high. Most property in this country goes up around 4% a year on average. In most parts of the country, when you include maintenace costs, housing isn’t that exciting an investment.</p>
<p>Greenspan freaked when the stock market crashed, and we were hit with 9/11. He flooded the market with cheap money. Along with the tax cuts on capital during the Clinton and Bush years, this generated a housing boom.</p>
<p>Now, Greenspan has figured out that whoops…we have a credit
bubble. We don’t save enough, we buy too many goods we don’t need from overseas, and we are spending too much on housing. He doesn’t know how to get out of this mess.</p>
<p>It’s everyone’s fault but his.</p>
<p>I feel real bad for the next Fed chairman.</p>
<p>Mini, since California is still experiencing something of a gold rush still, the cities appear to grow even as middle class move two hours plus out. Sacramento is providing bedrooms to workers from the Bay Area.</p>
<p>I would argue that perhaps a tax on investment property profits might help change the market. So many homes are being purchased by investors on speculation of inflation, driving the price above the affordable price for fire, police and nurses.</p>
<p>Mr B., what do you think will happen if we have a tax on investment property? What specific tax and tax rate do you want?</p>
<p>New Jersey has problems too.</p>
<p><a href=“http://www.app.com/apps/pbcs.dll/article?AID=/20051016/NEWS/510160423/1001/ENT[/url]”>http://www.app.com/apps/pbcs.dll/article?AID=/20051016/NEWS/510160423/1001/ENT</a></p>
<p>I don’t think those of you outside the SF Bay area get it. $600K will currently get a very modest, small home - probably a fixer-upper - in most neighborhoods in SF and the peninsula. The problem is that renting is not a better option: I’ve got a $1600 mortgage payment on a home I’ve occupied for 17 years - but the home is small and located in one of the more affordable areas. Median home values in my neighborhood are probably around $680K right now - there is no realistic downsizing I could do – and if I wanted to rent, the $1600 I now pay for a 3 bedroom home would get me only a very small studio apartment at best. My property taxes are “artificially” reduced only so long as I stay in this house - the taxes currently run about $4K annually, by the way – “reduced” or not they go up by a fixed percentage each year, so each year I pay more than I did the year before. If I sold my house and put the proceeds into money into a tiny $600K fixer upper, my property taxes would triple. </p>
<p>I’m not complaining - I don’t have a problem, I’ve got the house. But I worry about my kids – I honestly don’t see how either of them could ever afford to own their own home except for the obvious solution of my passing on my house to them. Now add in the likelihood of emerging from college with a very large student loan debt, and you can see why life could be rather challenging for a 20-something. Moving isn’t such a great option, either – more jobs are in the city, other major urban areas are also expensive… and I paid $3.10 a gallon for gas when I bought half a tank yesterday, so long commutes aren’t the answer either.</p>
<p>“Median home values in my neighborhood are probably around $680K right now - there is no realistic downsizing I could do – and if I wanted to rent, the $1600 I now pay for a 3 bedroom home would get me only a very small studio apartment at best.”</p>
<p>So you take your tax free $450k profit, apply $1,000 of it extra to the rent payment, so that you are now paying $2600 a month (if you want, take $1,500), make 5% a year on your money and you are WAY ahead. Or do you one better - don’t sell the house, RENT the house out, and move into something smaller.</p>
<p>Mini, some people don’t want to live as frugally as you are able to and enjoy. Some people don’t want to move to live in a middle class way.</p>
<p>The point of the article was the middle class are no longer making it as they once did. People in New Jersey are having the same problem and their homes aren’t worth nearly as much.</p>
<p>The problem with renting is you don’t have inflation protection. Over time, you can end up a big loser by selling and renting. </p>
<p>Mini, In order for the middle class to make it, they have to downsize. The standard of living isn’t really going up, is it?</p>
<p>The American dream is becoming an illusion.</p>
<p>Tis true. U.N. data suggests that quality of life/standard of living peaked in the U.S. in 1973, and has been declining ever since - it’s one of those elephants in the living room no one wants to talk about. The biggest losers have been those in the bottom quintile. Much of this has to do with the increased number of single-parent families having difficulty making ends meeting, the skyrocketing cost of health care, the increased number of hours people have to work (and drive) to maintain the same standard, the societal costs of maintaining clean air and water, etc. The decline is now creeping up off the bottom quintile, even as the top 20% get wealthier all the time. </p>
<p>“The American dream is becoming an illusion.”</p>
<p>For many folks, it always was.</p>
<p>dstark, One thought on restructuring the taxes on investment property, would be to remove the real property tax protections (prop 13) over a ten year period. Keeping protections for residents is one thing, but supplementing real property investors during an inflated market is absurd. There is no reason to encourage real property speculation…There is a public need for a greater supply of housing in the hands of residents.</p>
<p>It really annoys me when “minorities” get painted with the pity brush. Many of us own homes and found it not all that hard to find a little piece of the American Dream. My sister has a nice house in the same town as Bill Clinton, my brother has a nice home in central NJ, I have two houses in Virginia. Pretty much everyone in our extended family has homes in the NY, NJ and DC area. No mansions but good solid middle-class homes in good areas.<br>
Virtually all of us spent some time in housing projects in the Bronx and Queens as kids in the 50’s but managed to get into college or a good trade program. The system can work if you play by the rules and focus more on the future than the past.</p>