How much is your local "Trump at the Pump Tax?"

4,000 feet is large for older existing homes around here, and small for newer homes.
I grew up in a 1,200 foot ranch with 4 of us, and now live in 2,800 feet with mrs b.

 

I'd say 2500's about the right size for a typical, American-dream-size home.

Never owned one tho -- childhood homes were 1500 or smaller and single-level; largest I'd rented was a 2500 two-level 3-bath w/ two-car garage... and whilst having the room was fine, lived in less a quarter of it. Maybe betray's my JA side; didn't think staying with family in Japan was at all a sacrifice, whilst others would think it's like living in furnished tree houses with robotic toilets...

Can't even think about how much housework you'd have to do, for 4K. Had a friend with one in WA and ~2 acres in back next to the forest... and that guy was constantly cleaning and fixing it, esp the roof in Western WA...

 

In my area even though 100+ year old 400-600sqft bungalows exist they actually carry a premium because it’s functionally illegal to build anything under 1000sqft.

the city wants every property to be as expensive as humanly possible to maximize profit

 

While our home has nominally kept ahead of inflation, that requires ignoring its many carrying costs. After figuring out those costs, and noticing that the property tax system here effectively taxes away the entire property value over a normal human lifetime ...

... we decided to just stay in our 'starter' home (sub-1500 ft^2) and not 'move up'. It is big enough for our needs and protects us from the vagaries of landlords and the ever-rising rental market. "Tax write-offs" are just small discounts on money still spent and gone. The money needed to upsize is better invested elsewhere.

Compared to when we bought it in 1989:

Consumer Price Index (CPI-U) has risen to 2.67X;
Tax value now 6.1X what we paid for it, but doesn't account for the carrying costs;
Zillow value estimate is 6.2X;
S&P500 index is up 21X, with no carrying cost, instead paying a roughly 1% annual dividend.

Some places also used such rules to keep away the riff-raff, functionally applied in quite racist manners.

 

.



OK … since my last post in this thread, June 5, today I put as much gas in my tank as it would take, 7.75 gals. Combining today’s 11¢/gal “SpeedWay” gift coupon with my “Loyalty” card and my “Pay-First Fuel” card, I got a ttl of 19¢/gal off. $1.4725 savings on the day. I know that that doesn’t make any BFD for some of youse guys … but still … I’m happy to take it. The pump price, btw, was $3.60/gal after deals.

 

It's still an REAL appreciating asset and usually the best investment anyone can make. Obviously, you want that mortgage paid off before you retire - otherwise your faced with increasing rent and inflation on a fixed income. Home ownership gives you options and a chunk of money vs pissing your money away on rent for 30 years......

You need a place to live; piss your money away to a landlord or build equity over a 30 year mortgage and have something you can sell. Home prices has even gone up in the rust belt; but if you bought on either coast you would've gotten higher gains.
My current neighbor is 10 years older than me, a financial planner and his wife is a teacher, both still working - renting the house next door. Needless to say; I'm not following any of his financial advise.......

 

..yes..

as an example let's say you pay $2,500 property tax for 50 years = $125,000 (taxes almost always go up and never down so.. that rate is going to go up each year,
...most municipalities are very inventive when thinking of ways to take money from a homeowner
our area as an example adds franchise fee to all monthly utility bills and insurance
so - when you pay home insurance the local government will add an additional 10% fee they take as well as a franchise fee for all your home utilities - gas, water, electricity etc. that are assessed each month as a percentage of your total bill...

...let's not even visit the nightmare of assessed school taxes for homeowners

of course taxes are necessary....but.....

 

What services that YOU use are you willing to have reduced?

Where as YOU interact with local government do you wish they hired a less qualified person for less money?

Last October, I was tasked with leading a small group of knowledgeable people planning the expenses that a small community would have to expend/raise for the next 10 years to maintain road they own that were as old as 50 years. It was a sobering experience. And that was before oil stocks went through the roof and asphalt prices went through the roof. Up 30-45% in the last 5 years per google. We had people bitching about a $1.50 a month raise in assessments.

Now you have a fixed amount of infrastructure to maintain. That doesn't change. But costs for materials and labor go up. How can you hole taxes constant and still do what needs to be done?

 

Giving them the benefit of the doubt, renting is often the better strategy when a person is only staying in a location for a short time.

I know nothing about the site, but there are a bunch of interesting graphs of house prices, rental prices, and income, overall and by region here:

“Where the American Dream Goes to Die”: Changes in House Prices, Rents, and Incomes since 1960 by Region & Metro | Wolf Street

Note that the values are median's, so they are not too affected by rich people outliers, or at least, they are better than a mean value. In "the West" I think there are three main factors driving housing prices way up. The first is many areas hit their limits around 1970. That is the time the last easily built empty areas filled in, and moving outward locally wasn't generally possible. This is because, in California at least, the major metropolitan areas have either topological (hills or mountains) or water boundaries. The cost of putting housing nearby past those limits is vastly higher than dropping another house on an empty lot. There is more land where things can be built, but it tends to be far away from the city center (to the extent our cities have centers). There is housing construction in places like Riverside now, but that is quite a long way from the center of Los Angeles. The second is that some of the industries which thrived in these areas paid really well. Electrical and software engineers make a lot more than school teachers, builders cater to the people with the most money, and it ends up driving costs up for everyone else. The final factor is that there are rules or laws which restrict housing unit size. Housing is cheap(er) in Tokyo not because they have more land or their houses are cheaper to construct, but because they can be very small, much smaller than most cities would allow. I think it is now legal to build a 160 sq ft apartment in California - not that I have ever seen one for rent. I just checked local Zillow listings and the smallest apartments for rent which were not rooms in extended stay hotels, were just under 400 sq. feet.

Anyway, in most of these graphs the housing prices are diverging so much from the incomes that eventually there must come a reckoning. I would be very surprised if the wholesale firing of software engineers in Seattle and the Bay Area (because "AI", who needs programmers?) doesn't eventually put a hole in the housing market, at least the middle to upper end of it. My son knows a bunch of people from college who work in that field, had great salaries ($200-$400k/yr) with "good companies" and bought houses at corresponding prices, and were laid off when their "good companies" decided that 90% of the people were no longer needed and AI could do everything. (The remaining software engineers, aside from the ones building and hyping AI, are miserable because they are expected to produce as much now through AI as ten people did through their own labor before. Most of their job now consists of the parts of programming that nobody very much liked - mostly testing and finding bugs in other people's code. Except now it is AI generated code.)

The other thing you can see from some of the graphs is that in areas like Los Angeles with large value fluctuations it is very important to buy or sell at the right part of the market curve, in terms of how good an investment it is. We were very lucky to buy our house in 1995 which was near a minimum (the small number of data points in the graphs distorts the actual curves quite a bit). We knew a family who had to sell their house at the same time, having bought it 5 years earlier. Theirs was worth half what they paid for it when sold. Ours is currently worth more than 4X what we paid, had we bought when they did, it would only be 2X. Unfortunately, lacking a crystal ball, it is very difficult to predict where these peaks and valleys will be.

 

If the property in question is rented out then the structure must be depreciated over a 27.5 year period and that deducted from the rental income. If it is sold all that depreciation must be paid back, which is "depreciation recapture". This is on top of the property taxes fuzzy1 mentions. The best way to avoid actually paying "depreciation recapture" is to die and leave the property to your kids, who get it at a new basis. There are also 1031 exchanges, which can effectively sell this property and buy another without having to pay the recapture or any capital gains. I do wonder if razing the fully depreciated house (which is a fairly inexpensive operation) and then just selling the land would eliminate the recapture, since it is only on the structure, which was said to be worthless, and is not sold.

What is the purpose of all these accounting shenanigans? I assume that for people with a lot more money than we have it has a substantial tax benefit, somehow. Because all these strange quirks in the US tax code seem to exist solely to provide methods for rich people to become ever richer, preferably without offering any benefits to less wealthy citizens.

 

Maybe current pricing is the reckoning.

Those charts start in 1960, before married women with children working full time was a dominant pattern. The longest normal mortgages were 20 year fixed rate with 30%-50% downpayments required. People used to save money for a downpayment on a house.

Nearly double household incomes, programs allowing people who can't save money into the house buying market, and expanding how much one can borrow all flush money into that market.

 

We certainly did. It was a lot easier then than now because rent was a much smaller fraction of income.

 

i can think of a couple I would be happy to reduce:

have utility expansion be paid by developers who necessitate the expansion all developers would be assessed a fee for costs that their developments cause the infrastructure to incur to accommodate the development

raise the price of traffic and misdemeanor fines to accommodate expansion of the police department

expand flock cameras and begin to use them to capture traffic violation and fine the violators appropriately

governments especially local governments should do away with any contributions to services that degrade the community such as needle exchanges , food and housing allowances for anyone who is not vetted as needing the services

better use of government buildings to assure energy efficiency and occupancy rates are optimized

pensions for any government/state/city workers should immediately go to 100% individual contribution based

double dipping by former government/state/local workers is to be immediately stopped

road word is to be bid out to competent proven companies at free and open contracts rather than a union scale

average student expenditure of $17,000 per student yearly is to be investigated to find out how after 12 years of schooling at $17,000/yr someone cannot do math or even read

..............i'm just getting started

 

Yes. That is why I wrote "... we decided to just stay in our 'starter' home and not 'move up'.It is big enough for our needs and protects us from the vagaries of landlords and the ever-rising rental market." Anything larger is an added continuing expense, not a good investment.

I can't remember back to when our property tax was just $2500. I'm paying triple that. And our property value is less than the area median. Though this is one of the costs of having no state income tax. (Yet)

Under my state's budget-based property tax system, levy rates do go down when market values rise rapidly. And go up when values fall. If a home's market value rises slower than the county average, its property tax bill will drop. But the long term trend is clearly up.

Most of our property tax bill is voter-approved, so we can't blame only the municipalities.

As for that franchise fee, my state caps it to 6% on utilities, and doesn't levy it on insurance. Some utilities are owned and operated by their city, I don't think they can charge it as a separate line item.