[thghtihadanacct]

Again, if they sell ... my house has doubled in value ... its still the same house I bought. I would only realize some gain if I put it on the market. What it is now is just another house not for sale and I happen to live in it. This is the same uneducated statement people make about prop 13 in California ... 'oh your house is worth a million so youre a millionaire' ... oh?

[mbauman]

Baloney. You have a house with relatively stable monthly payments. You will be able to purchase another hour if and when you need to move. You have a nest egg.

It doesn’t matter when you sell because now you’re floating on the water. As the tide rises, so do you.

[kelnos]

The problem is that in California, the owner is still paying taxes on an assessed value only a little bit higher than what they paid for it initially.

If they sell that house, and then buy something new at a similar market rate, their property taxes will balloon overnight, because the assessments "reset" to the purchase price when the property changes hands.

The only way this works out great is if, after selling this house, they move to a new area (possibly new state) with lower cost-of-living, and possibly a more sane property tax regime.

(Not sure the person way upthread is in California, but someone lower down mentioned Prop 13, so I thought I'd bring this up.)

[Guvante]

1% property taxes are ~15% of my mortgage payment in CA.

I would pay 50% more if I upgraded with the same debt amount due to interest.

[jjav]

> You will be able to purchase another hour if and when you need to move.

Say you bougt a house for 200K many years ago. Your neighbor bought the slightly larger house next door for 275K back then. Your house is worth 1M now. Can you move?

Sure, you can sell your house at a nice profit (and pay taxes on that!!). The neighbors house is worth maybe 1.2M now. So you can't really afford to move.

Housing gains on paper are not income and you can't cash in on it unless you move out to a much cheaper area. Otherwise whatever gains you had on paper also apply to the nearby houses, so you can't afford them.

[mbauman]

> Otherwise whatever gains you had on paper also apply to the nearby houses, so you can't afford them.

Why are you so certain you couldn't you afford them? You were able to purchase a 200K house many years ago. Now you just need another 200K to buy that bigger house — and it's a bigger house! You did it once long ago, you can probably do it again even easier (in addition to everything else, you have a huge downpayment now). And no, you typically don't pay capital gains taxes against your primary residence.

In any case, the point is that you're in a way better place than if you hadn't made that 200K purchase. That's what I mean by "floating on the water" — you have a stake in the market so now as it moves, so does your asset.

[jjav]

> And no, you typically don't pay capital gains taxes against your primary residence.

A married couple can exclude 500K from taxes, but the rest (given example above) is taxable.

> In any case, the point is that you're in a way better place than if you hadn't made that 200K purchase.

For sure. Owning is better than renting.

[thghtihadanacct]

Not where i live I wont ... there is a bunch of real estate know nothings in here downvoting me cuz they angry. If I sell my house I gotta leave town. I cant afford any of the others. It isnt an investments it is where i live, even if i owe on. A mortgage isnt speculation ... it is debt.

[Guvante]

California has a 1% tax rate.

If you can't afford less than $1k per month you could just sell your $1 million house.

Those numbers aren't being dramatic. You need a $1.2 million house to pay $1k a month in property taxes.

[jjav]

> California has a 1% tax rate.

That is technically true, but not really true. The basic tax rate is indeed 1%, but counties and cities are free to add any kind of fees they want (AFAIK there is no limit) to your property tax so in practice you're paying way more than 1% in CA.

[Guvante]

Prop 13 says they can't do that. Only the county can charge 1%.

Irvine CA wanted property tax and so they get builders to force you to an extra fee but it isn't technically a property tax.

Not to say there isn't sometimes a fee or two added but it isn't the Wild West at all.

[jjav]

> but it isn't technically a property tax

That is the loophole they use. They add all kinds of fees into the property tax but don't classify them as taxes. Best I know, there is no limit to how many and how much. Twenty years ago my property tax was just a single line item, the property tax. Now it's up to 6-7 (don't have the bill in front of me to check exact count) line items.

So yes, your CA propery tax^H^H^Hfee bill can be way over 1%