CA real estate market and property taxes...

[vi edit]

Am I correct that CA has a law in place that limits property taxes to no more than 1% of the propertys value?

If that's the case then CA has vastly lower property taxes than much of the US. In Wisconsin $250,000 homes can easily have property taxes in excess of $4,000. In Illinois my parents have a home worth about $210,000 and they pay over $5500 in property taxes. A $300,000 home in IL can have a property tax in excess of $8,000....that's a mortgage payment for many! In CA those rates would be $2500, $2100 and $3000.

Since CA is so disastrously in debt, do you think they would consider peeling back that tax limitations to get the budget in check?

What would that do to the CA real estate market? Would it hurt it or make a minimal difference. Property taxes are a silent number that many disreguard when they compare house prices between markets/states.

CA has it easy right now when it comes to that. Would the bubble burst if that 1% got bumped up to 1.5% or 2% of property value?

 

[Queasy]

Didn't Arnold run partly on a promise not to peel back the property tax limitation? That along with no increase in car taxes?

 

[Demon-Xanth]

Then again, in California, a $250,000 home is owned by a family making less than $50,000/year.

 

[KEV1N]

I don't think there is a limitation. The house that I'm buying in W. Sacramento has a 1.075% property tax, but the place I'm renting now has a 3% property tax.

 

[vi edit]

Originally posted by: Queasy
Didn't Arnold run partly on a promise not to peel back the property tax limitation? That along with no increase in car taxes?

I just wonder how long a state can run the budget into the ground before they start getting desperate and going at things like property taxes. The state of CA is losing billions a year by keeping things artificially low. I'm sure it would be political suicide...but eventually you run out of things you can cut before you start steping on toes.

 

[ITJunkie]

Originally posted by: Demon-Xanth
Then again, in California, a $250,000 home is owned by a family making less than $50,000/year.

I didn't know there were $250,000 homes in California. I thought you couldn't touch anything for less than 400K

 

[Demon-Xanth]

IT: $250,000 home is a 900 square foot house in a lower income area around Sacramento. This rate is unchanged for approximately 50-100 miles around major cities.

 

[Leejai]

SF has 1.14% prop tax right now...

And as for peeling it back, i'm not sure that's really a good idea in an already over-inflated market. Take a look.


SF's MLS is sfarmls.com

Try to find anything under 250...and you'll see what i'm talking about...

 

[vi edit]

Originally posted by: KEV1N
I don't think there is a limitation. The house that I'm buying in W. Sacramento has a 1.075% property tax, but the place I'm renting now has a 3% property tax.

I'm going off of information from a thread a while back. Some CA residents said there was a cap. A quick google hasn't really yielded any concrete numbers.

 

[Leejai]

let's also factor in the higher cost of living as well.....the state is in debt due to bad management...we're already paying grip on gas/highway, etc...sales tax is 8.5% as well...

 

[meltdown75]

Interesting law. I work in property assessment - not in the US mind you. My job would probably be non-existent if we were based on the same system, since my main function is to (nef) set the values for residential properties in my given area. Well, I should clarify - I am little more than a data collector. The formulas for values are all in place, all I do is put in the data.

Capping rates at 1% - geez that's low. I bet the various local governments would have a lot to say about that since it boils down to how much money is available for local infrastructure projects, road repairs, etc etc. People sometimes don't realize that the property tax revenue taken in by the local governments is usually put back into the local economy.

 

[ArmenK]

A 3 bedroom home in my neighborhood recently sold for $900,000. 1% of that is $9000 which is alot.

 

[vi edit]

http://www.lincolninst.edu/sub...ation/dl/mikhailov.pdf

That says that there's be a 1% limit since 1978.

 

[Queasy]

Originally posted by: vi_edit

Originally posted by: Queasy
Didn't Arnold run partly on a promise not to peel back the property tax limitation? That along with no increase in car taxes?

I just wonder how long a state can run the budget into the ground before they start getting desperate and going at things like property taxes. The state of CA is losing billions a year by keeping things artificially low. I'm sure it would be political suicide...but eventually you run out of things you can cut before you start steping on toes.

I say this all the time and it will probably never happen but, they need to look into cutting back the pork spending and some of the expensive social programs before they look into raising taxes.

 

[vi edit]

Originally posted by: Leejai
let's also factor in the higher cost of living as well.....the state is in debt due to bad management...we're already paying grip on gas/highway, etc...sales tax is 8.5% as well...

Sales tax in IL is 7.5%-8.5% in some areas....it's also 10.5% in some parts of the state for "entertainment"....all eating establishments charge 10.5%.

 

[Demon-Xanth]

Consider my situation:
I'm looking at getting a home, I can barely afford $180k, which I've found that there is a few places where I can find one for. If you took my take-home pay, and slapped on a 3% property tax, 20% of my take home pay (after income taxes) would go to just the property tax. That would mean that affording a house is completely out of my range unless I get a night job. 60% mortgage+20% property tax==20% for food, car maintenance, gas, insurange, electricity, water, and anything else I might want to get/do.

Sure, I'd LOVE to get a job that pays more. But the job market is crap since Intel laid off a bunch of people.

 

[DealMonkey]

I don't think CA's budget woes are directly attributable to low property taxes. It's mostly due to mismanagement by the State Legislature/Governor (mostly the former Governor) and other factors like employers fleeing the state because of an out-of-control worker's compensation program, etc., etc.

Remember our tax rate has been like this since the late 70s. It's not some new thing. Plus, with the insane rise in RE prices over the last 4-5 years, the state (and local counties) is seeing a huge spike in property tax revenue.

Just my $0.02.

 

[KEV1N]

Originally posted by: Demon-Xanth
IT: $250,000 home is a 900 square foot house in a lower income area around Sacramento. This rate is unchanged for approximately 50-100 miles around major cities.

Demon-Xanth,

I'm moving into a new home in West Sacramento (Yolo County, across the river from Sac Proper). It's a 1312 square foot house in the Southport Area. I went through a moderate income housing program to get it for $265,000, market value is $288,000. If you've been to this area you know it's not the ghetto. You should look into such programs... it's really in the governments' best interests to have affordable housing programs available.

 

[Leejai]

Originally posted by: KEV1N

Originally posted by: Demon-Xanth
IT: $250,000 home is a 900 square foot house in a lower income area around Sacramento. This rate is unchanged for approximately 50-100 miles around major cities.

Demon-Xanth,

I'm moving into a new home in West Sacramento (Yolo County, across the river from Sac Proper). It's a 1312 square foot house in the Southport Area. I went through a moderate income housing program to get it for $265,000, market value is $288,000. If you've been to this area you know it's not the ghetto. You should look into such programs... it's really in the governments' best interests to have affordable housing programs available.

i agree w/ Kevin,

Also in Elk Grove, there's still decent housing prices too...similar to the ones in Yolo.

 

[Demon-Xanth]

Kevin: I'm looking into the CALHFA financing deal, and $265k is so far outside of what I can afford that I can't even consider it. I'm looking towards the Citrus Heights/Orangevale area. I work on the east side of the Sac area.

 

[shopbruin]

here's part of the problem - prop 13

the gist of it:

On June 6th, 1978, nearly two-thirds of California's voters passed Proposition 13, reducing property tax rates on homes, businesses, and farms by about 57%. Now, according to the newly amended state constitution property tax rates could not exceed 1 percent of the property's market value and valuations couldn?t grow by more than 2% per annum unless the property was sold.

Prior to Proposition 13, the tax rate throughout California averaged a little less than 3% of market value, and there were no limits on increases either for the tax rate or property value assessments. Some properties were reassessed 50% to 100% in just one year and their owners? tax bills jumped correspondingly. Under the tax cut measure, property tax valuation was set at the 1976 assessed value. As stated above, property tax increases on any given property were limited to no more than 2 % a year as long as the property was not sold. Once sold, the property was reassessed at 1% of the new market value with the 2% yearly cap placed on this new assessment. Thus, the new buyer is aware of what the taxes will be and knows the maximum amount property taxes can increase each year for as long as he or she owns the property.

In addition, Proposition 13 required that all state tax rate increases be approved by a two-thirds vote of the legislature and that local tax rates also have to be approved by a vote of the people. The people's right to vote on taxes is a key taxpayer protection.


it is nearly impossible to raise it. the site linked above wants to keep it. it also pretty much enshrined the propositions in california, with every election with a gazillion props on the ballot.

Anoter site on financial impact'

some argue to repeal it, to give us more money. some say leave it, because you can't guarantee where the money will go, that it doesn't protect older home owners on fixed incomes, etc.

 

[vi edit]

Originally posted by: DealMonkey
I don't think CA's budget woes are directly attributable to low property taxes. It's mostly due to mismanagement by the State Legislature/Governor (mostly the former Governor) and other factors like employers fleeing the state because of an out-of-control worker's compensation program, etc., etc.

Remember our tax rate has been like this since the late 70s. It's not some new thing. Plus, with the insane rise in RE prices over the last 4-5 years, the state (and local counties) is seeing a huge spike in property tax revenue.

Just my $0.02.

Sorry if I made it sound like low property taxes were the reason for the debt. That wasn't my intent. My company was looking at buying franchise rights to develop there but backed out once we saw all the red tape and other misc. costs. Much of the budget woes are largely self inflicted by both legislature and taxpayers and we wanted no part of it.

I was just curious if/when the state would look to property taxes as an untapped honeypot to help band aid a problem.

And if they did...what impact that would have to disgustingly high property values/housing market.

 

[Dragnov]

You are correct on the 1% figure. This was actually push by the Democrats to help protect old retired people from getting pushed out of their homes due to rising property taxes. However, this severely reduces the states own income, and has been at the same time (if not more) favorable to Republicans as it limits taxes on everybody (including the more wealthy). So now Democrats want to repeal this law, but Republicans and the general public don't want to.

 

[Leejai]

Originally posted by: vi_edit

Originally posted by: DealMonkey
I don't think CA's budget woes are directly attributable to low property taxes. It's mostly due to mismanagement by the State Legislature/Governor (mostly the former Governor) and other factors like employers fleeing the state because of an out-of-control worker's compensation program, etc., etc.

Remember our tax rate has been like this since the late 70s. It's not some new thing. Plus, with the insane rise in RE prices over the last 4-5 years, the state (and local counties) is seeing a huge spike in property tax revenue.

Just my $0.02.

Sorry if I made it sound like low property taxes were the reason for the debt. That wasn't my intent. My company was looking at buying franchise rights to develop there but backed out once we saw all the red tape and other misc. costs. Much of the budget woes are largely self inflicted by both legislature and taxpayers and we wanted no part of it.

I was just curious if/when the state would look to property taxes as an untapped honeypot to help band aid a problem.

And if they did...what impact that would have to disgustingly high property values/housing market.

i just had to chuckle when i read "untapped honeypot"...i don't disagree w/ you one bit, but i just hope no legislatures are ATOT addicts reading this...

it's all mismanagement as DealMonkey said...take the Bay Area:

BayBridge retrofit...the recent hike to $3 tolls voted on in Nov was 100% suppose to go towards schools and education (as schools are closing in the area)....well, mismanagment of the retrofit project, the government wants to take that money to now go towards the bridge retrofit and another hike to take care of education....

it's the governement's fault it went overbudget...but taxpayers, yet again, have to pay...

Treat it like a Bankrupt Lotto winner....throwing more money at them isn't going to change the fact they can't manage money.

 

[jadinolf]

Maybe I missed it here but in CA property tax is based on "Assessed Valuation" which is not what the house would sell for. My home is assessed for $99,237 but if you would like to buy it you'd better bring a check for over half a million. Now because I live in this house, I get a homeowner's exemption of $7,000 off the assessed valuation.
My taxes are $1.433.10.

Now, the poor family that buys this house after I am done with it will pay taxes based on the selling price.

We have lots of incentive not to move.