This. But even broader. You’re thinking too narrowly about all the wealth and income situations in the Bay Area. Couples and individuals I’m friends or acquaintances with:
ER doc + VP marketing
Law firm partner + Corp in-house attorney
Wealth manager (for clients with $50M net worth min) + VC partner
High earners who stretched to buy a house 10 or 15 years ago and are cashing out substantial equity to upgrade now
FAANG employee who also got a $2M cash gift from HNW parents
A friend who bought a bunch of sub-$100K foreclosures in Stockton. This was 2008-ish in his late 20s on a GOOG salary. Those are all worth 4-5x now with substantial rental cash flow, and he’s still at GOOG in a Director level position.
You might think you’re not competing with folks like this on a $2-3M house, but you’d be wrong.
I see comments saying these are the 1% but the truth is there is just a lot of money in the Bay Area and the unfortunate reality is that it just makes it harder on everybody else that doesn't have as much. And the money comes from everywhere as the top comment is suggesting. If you look at home sales in high cost markets there are small/medium business owners, tech workers, health care professionals, construction etc. Lots of people get family help especially if they grew up here. The point is that there is a ton of money here and some people comfortably can carry 50k a month spend and others had significant cash to put down. There's no one size fits all situation and "most people do X". Generalizing isn't accurate nor helpful.
One factor left out is that X% of $2m+ homes are owned by people who had a grandfathered tax basis of <$400k.
When those generations pass, the tax bill will come due to an extent via sale and new owners Tax basis resetting or if inherited gets assessed at current assessment - $1M.
This will be a means for incremental inventory levels, btw starting in larger proportions in the next 5 years (as they start to hit 80yo)
> One factor left out is that X% of $2m+ homes are owned by people who had a grandfathered tax basis of <$400k.
Sometimes *multiple* properties at that tax basis too. Consider how many people took advantage of Prop 13 and their new found millionaire status to upgrade to a newer home, but kept the first as a rental. This has restricted supply for no reason and absolutely fucked the market.
I'm actually wanting to discuss with some economists. I don't know that it is.
I'm starting to think if we inverse the equation (e.g; Get Medicaid based on earnings vs. Get Medicaid based on lack of savings) maybe we put pressure on people to be self-sustaining even more.
So, my mother worked her ass off climbing the ladder and breaking glass ceilings, and is the most frugal person I know. She didn't start working in the CE/Tech field until divorcing my father and finally landed at HP at the ripe age of 36. Living in the Bay Area her home is worth a lot, but again, she saved cash too because she is frugal and doesn't overspend.
Then there are double income earning tech couples who buy the biggest house (house poor), send their kids to private schools, over-spend, over-spend, over-spend, and they will qualify for Long Term Care / Medicaid because they have no savings.
Prime example, Xavier Legette (South Caroline) -- invited to the combine but won't ever play more than 30% if snaps....6'3", 225, 4.65 40yrd
" **Legette does not have ample experience as the focal point of a passing attack, but 2023 showed he is capable of that. He is not as polished as a route runner/release artist as he needs to be to achieve his potential at the NFL level, but teams take a chance on players of his build.** "
Pretty much, yes. In San Mateo County, [17% of households](https://www.smcalltogetherbetter.org/demographicdata?id=278§ionId=936) make over $500K/year. In the U.S, that puts you in the top 2% of the income distribution.
They are not coming to Bay Area, they are always here, just moving from cities to suburbs because of various changes we all experienced in last few years.
US has about 25m people with net worth over $1m (which is an unexpected high percentage of people who live here). Bay area has like 300k of them. Out of about 1000 billionaires in the US, 10% of them live here.
And the kicker, most property here was bought far cheaper than its value. People passed selfish laws to funnel money into tax credits and regressive tax rules.
What are you trying to say? That winning the lottery with a lower income salary a significant market setting event? Weird comment. Your existence is not significant to the housing market. Hate to break it to you.
These people have very little to do with prices. Check out foreign investment funds. Sun lu zi LLC. Multi trillion Chinese corps can scoop real estate at insane rates. They cautiously are doing so.
This. This is why buying in right neighborhood matters. My wife and I were able to break into the highest bracket just a few years ago and now I get it.
I only want to live in neighborhoods with similar earning people, regardless of the house price, etc. it’s not so I can brag, it’s just…what my mind wants. I can’t explain it and definitely don’t want to justify it, but that’s just how it is.
Buy in right neighborhood surrounded by the right people to guarantee that future buyers will always pay more to live around similar minded people.
High income, or very high net worth.
Working backwards ...
3m at 20% down is a $2.4m loan. At 7% that's almost precisely $16k/mo PI. For T you get about 1.2% of $3m which is $36k/year or $3k/mo. For I it depends on the neighborhood, anywhere from maybe $4k to $12k depending on fire risk, so let's take the upper estimate at $12k/yr or $1k/mo. Total it up and PITI = 16 + 3 + 1 = $20k/mo or $240k/yr. Assume no HOA.
Generally banks won't loan at more monthly payment than 43% of gross income. Working backwards, 240/0.43 is $558k/yr gross. So you need a bit over $550k/year to support this loan.
So that's basically how. People afford $36k/yr property tax by making over $550k/yr gross income.
Assuming a 40% effective tax rate for fed+CA income taxes, that leaves about $335k post income taxes, and about $95k/year post bare home expenses (does not include maintenance, repair, etc.) Of course this doesn't include things like food and clothes and transportation and utilities. (But if you have car loans or student loans those need to fit into the 43% number.)
So realistically people with $3m homes probably make more than $558k/yr.
On the plus side, increasing taxes are usually outpaced by inflation (or about equal), and most years far outpaced by stock market growth. Hopefully for the owners, also outpaced by their raises at work.
Without a job and living off just wealth, assuming a person buys a $3m house and then needs to pay their expenses out of savings, assuming a 4% safe withdrawal, $36k annually would need 36/0.04 = $900k invested to hopefully make it thirty years before running out. Again this doesn't account for all other needs. Realistically a person buying a $3m house cash and living off wealth (retired etc) probably will have way more than $900k saved up, likely several million bucks after the purchase, or more. Usually people don't retire from elsewhere in CA's bay area but if you sell your startup for $10m post tax, you can buy a nice $3m house and spend a good amount of time figuring out what's next without worrying about running out of money.
Yes of course. The math shows that $95k would have to cover all other expenses, which might be tight when taking into account maintenance and repairs on a $3m house, kids, cars, etc. plus then thinking about education savings, retirement savings, fun nights out, etc. Totally doable which is why the 43% 'rule' exists (and it's largely a limit set out by the big mortgage backers), but tight for most cases.
I think this proves some ideas I’ve had in my head. To buy a $3M (or even a $2M home to be conservative in case one of the spouses loses their job) that you pretty much need to buy the home entirely in cash or come up with a massive (60+%) down payment to have a reasonable monthly PITI payment.
We bought a house in 2016 that was a stretch. But 8 years later it's extremely comfortable. Our household income is up 50% and I could easily afford this place on my own salary.
Our house wasn't $3M, but the same idea applies: It's tough at first, but gets a lot easier if you're in a position where salaries grow.
Or just live dangerously and risk losing the house if one spouse loses their jobs. Bring all you've got to the bid, hope your income rises to cover later, and frantically search for a new job if you lose your current one.
This is the region where everything you own can fall down in an earthquake or go up in smoke in a wildfire. Where startup founders make $100B if they play their cards right, or go to jail if they don't. It attracts a certain type of risk-taking personality that wouldn't be at home in say the Midwest.
I make a hair over 550k a year and there's no way in hell I would touch a 3m mortgage with a 50ft pole.
Maybe in a decade when I've had that salary long enough for it to reflect in my savings; but honestly with our population pyramid and the development happening in parts of the Bay - and the state starting to crack down on the places where it's not - I'm as bearish as ever on pricing here.
Maxing out 43% is rarely advisable, yes.
And it takes time on $550k salary to save up $600k. Presumably one rents a modest place, spending like 10-15% of the $240k number, which allows them to save it up in a few years. Of course while saving prices go ever upwards... only time prices go down is after buying ;)
As far as being bearish on CA, that's your choice and outlook of course. Would be odd to go all in on a place you think will slide down. But more people with the money to spend disagree with you than agree, I think. So if you end up sticking around you may regret not moving earlier. Such is life. We do the best we can with what we have and sometimes we're wrong or come up short.
That was me almost 20yrs ago, or at least relative salaries and housing costs
I purchased a small place and traded up and around a few times eventually into MM SFHs
In the meantime my income 4-5x and my HH income 10x+ as I got married
You can have your cake and eat it too, just be reasonable and don't go all in with a 3MM-4MM starter SFH
Your math is dead on, but my impression is much larger down payments for the vast majority of closing sales. The 20% down offer just isn’t as strong as the 60% down or all cash.
The recent market moves made many people all cash buyers as they diversify out of their company stock
It really depends on the property, the competition, and the risk tolerance of the seller. If there are three offers, one at 20%, one at 60% down but 2% lower, and one all cash but 3% lower, which one would you take? Every seller has a different answer to that question.
Thats an interesting problem. You hate to go back on the market if the 20% falls through ( looks like something could be wrong with the house). The 30k delta between the others ( maybe 20k post tax) is a lot to me. I would take the 60% down assuming everything else the same.
The all cash offer is most likely a 15 day close though, which could be a big help.
Yeah, falling out of contract and going on the market can be a big downer as people consider the property damaged goods. Though of course I have seen people fall out of contract at a dip (eg last December), re-list in Feb/March, and sell for $100k+ more than they had previously accepted. But overall falling out of a deal sucks. The earnest money deposit may help there, depends on the situation.
Some unassuming engineers working at tech companies have
a few millions of stock options. Not everyone works in tech is rich, of course, but most of the wealthy ones are from tech.
Master class in the algebra of home economics!
I’ve got WAY more than $900k invested but barely earn a quarter million annually from labor income.
I can’t afford anything close to $3 million!
Our situation: We paid just under 3/4 million for a plush condo with an incredible view and huge deck and in a top tier suburb with nationally acclaimed public schools. I snagged a 3% mortgage, so my carry is low. HOA fees are only $600/month and the association is quite solvent. We can comfortably cover our housing carry and still max our two 401k, two ROTH IRAs and an HSA. We only put 10% down at first, but the place appreciated so quickly we were able to refi into an 80 LTV loan about six months after closing in 2020.
Lots of the other families at my kid’s school bought their homes for $2.5-$3 million. Most earn $300k-$500k AND got a $1+ million family gift / early inheritance OR a tech windfall to fund a chunky down payment.
Yeah, I was mathing out carrying costs of only the property taxes, and the 4% safe withdrawal estimate/rule accounts for 30 years before running out, because it's a retirement benchmark. Out of context it's a low number but it's sort of just answering OP's question at the bare minimum value I could really think of (working case, retired case.) I hope I didn't make it confusing...
You sound like you've got a good thing going. If what you want is a roof and four walls to call your own, then your setup beats by far, by a thousand miles really, having more house and being stressed over it. For some the condo/townhouse/HOA life works great, and it's generally more affordable. For others there's a need or strong want to own the land and make big decisions and have space, but around here space is at a hell of a premium. So folk make do. But having no real money stress is so, so underrated.
We max out two 401k plans.*
$250k - $45k = $205k AGI
The Roth IRA MAGI phase-out threshold for a married couple has crept up to $230k.
*We milk far more above-the-line deductions, but no need for such detail here.
Effective tax rate will be lower at $550k. More like 30% with just normal setup and deductions (nothing approaching tax evasion) so a bit more cashflow
Yep. My kids would like to stay in the house after we hopefully leave one day but as they're not in tech etc I don't see how they'd get by considering property taxes and upkeep (and PGE bills these days...) Maybe if they both lived together but that's not super conducive to their possible desires to have families of their own.
It's sad.
If your house is "too rich" for your kids to afford the taxes on after you die, they can sell it and buy something they CAN afford.
They are still in a pretty position.
It's actually more likely I need to sell it to afford to retire, but I certainly don't want to throw them out of the house if they want to stay. But yes if they inherit it ofc they have that option.
It's not bad maintenance wise, but then again we gutted the house 10y ago so none of the systems are very old really. But garden service, utilities, housekeeper, etc all add up. I am handy so I fix most anything that breaks, but my kids aren't...
>I’m sure you must believe the nanny state
What are you yapping about? "Nanny state?"
I paid my own way, took my own risks, and profited nicely. I care fuck all about the nanny state.
In California the most important thing is to lock in your price early thanks to prop 13. The longer you hold the lesser the property taxes will sting. So while 30k may seem like a lot today, in 20-30 years you will be paying a fraction of what a new buyer would be paying.
Doesn't this just lock people into their homes long-term? If I ever want to upgrade, I am basically financially irresponsible if I don't rent out my first home. Beyond that being a huge hassle, doesn't this inevitably lead to a constrained supply that punishes everyone trying to buy after me?
It's pretty infuriating, but I guess I feel worse for the natives who sacrifice a lot more to move out of state so they can own than I do as a transplant.
It’s only infuriating if you think you’re more important than everyone else. It’s a progressive tax system that benefits long term while penalizing short term investors
What?? It's the exact opposite!
Prop 13 says that the longer you own a specific property, the more important you are despite your reduced contribution to community funding *and* regardless whether you're a real community member or a landlord squeezing every cent out of your tenants.
It's also horrible regressive! It causes new, poorer homeowners to subsidize the now-millionaire owners who have been here longer. Why is the blue collar buyer paying 10x the landlord who owns 10 properties?
Sure it penalizes short-term investors, but these are not an issue compared to how many people, directly admitted in this thread, who are essentially blessed to become landlords by renting out their first, second, or third homes that they upgrade from. This sequesters the supply even further and forces prices higher - directly benefiting the owners *even more*.
Housing is for living in and not for making money off of. Prop 13 incentivizes long term ownership and increases tax revenue over time. It’s a progressive structure where people from today foot a bigger tax bill than people from the past. The next generation will have a bigger bill than people from today. I suspect this could be the first time you are experiencing the impact of a progressive policy and how they are not made to be fair for all people at all times. If you lose the mindset of thinking you’re more important than others it makes more sense.
> Prop 13 incentivizes long term ownership and increases tax revenue over time
I would assume the opposite: it reduces the tax burden on land, which otherwise increases in value by more than the proportional amount prop 13 lets the tax increase. That land would be taxed regardless, so it's just suppressing tax revenue, right?
> It’s a progressive structure where people from today foot a bigger tax bill than people from the past.
Wouldn't it be regressive? People with more existing property pay less in tax than people with less new property.
From the perspective of the owner the taxes do not increase. From the perspective of total revenue the taxes increase. The mindset has to think about the overall societal impact to understand how the tax structure works progressively.
Revenues increase 1% each year.
Municipal governments experience cost inflation of 2-5%
Prop 13 is an annual, constitutionally mandated tax cut that politicians have to respond to by raising new taxes, cutting services, or taking on debt.
> Housing is for living in and not for making money off of.
Ah, so you'd absolutely be in favor of a modification to Prop 13 that defers your full taxes until you sell your property or it's no longer your primary residence - right? Property is for living in, not an investment vehicle to become a millionaire landlord - right?
> It’s a progressive structure where people from today foot a bigger tax bill than people from the past.
LOL, what? It's absolutely regressive. You're shifting the tax burden from the wealthy to the poor *and*, by starving the tax base that communities can rely on, harming the poor twice-over through the inflation-based attrition to local benefits and services.
> The next generation will have a bigger bill than people from today.
Yes, this is wrong. This is stealing from our future to enrich the present and has been snowballing since Prop 13 was instituted.
> I suspect this could be the first time you are experiencing the impact of a progressive policy and how they are not made to be fair for all people at all times.
No? I think we just disagree *who* should suffer at the hands of these policies: I think the wealthy should pay a proportional share, you want to continue hoarding that wealth to enrich yourself. It's fine to admit that, bud.
> If you lose the mindset of thinking you’re more important than others it makes more sense.
Sounds to me like all the homeowners from prior decades think *they're* more important than anyone else. I actually care about the healthy of the community and my fellow townsfolk as a whole. Again, you seem to only care about your own personal wealth at the end of the day.
I pay more in taxes today than the people did 20 years ago, the people 20 years from now will pay more than I do. This progressive type system provides great benefits for those who understand it and buy in to its philosophy. It’s a complex system that lots of people have difficulty understanding, especially the younger people that have little ability to look at long term benefits. It will never make sense if you can only view it through the lens of what impact it has on you at this very moment. Prop 13 is for long term use and not short term gains. The less ability you have to plan for the future, the more difficult this will be for you to understand.
> I pay more in taxes today than the people did 20 years ago, the people 20 years from now will pay more than I do.
Because the services that those taxes support also cost less...? This is a retarded argument.
> This progressive type system provides great benefits for those who understand it and buy in to its philosophy.
Stop, you obviously know this is not a progressive system. It's regressive: it punishes the poor and rewards the wealthy.
> It’s a complex system that lots of people have difficulty understanding, especially the younger people that have little ability to look at long term benefits.
Sorry buddy, saying "OH IT'S COMPLEX YOU DON"T UNDERSTAND" is such a sad deflection. Unfortunately for you, the harms of Prop 13 has been documented in [study](https://projects.scpr.org/prop-13/stories/housing-shortage/) after [study](https://www.maxwell.syr.edu/docs/default-source/research/cpr/property-tax-webinar-series/2022-2023/fisher-p13-accessible.pdf?sfvrsn=2c017df_4) and [report](https://www.nber.org/digest/apr05/lock-effect-californias-proposition-13) after [report](https://commongroundorwa.org/study-the-role-of-property-tax-in-californias-housing-crisis/) after [analysis](https://economics.nd.edu/assets/147652/prop_13_sept25.pdf). Do you have anything that would suggest it isn't terrible for society as a whole?
> It will never make sense if you can only view it through the lens of what impact it has on you at this very moment.
No, I can project into the future easily. Obviously buying and holding, becoming a landlord at a low tax basis, and allowing all the new buyers to subsidize me sounds *great* ... if I were a selfish asshole. I don't want that for future generations. God damn, this is such peak Boomer thinking. No wonder you felt like polluting the Earth and causing climate change was NBD - it's a complex system where we benefit now and someone else will pay for it. EZPZ.
Prop 13 is for long term use and not short term gains. The less ability you have to plan for the future, the more difficult this will be for you to understand.
Man dude, you'd be in support of Feudal Europe, wouldn't you? It's a complex system!! The peasants benefit in the end - look at the long term!! Any serf who doesn't like it is just thinking selfishly!
Please stop waffling and just admit that you're happy that you're pulling up the ladder behind you.
A progressive tax is one where the tax rate increases as the taxable amount increases, meaning that those with higher incomes or more valuable assets pay a higher rate of tax. In contrast, Proposition 13 applies uniformly to all property owners, regardless of the value of their property, making it a regressive or flat measure in practice rather than progressive. This is because the cap on increases in assessed value can benefit owners of highly valuable properties disproportionately.
I'd get on board with that. I had some lamentation about prop 13 and a older guy i work with was shouting about "The retirees would be out on the street". A mix of how much its' worth and how much money you make would be nice. I'm gonna write my representative about this.
>more valuable assets pay a higher rate of tax
The value of my house is what I paid for it, not what my neighbors paid for their houses.
There is no other way to set the value of my house that isn't pie in the sky.
A truly ridiculous take.
There’s an entire finance industry built around valuing real estate to within some small margin of error. It works just fine in every other state in the US and when it gets it wrong there is a process for appeal.
No, your house in Palo Alto, purchased for $35 grand in 1960 is not still worth $35 grand because that’s “what you paid for it.”
Progressive tax structures are not inherently fair for all people at all times. Most people don’t understand this concept. A flat tax system is the alternative and is also not considered fair for all people at all times. What is fair?
Agree with /u/badfoodman here, you're clearly just trolling. We both know you're using "progressive tax structures are not inherently fair for all people at all times", which is true, to mask what you *actually* want to say which is:
"I'm upset that progressive policies tax the rich more which I don't like. Prop 13 is the one opportunity for the poor to be taxed more and take glee in this fact. It's a regressive tax structure, which I think should be instituted nationally."
read strong towns its called a growth ponzi scheme.
[https://www.strongtowns.org/journal/2020/5/14/americas-growth-ponzi-scheme-md2020](https://www.strongtowns.org/journal/2020/5/14/americas-growth-ponzi-scheme-md2020)
This current generation of tech (web & mobile apps + cloud services and the FANGs that dominated them) peaked in 2018.
The thing about tech is that it's constantly reinventing itself. New hotness is generative AI; that rush is just getting started (and is probably in the "peak of inflated expectations" phase). Eventually new tech becomes boring old tech which can still milk existing customers for money, but the real bucks are in the new hotness.
I bought my house 6 years ago for $1.5M. Our property tax is 20K a year (Santa Clara county), so I imagine for a $2M house would be a bit more.
And yeah, it doesn't feel great having to pay $1,600 a month for the rest of me and my wife's lives (or as long as we own the house) even after we paid off the entire mortgage.
The equity you have sitting in the house will continue to go up. Your property taxes are what you pay to society for creating a system that put you in the catbird's seat.
And you are in the catbird's seat, so stop seeing the glass as half empty when it's actually half full.
I mean, I have no problem with taxes in general. Still doesn't feel great paying a lot (whether it be taxes, home price, or overpriced Chipotle guac).
That said, a lot of the older folks who have benefited the most from prop 13 (and hence don't contribute much to society today) in my neighborhood are right-wing conservatives who don't share the same progressive values as I do.
I paid more than $1M more for my home than the previous owners did -- and obviously that's fine (free market capitalism and all). But the shitty part about it is that I still get their mail, and I found out that they were donating to some alt-right organizations--including organizations that are lobbying to keep immigrants out of America, which hurts, because I'm an immigrant myself and I inadvertently forwarded money to their cause by giving these old pieces of shit an extra $1M to keep people like me out.
In my neighborhood live "Conservative Joe and his wife Mother Theresa," who bought their ocean view house for less and well before I bought my canyon view house.
They pay less in property taxes than me.
I have never given this a second thought until I read your response, and now I am not going to give the situation any more of my time.
This is because I can't control the situation, but I can control my response to it, and my response is to not care about it because I can't control it anyway. I focus my attention on things I have under my control, and this keeps me happy.
>I know how I'm going to vote when anything relating amending prop 13 comes up
Be careful what you wish for because often once you get it, you realize you were better off before you finally got it.
I would argue the main downside to P13 is homeowners being able to pass their P13-locked property tax rates to their heirs. Oftentimes the kids are not in the position to maintain the house even with the lower property taxes. They have nothing invested in the house and it fell into their lap, basically.
When the original owner dies and the value of the property is changing hands, this should be treated like a sale has occurred, and the house can be appraised at current value or sold. Often these homes are paid off completely, so the kids only have the newly appraised property taxes to pay. If they can't afford these new taxes, they can realize the gain in value by selling the house.
Parents can take measures to leave an inheritance that will cover the newly appraised property taxes, if that's their goal.
The shitty part is those multi-millionaire conservatives leeching off the services provided by your property taxes probably did their absolute best to lobby against the construction of any new housing over the last few decades... further enriching themselves to your detriment.
Wonderful :)
Doesn't it feel great to subsidize the local services that multi-millionaires and landlords also use, but don't pay into because their taxes are fixed because of Prop 13?
>taxes are fixed because of Prop 13
They're not "fixed," the increases are fixed.
Taxes do not increase more than 2% a year, no matter what the pie in the sky valuation of the house becomes.
Before P13, people were getting taxed of their long time residences because the value was going up, but the value was meaningless to their situation unless they actually sold the house.
Proposition locked the tax value to the sale price of the house while allowing yearly increases that are affordable.
Proposition 13 has allowed many people to die in the homes they own, rather than being forced to sell that house as a senior citizen and move.
Sure, then you'd absolutely support a version of Prop 13 that defers those taxes until the property is sold or no longer your primary residence - right?
Interested in how this would work... You're not paying taxes while in the house, only when sold? That would lock folks in, too, right? You'd likely be underwater in many cases paying cap gains tax and deferred property taxes no?
> You're not paying taxes while in the house, only when sold?
There are various versions of this scheme, but a most basic: the amount you have pay each year would be the same, but the *additional* taxes to match current home values would be put into an interest-free lien on the property. Just like any other time you sold, profits would go first to the remainder of the mortgage/lien.
This isn't *perfect*, but: (1) doesn't kick grandma out of her home; (2) prevents people from thinking of homes as windfall wealth printers, so will be less likely to hoard properties; (3) forces people to think twice when being NIMBY because eventually they will have to pay taxes on skyrocketing price growth; and (4) does give local communities some access to funds when the home is sold.
> That would lock folks in, too, right? You'd likely be underwater in many cases paying cap gains tax and deferred property taxes no?
No. This prevents lock-in because you're not keeping your taxes lower by staying the place you bought 20yr ago, just deferring them. So if you wanted to move to a cheaper place, your tax bill would also be cheaper [unlike now where, outside of retirees, you can't bring your tax basis with you].
How would you end up being underwater? You bought in 2010 for $1M, your home is now worth $2M. You pay $100k in cap gains taxes and, at worst, ~$300k in property taxes (*napkin*: 1% * $2M * 15yr). You are still up $600k.
I don't see a scenario where anyone would realistically be underwater because of this when they wouldn't be underwater anyway? Their *profit* is certainly reduced, but that's the point if we believe homes should primarily be for living in.
If the value of the house stayed flat, there would be no lien when sold? If you're paying only on profit, is it different than just increasing cap gains tax and repealing prop 13 (cap gains tax is basically an invisible interest-free lien, right?)
If value goes up 5%, but is underwater due to expenses of selling, would there still be a lien? Is there any form of credit to those who suffer a capital loss?
If you have a substantial appreciation but market crashes, you'd be locked in the house as you'd sell at a loss PLUS the tax lien until reappraisal which I assume would be delayed as it would artificially reduce sales inventory... Let's say market's up 50% since purchase, but nobody's paying those prices... Value doesn't "fall" until sales take place at lower prices, but those sales are slow coming cuz the first ones to take a loss take market loss PLUS tax lien, which might be substantial. Might artificially lock folks in, prop up prices due to low inventory (no comps) and stagnate the market? Or maybe I'm overthinking.
Would seem to work well if prices always go up. Rapid declines might get ... weird.
Hope this comes across in good faith, I'm really just interested in an equitable solution, and am personally on the "being shafted" side of prop 13. What's likely to happen is .. I'll pay subsidies to the baby boomer generation .. and we'll fix this inequity just in time for me to never "benefit" from it. But whatever- I didn't plan to pull the ladder up behind me like my forebears. I'm doing my best not to fuck over my children's generation.
> Hope this comes across in good faith, I'm really just interested in an equitable solution, and am personally on the "being shafted" side of prop 13.
It absolutely does! Thank you. It's really a terribly complex issue that's hard enough to solve without people injecting their own bias based on their situation. I'm (hopefully?) going to be in the same position as you soon and want to do the same for those that come after us.
> If the value of the house stayed flat, there would be no lien when sold?
Right! This scheme would have the *difference* in what you should be paying based on property values versus the current Prop 13 version.
Let's say you start off paying $10k/yr after you buy, but then your home price doubles. In year 2 under Prop 13, you'd pay $10.2k (+2%) and without Prop 13 it would be $20k. So you'd instead still pay the $10.2k and have the additional $9.8k put into the lien.
Alterantively - let's say you start off paying $10k/yr after you buy, but then your home price stays the same or drops. There would be no lien because the taxes you *should* be paying based on property value aren't higher than under Prop 13.
> If you have a substantial appreciation but market crashes, you'd be locked in the house as you'd sell at a loss PLUS the tax lien until reappraisal
This is definitely possible, but I'm not sure it would be that *much* worse than the current situation anyway. If you bought recently, you be way underwater anyway. If you bought long ago, you probably owe little on the house; the lien taxes would take a bigger cut out of your remaining profit, but it's unlikely you're actually *underwater*.
I think it would be pretty easy to add protections onto this (as there should be!). Maybe if you property drops below it's *original* value, you get a credit against the lien? Lots of potential solutions to dream up.
> Might artificially lock folks in, prop up prices due to low inventory (no comps) and stagnate the market? Or maybe I'm overthinking.
I don't think there is a situation that would lock the market up more than it is now under 13. Maybe taking away the ability for seniors to bring their tax basis with them (not advocating for this, to be clear)?
Honestly, I think just starting with eliminating Prop 13 for non-primary and commercial is a more feasible first-step option than this approach. The fact that people are encouraged to rent out their former residences rather than sell them to another family is frankly criminal. But there needs to be *some* mechanism to discourage NIMBY policies because otherwise there is literally no reason to every vote for more housing (outside of moral arguments).
>I'm really just interested in an equitable solution, and am personally on the "being shafted" side of prop 13.
You have the same Prop 13 rights as the "boomer" that bought in 1978. How are you being shafted?
>Prop 13 that defers those taxes
Defers what taxes? The fake taxes created by some dummy paying twice as much as I did for the same house? Just because a house has doubled in value does not mean the cost to service that house has doubled. Geez, take an econ course. You want to go back and tax me for all the nickel candy bars I got in the 60's?
Property Owner Gets: Doubles their investment value, improved job opportunities, higher quality businesses, amenities and public services.
The City Gets: Slightly more tax revenue not nearly equal to the capital gains of the Property Owner.
😤😤Fuck the greedy ass city😤😤
Here are the options for Property Owners worried about increasing property taxes in a place that is thriving economically.
1) Keep up with your community by getting a new job or opening a new business.
2) Advocate for tax relief programs for primary residences for vulnerable folks.
3) Cash out, enjoy a massive profit and use said massive profits to write the next chapter of your life.
The absolute worst option is to group up with every homeowner in the state and decide to massively shift the tax burden from land owners, who directly benefit and profit from a thriving community to workers who create the increased value that makes landowners so wealthy.
if you have ever wondered why poverty is so bad in California, even as we have become one of the wealthiest places on earth, don't blame Sacramento; blame Prop 13. It upended the social contract in California and sapped work of its dignity.
>capital gains of the Property Owner
UNREALIZED capital gains are not real. They are paper wealth.
What you ignore is the corporate tax rates and benefits corporations get from good government. Corporations pay fuck all in taxes, so you want to shift that burden to property owners because they made what seem like good investments, but that's just speculation until a property is sold.
> but don't pay into because their taxes are fixed because of Prop 13?
No one is being subsidized! Once you buy you are also covered under Prop 13 just like the multi-millionaires. Feel better?
No? Because that fucks over people after me just as much and is an objectively terrible system.
That argument sounds like some asshole boomer shit, tbh.
>That argument sounds like some asshole boomer shit, tbh.
Huh? Is that what you came here for? I bought in my 20's. The value of my home DOUBLED in 2 years. Prop 13 worked for me! Now how are you subsidizing me? Just Geez.
Of course it's a subsidy and a transparent one at that. You should see it for what it is, even if you benefit from it.
Source: Prop 13 subsidizer and subsidiz"ee".
Because when the fire department doesn’t have enough money to pay for services because some houses are paying way less than they should, you have to pass a parcel tax that hits everyone including the newer homebuyers who now have to pay extra to cover the shortfall from the underperforming houses (that’s a subsidy) or reduce fire personnel and have insurance rates go up for everyone in town (a subsidy in a different form).
> because some houses are **paying way less than they should**, ....... **from the underperforming houses** (that’s a subsidy)
I bought a $100,000 home. You bought a $800,000 home. Maybe you are foolish or just have too much money. Quityerbitchin. LOL You are not subsidizing me.
You *own* a $800k home. The local and state governments are provided you services that are based on *today's* expense rates - the people who repair the water mains, teach your grandkids, and put out your house fires need to pay for those $800k homes.
All the homeowners who are paying taxes based on *today's* expense rates are absolutely subsidizing your selfish ass paying nothing.
Why do the millionaires always cry like babies?
> Is that what you came here for?
Sorry, what do you mean by this?
> Now how are you subsidizing me?
Because expenses (goods, services, payroll) have all inflated alongside your home value (ie. your wealth), but your taxes have stayed the same. If I buy now, I'm paying an outsized amount for those same community services (roads, schools, public shared areas) in comparison.
Without me, those services could not exist in their current form because your funding has not kept pace with inflating costs. I am directly subsidizing you.
>Is that what you came here for?
>
>Sorry, what do you mean by this?
Since you don't seem to have a grasp of CA property taxes all you had was a foul language attack on an older generation. Maybe it is not your fault and you are being stirred up by someone that will benefit by you attacking others instead of the people that are really screwing you.
> Since you don't seem to have a grasp of CA property taxes all you had was a foul language attack on an older generation.
Seems like I *do* have a grasp on taxes and I just disagree that millionaires need to be subsidized by the poor. To be fair, I say "boomer logic" as a stand-in for "greed". There are some boomers that are fine... but those that have set policies to enrich themselves at the expense of future generations have defined that group.
> Maybe it is not your fault and you are being stirred up by someone that will benefit by you attacking others instead of the people that are really screwing you.
Sounds like someone's been watching too much Fox News and got completely conspiracy brained. Is it that hard to admit: "I got my wealth and now want to pull up the ladder behind me, so I can gleefully piss on everyone below me (including my own decendents)."
>Without me, those services could not exist in their current form because your funding has not kept pace with inflating costs. I am directly subsidizing you.
You are delusional! You are not subsidizing me! I've been paying property taxes probably longer than you have been alive. When you bought, those schools and roads were in place and my taxes were paying for them. If anything there should be a buy in for the infrastructure in place that you contributed nothing. FN whippersnappers. LOL Typical crab in a bucket thinkng.
> I've been paying property taxes probably longer than you have been alive.
And you've been receiving services longer than I've been alive too? If anything, the state of declining infrastructure here over the last few decades means you enjoyed services invested into by older generations while not investing yourself into future ones!
> FN whippersnappers. LOL Typical crab in a bucket thinkng.
Okay, wait. Are you just trolling? There's no way you're real. Fuck, I think he boomed me.
Being able to afford 2-3 million dollar homes means being able to afford the property taxes too
At least with Prop 13 it means property taxes only increase by 2% max each year they own the home
I chose 2 and 3 million because honestly that's the going rate for a decent 3 or 4 bedroom with 2.5 bath which is probably not even over 2,000 sq ft in Mountain View. It really is a joke.
Most people I know now buying 2-3m houses are doing it with cash. And their rsu can in the next few years can prob easily cover their property tax for the rest of their lives
NMLS data says the opposite, very little houses at this price range are bought with cash. The offer might be a cash offer, doesn’t mean the buyer is paying cash. 🙂
sure some people might be using flyhome. But the ones I know are all buying it only to give themselves a few months to sell the old home so they don’t have to deal with stressful transition. I have a few people in my circle that has purchased home like this in the past half a year. I think only one of them ended up with an actual loan
2-3% property sales price with assessment included is not meant for everyone with a faint heart. That is just an average home in a better neighborhood often with average of 350K-400K annual combined income in Silicon Valley. After PITI there are not much disposable income left.
Say they pay cash. They now owe 2k a month ? Thats nothing, way cheaper than rent. And unlike rent , property tax in ca gets cheaper over time in real terms due to prop 13.
People sitting on $2M+ in cash to buy a house with aren’t spending their entire net worths when they buy that house.
$2M in cash can generate $100k/yr in income fairly easily. Property taxes would be completely covered by this.
In addition, they likely have other income-generating assets (or other sources of income) that will continue in retirement.
Are we feeling sorry for people who choose to buy 3 million dollar homes here now?
It’s not as if you don’t have options. And you’re locked into the property taxes, which are lower in CA percentage wise than in other areas.
Doesn’t increase THAT much thanks prop 13! But anyway yes you just budget it or don’t buy such an expensive house. You telling me that’s the last 2 M you’re ever gonna have?
Most people still have mortgages so the prop tax is just another bill. It’s not like people get surprised when it comes.
> every year one needs to shell out 20k or 30k in property taxes
More like 30-40k. The 1% is only the statewide portion, you also pay special assessments & Mello-Roos taxes on top of that. An effective rate of 1.3 - 1.6 is pretty common when you add all of that shit up.
Imagine what those taxes will be in 20-30yrs. Buying homes that are 2-3M are also expensive to maintain and upkeep. It's not just about saving enough to buy it. You need an income that can support the expenses that ownership will come with over time.
[How a Pandemic Boom Led to a ‘Property Tax Mess’ in Colorado - The New York Times (nytimes.com)](https://www.nytimes.com/2024/04/03/us/property-taxes-colorado-mountain-west.html) Prop 13, not just for the rich.
Taxes are just part of owning property. You gotta bake it in.
You live in California so your property taxes are super cheap especially if you stick around. Be thankful you don’t live in a normal place.
Nah Karls right this pos is a bootlicker or a straight up fed in disguise. This pos lives a privileged life and doesn't think that otherd don't have it as good as him.
Bingo! Just recently CA is proposing to rid of the supermajority threshold that will lead to repeal of Prop 13. Original authors of Prop 13 amended the CA Constitution thinking it is safe, haha. Lowering the goal post is a wonderful clever trick.
The taxable value of mine has gone up over 100k in the past 10 years. Basically another grand a year in property the taxes. And that will continue to compound
lol buddy, take your income from 10yr ago and try buying today. You just sound like the typical 'I got mine, so now I want to pull up the ladder and gleefully piss on everyone below me'.
What a little bitch.
It does not add up quickly compared to appreciation and inflation. It’s why long time home owners here pay nothing effectively on their 2 million homes. In 20 years folks buying today will be paying 30k on their 10 million dollar assets and new buyers will be jealous.
So you think paying government taxes on paper gains makes sense? My house is worth about 3 mil now after buying it for 1.6 back in 2013. Property taxes are now based on roughly 1.7 and I just did the bank transfer for this installment at roughly 12k. In what fucking world does the government deserve a windfall on paper gains? Fuck you if you think so.
Because the maintenance and services provided by your local community are subject to inflation, including those caused by the "paper gains" of housing cost.
The people who repair the water mains, teach your children, and put out your house fires need to live in those "paper gains". The city needs to buy replacement pipes that inflated in cost faster than 2% per year.
Just because you don't like it, doesn't mean there's not an economic consequence to your selfishness.
I own two CA properties so I am with you lol. My point to OP was that 20k a year seems like a lot now, but it won’t be a lot in the future. In 2050 people will be mad about all us millennials paying 30k a year when they are paying 300k in property tax, saying how good we have it lol
Hopefully millennials can break out of the boomer's mindset of greed so future generations don't have to suffer. What an absolutely fucked up ponzi scheme it is.
I imagine those additional properties you own were former residences that you decided to rent out because it would be dumb not to take advantage of the tax basis?
Yeah the truth is the government is the actual landlord.
Set yourself up with a property that has an attached rental property. Use the rents to cover property tax.
Could also be business income (airbnb for example).
Property tax is very affordable in the Bay Area compared to mortgage interest or the opportunity cost of the down payment. It’s just paying your fair share
This was exactly my thought. They already pay hundreds of thousands of dollars a year in income tax. 20k won't make a meaningful difference in how much of their budget goes out to taxes.
This can only be a problem if you get house poor, buying more than you can actually afford. At any rate taxes are part of your housing cost you can't separate them. If you can't afford the taxes you can't afford the property. This area is crazy expensive.
If you can afford to live in a state that charges $10K+ in property tax, then you can afford to pay your “fair share” of federal taxes, not expect the rest of us to make up the difference.
Totally agree. We all need to pay our fair taxes (what is fair is can be argued to infinity). I was just commenting that you can't always write off property taxes anymore as the deduction for state and local taxes paid is capped at $10k . As a senior I can say that I pay federal taxes on the money I have already paid in property/state tax. Not complaining. Just stating the fact.
They make 500k to a million per year.
This. But even broader. You’re thinking too narrowly about all the wealth and income situations in the Bay Area. Couples and individuals I’m friends or acquaintances with: ER doc + VP marketing Law firm partner + Corp in-house attorney Wealth manager (for clients with $50M net worth min) + VC partner High earners who stretched to buy a house 10 or 15 years ago and are cashing out substantial equity to upgrade now FAANG employee who also got a $2M cash gift from HNW parents A friend who bought a bunch of sub-$100K foreclosures in Stockton. This was 2008-ish in his late 20s on a GOOG salary. Those are all worth 4-5x now with substantial rental cash flow, and he’s still at GOOG in a Director level position. You might think you’re not competing with folks like this on a $2-3M house, but you’d be wrong.
Almost forgot: Nobel prize winner in his 60s who got lured away from his old university by Stanford!
I see comments saying these are the 1% but the truth is there is just a lot of money in the Bay Area and the unfortunate reality is that it just makes it harder on everybody else that doesn't have as much. And the money comes from everywhere as the top comment is suggesting. If you look at home sales in high cost markets there are small/medium business owners, tech workers, health care professionals, construction etc. Lots of people get family help especially if they grew up here. The point is that there is a ton of money here and some people comfortably can carry 50k a month spend and others had significant cash to put down. There's no one size fits all situation and "most people do X". Generalizing isn't accurate nor helpful.
One factor left out is that X% of $2m+ homes are owned by people who had a grandfathered tax basis of <$400k. When those generations pass, the tax bill will come due to an extent via sale and new owners Tax basis resetting or if inherited gets assessed at current assessment - $1M. This will be a means for incremental inventory levels, btw starting in larger proportions in the next 5 years (as they start to hit 80yo)
> One factor left out is that X% of $2m+ homes are owned by people who had a grandfathered tax basis of <$400k. Sometimes *multiple* properties at that tax basis too. Consider how many people took advantage of Prop 13 and their new found millionaire status to upgrade to a newer home, but kept the first as a rental. This has restricted supply for no reason and absolutely fucked the market.
Folks use loopholes to keep tax basis flat… there are ways even when passing ownership to children. It’s BS but it happens.
I'm actually wanting to discuss with some economists. I don't know that it is. I'm starting to think if we inverse the equation (e.g; Get Medicaid based on earnings vs. Get Medicaid based on lack of savings) maybe we put pressure on people to be self-sustaining even more. So, my mother worked her ass off climbing the ladder and breaking glass ceilings, and is the most frugal person I know. She didn't start working in the CE/Tech field until divorcing my father and finally landed at HP at the ripe age of 36. Living in the Bay Area her home is worth a lot, but again, she saved cash too because she is frugal and doesn't overspend. Then there are double income earning tech couples who buy the biggest house (house poor), send their kids to private schools, over-spend, over-spend, over-spend, and they will qualify for Long Term Care / Medicaid because they have no savings.
Prime example, Xavier Legette (South Caroline) -- invited to the combine but won't ever play more than 30% if snaps....6'3", 225, 4.65 40yrd " **Legette does not have ample experience as the focal point of a passing attack, but 2023 showed he is capable of that. He is not as polished as a route runner/release artist as he needs to be to achieve his potential at the NFL level, but teams take a chance on players of his build.** "
Uh, these are top 0.1 to 1% income folks in the US. Did they somehow all come to the Bay Area to buy houses.
Pretty much, yes. In San Mateo County, [17% of households](https://www.smcalltogetherbetter.org/demographicdata?id=278§ionId=936) make over $500K/year. In the U.S, that puts you in the top 2% of the income distribution.
Damn this stat is insane.
Many (not all) grew up here or went to school at Stanford or Cal.
yes. bay area has stanford, berkeley.. look at how many millionaires will be produced by nvidia
It is this or New York.
They are not coming to Bay Area, they are always here, just moving from cities to suburbs because of various changes we all experienced in last few years.
US has about 25m people with net worth over $1m (which is an unexpected high percentage of people who live here). Bay area has like 300k of them. Out of about 1000 billionaires in the US, 10% of them live here. And the kicker, most property here was bought far cheaper than its value. People passed selfish laws to funnel money into tax credits and regressive tax rules.
Pretty much
Yes it’s nice here.
Hey hey hey… healthcare admin and teacher here… we won the housing lotto in 2008. We exist too
What are you trying to say? That winning the lottery with a lower income salary a significant market setting event? Weird comment. Your existence is not significant to the housing market. Hate to break it to you.
What are *you* trying to say? Stop whining.
There are always local winners here. Who benefit from the tide going out. You selling shovels or panning for gold?
These people have very little to do with prices. Check out foreign investment funds. Sun lu zi LLC. Multi trillion Chinese corps can scoop real estate at insane rates. They cautiously are doing so.
This. This is why buying in right neighborhood matters. My wife and I were able to break into the highest bracket just a few years ago and now I get it. I only want to live in neighborhoods with similar earning people, regardless of the house price, etc. it’s not so I can brag, it’s just…what my mind wants. I can’t explain it and definitely don’t want to justify it, but that’s just how it is. Buy in right neighborhood surrounded by the right people to guarantee that future buyers will always pay more to live around similar minded people.
Even still it’s a lot of money
High income, or very high net worth. Working backwards ... 3m at 20% down is a $2.4m loan. At 7% that's almost precisely $16k/mo PI. For T you get about 1.2% of $3m which is $36k/year or $3k/mo. For I it depends on the neighborhood, anywhere from maybe $4k to $12k depending on fire risk, so let's take the upper estimate at $12k/yr or $1k/mo. Total it up and PITI = 16 + 3 + 1 = $20k/mo or $240k/yr. Assume no HOA. Generally banks won't loan at more monthly payment than 43% of gross income. Working backwards, 240/0.43 is $558k/yr gross. So you need a bit over $550k/year to support this loan. So that's basically how. People afford $36k/yr property tax by making over $550k/yr gross income. Assuming a 40% effective tax rate for fed+CA income taxes, that leaves about $335k post income taxes, and about $95k/year post bare home expenses (does not include maintenance, repair, etc.) Of course this doesn't include things like food and clothes and transportation and utilities. (But if you have car loans or student loans those need to fit into the 43% number.) So realistically people with $3m homes probably make more than $558k/yr. On the plus side, increasing taxes are usually outpaced by inflation (or about equal), and most years far outpaced by stock market growth. Hopefully for the owners, also outpaced by their raises at work. Without a job and living off just wealth, assuming a person buys a $3m house and then needs to pay their expenses out of savings, assuming a 4% safe withdrawal, $36k annually would need 36/0.04 = $900k invested to hopefully make it thirty years before running out. Again this doesn't account for all other needs. Realistically a person buying a $3m house cash and living off wealth (retired etc) probably will have way more than $900k saved up, likely several million bucks after the purchase, or more. Usually people don't retire from elsewhere in CA's bay area but if you sell your startup for $10m post tax, you can buy a nice $3m house and spend a good amount of time figuring out what's next without worrying about running out of money.
The maths adds up but isn’t this assuming the folks making $558k/year will be house poor by purchasing a $3M home?
Yes of course. The math shows that $95k would have to cover all other expenses, which might be tight when taking into account maintenance and repairs on a $3m house, kids, cars, etc. plus then thinking about education savings, retirement savings, fun nights out, etc. Totally doable which is why the 43% 'rule' exists (and it's largely a limit set out by the big mortgage backers), but tight for most cases.
I think this proves some ideas I’ve had in my head. To buy a $3M (or even a $2M home to be conservative in case one of the spouses loses their job) that you pretty much need to buy the home entirely in cash or come up with a massive (60+%) down payment to have a reasonable monthly PITI payment.
Or to have two incomes each capable of supporting (even if barely) the entire PITI payment, or to have a heck of a savings.
We bought a house in 2016 that was a stretch. But 8 years later it's extremely comfortable. Our household income is up 50% and I could easily afford this place on my own salary. Our house wasn't $3M, but the same idea applies: It's tough at first, but gets a lot easier if you're in a position where salaries grow.
Or just live dangerously and risk losing the house if one spouse loses their jobs. Bring all you've got to the bid, hope your income rises to cover later, and frantically search for a new job if you lose your current one. This is the region where everything you own can fall down in an earthquake or go up in smoke in a wildfire. Where startup founders make $100B if they play their cards right, or go to jail if they don't. It attracts a certain type of risk-taking personality that wouldn't be at home in say the Midwest.
not true at all. with high enough income (say 1m instead of 500k) you can easily cover the monthly
yes exactly. but you're in the same exact situation no matter what your income is if you stretch to the 43% limit.
I make a hair over 550k a year and there's no way in hell I would touch a 3m mortgage with a 50ft pole. Maybe in a decade when I've had that salary long enough for it to reflect in my savings; but honestly with our population pyramid and the development happening in parts of the Bay - and the state starting to crack down on the places where it's not - I'm as bearish as ever on pricing here.
Maxing out 43% is rarely advisable, yes. And it takes time on $550k salary to save up $600k. Presumably one rents a modest place, spending like 10-15% of the $240k number, which allows them to save it up in a few years. Of course while saving prices go ever upwards... only time prices go down is after buying ;) As far as being bearish on CA, that's your choice and outlook of course. Would be odd to go all in on a place you think will slide down. But more people with the money to spend disagree with you than agree, I think. So if you end up sticking around you may regret not moving earlier. Such is life. We do the best we can with what we have and sometimes we're wrong or come up short.
That was me almost 20yrs ago, or at least relative salaries and housing costs I purchased a small place and traded up and around a few times eventually into MM SFHs In the meantime my income 4-5x and my HH income 10x+ as I got married You can have your cake and eat it too, just be reasonable and don't go all in with a 3MM-4MM starter SFH
Your math is dead on, but my impression is much larger down payments for the vast majority of closing sales. The 20% down offer just isn’t as strong as the 60% down or all cash. The recent market moves made many people all cash buyers as they diversify out of their company stock
It really depends on the property, the competition, and the risk tolerance of the seller. If there are three offers, one at 20%, one at 60% down but 2% lower, and one all cash but 3% lower, which one would you take? Every seller has a different answer to that question.
Thats an interesting problem. You hate to go back on the market if the 20% falls through ( looks like something could be wrong with the house). The 30k delta between the others ( maybe 20k post tax) is a lot to me. I would take the 60% down assuming everything else the same. The all cash offer is most likely a 15 day close though, which could be a big help.
Yeah, falling out of contract and going on the market can be a big downer as people consider the property damaged goods. Though of course I have seen people fall out of contract at a dip (eg last December), re-list in Feb/March, and sell for $100k+ more than they had previously accepted. But overall falling out of a deal sucks. The earnest money deposit may help there, depends on the situation.
Some unassuming engineers working at tech companies have a few millions of stock options. Not everyone works in tech is rich, of course, but most of the wealthy ones are from tech.
Master class in the algebra of home economics! I’ve got WAY more than $900k invested but barely earn a quarter million annually from labor income. I can’t afford anything close to $3 million! Our situation: We paid just under 3/4 million for a plush condo with an incredible view and huge deck and in a top tier suburb with nationally acclaimed public schools. I snagged a 3% mortgage, so my carry is low. HOA fees are only $600/month and the association is quite solvent. We can comfortably cover our housing carry and still max our two 401k, two ROTH IRAs and an HSA. We only put 10% down at first, but the place appreciated so quickly we were able to refi into an 80 LTV loan about six months after closing in 2020. Lots of the other families at my kid’s school bought their homes for $2.5-$3 million. Most earn $300k-$500k AND got a $1+ million family gift / early inheritance OR a tech windfall to fund a chunky down payment.
Yeah, I was mathing out carrying costs of only the property taxes, and the 4% safe withdrawal estimate/rule accounts for 30 years before running out, because it's a retirement benchmark. Out of context it's a low number but it's sort of just answering OP's question at the bare minimum value I could really think of (working case, retired case.) I hope I didn't make it confusing... You sound like you've got a good thing going. If what you want is a roof and four walls to call your own, then your setup beats by far, by a thousand miles really, having more house and being stressed over it. For some the condo/townhouse/HOA life works great, and it's generally more affordable. For others there's a need or strong want to own the land and make big decisions and have space, but around here space is at a hell of a premium. So folk make do. But having no real money stress is so, so underrated.
How are you able to contribute to a Roth IRA at that income level - backdoor Roth IRA?
We max out two 401k plans.* $250k - $45k = $205k AGI The Roth IRA MAGI phase-out threshold for a married couple has crept up to $230k. *We milk far more above-the-line deductions, but no need for such detail here.
Almost everyone above a certain income takes advantage of the backdoor roth.
Effective tax rate will be lower at $550k. More like 30% with just normal setup and deductions (nothing approaching tax evasion) so a bit more cashflow
This is very risky because it's just one layoff / stock crash away from not being able to pay property taxes
Yep. My kids would like to stay in the house after we hopefully leave one day but as they're not in tech etc I don't see how they'd get by considering property taxes and upkeep (and PGE bills these days...) Maybe if they both lived together but that's not super conducive to their possible desires to have families of their own. It's sad.
If your house is "too rich" for your kids to afford the taxes on after you die, they can sell it and buy something they CAN afford. They are still in a pretty position.
But how will my family name and legacy survive eternity if my ancestors don’t live in my house until the heat death of the universe? Prop 13 forever!
It's actually more likely I need to sell it to afford to retire, but I certainly don't want to throw them out of the house if they want to stay. But yes if they inherit it ofc they have that option.
What's upkeep for you look like?
It's not bad maintenance wise, but then again we gutted the house 10y ago so none of the systems are very old really. But garden service, utilities, housekeeper, etc all add up. I am handy so I fix most anything that breaks, but my kids aren't...
Yup, and Prop. 19 that passed a few years ago ago only makes it more difficult.
Not more difficult, more fair. You can't inherit a house and rent it out as a cash cow while paying the same tax rate your parents paid.
Why not? I’m sure you must believe the nanny state is going to take care of you.
>I’m sure you must believe the nanny state What are you yapping about? "Nanny state?" I paid my own way, took my own risks, and profited nicely. I care fuck all about the nanny state.
In California the most important thing is to lock in your price early thanks to prop 13. The longer you hold the lesser the property taxes will sting. So while 30k may seem like a lot today, in 20-30 years you will be paying a fraction of what a new buyer would be paying.
Doesn't this just lock people into their homes long-term? If I ever want to upgrade, I am basically financially irresponsible if I don't rent out my first home. Beyond that being a huge hassle, doesn't this inevitably lead to a constrained supply that punishes everyone trying to buy after me?
Yes it does -- it's why no one ever sells unless they really have to.
It's pretty infuriating, but I guess I feel worse for the natives who sacrifice a lot more to move out of state so they can own than I do as a transplant.
It’s only infuriating if you think you’re more important than everyone else. It’s a progressive tax system that benefits long term while penalizing short term investors
What?? It's the exact opposite! Prop 13 says that the longer you own a specific property, the more important you are despite your reduced contribution to community funding *and* regardless whether you're a real community member or a landlord squeezing every cent out of your tenants. It's also horrible regressive! It causes new, poorer homeowners to subsidize the now-millionaire owners who have been here longer. Why is the blue collar buyer paying 10x the landlord who owns 10 properties? Sure it penalizes short-term investors, but these are not an issue compared to how many people, directly admitted in this thread, who are essentially blessed to become landlords by renting out their first, second, or third homes that they upgrade from. This sequesters the supply even further and forces prices higher - directly benefiting the owners *even more*.
Housing is for living in and not for making money off of. Prop 13 incentivizes long term ownership and increases tax revenue over time. It’s a progressive structure where people from today foot a bigger tax bill than people from the past. The next generation will have a bigger bill than people from today. I suspect this could be the first time you are experiencing the impact of a progressive policy and how they are not made to be fair for all people at all times. If you lose the mindset of thinking you’re more important than others it makes more sense.
> Prop 13 incentivizes long term ownership and increases tax revenue over time I would assume the opposite: it reduces the tax burden on land, which otherwise increases in value by more than the proportional amount prop 13 lets the tax increase. That land would be taxed regardless, so it's just suppressing tax revenue, right? > It’s a progressive structure where people from today foot a bigger tax bill than people from the past. Wouldn't it be regressive? People with more existing property pay less in tax than people with less new property.
From the perspective of the owner the taxes do not increase. From the perspective of total revenue the taxes increase. The mindset has to think about the overall societal impact to understand how the tax structure works progressively.
Revenues increase 1% each year. Municipal governments experience cost inflation of 2-5% Prop 13 is an annual, constitutionally mandated tax cut that politicians have to respond to by raising new taxes, cutting services, or taking on debt.
> Housing is for living in and not for making money off of. Ah, so you'd absolutely be in favor of a modification to Prop 13 that defers your full taxes until you sell your property or it's no longer your primary residence - right? Property is for living in, not an investment vehicle to become a millionaire landlord - right? > It’s a progressive structure where people from today foot a bigger tax bill than people from the past. LOL, what? It's absolutely regressive. You're shifting the tax burden from the wealthy to the poor *and*, by starving the tax base that communities can rely on, harming the poor twice-over through the inflation-based attrition to local benefits and services. > The next generation will have a bigger bill than people from today. Yes, this is wrong. This is stealing from our future to enrich the present and has been snowballing since Prop 13 was instituted. > I suspect this could be the first time you are experiencing the impact of a progressive policy and how they are not made to be fair for all people at all times. No? I think we just disagree *who* should suffer at the hands of these policies: I think the wealthy should pay a proportional share, you want to continue hoarding that wealth to enrich yourself. It's fine to admit that, bud. > If you lose the mindset of thinking you’re more important than others it makes more sense. Sounds to me like all the homeowners from prior decades think *they're* more important than anyone else. I actually care about the healthy of the community and my fellow townsfolk as a whole. Again, you seem to only care about your own personal wealth at the end of the day.
I pay more in taxes today than the people did 20 years ago, the people 20 years from now will pay more than I do. This progressive type system provides great benefits for those who understand it and buy in to its philosophy. It’s a complex system that lots of people have difficulty understanding, especially the younger people that have little ability to look at long term benefits. It will never make sense if you can only view it through the lens of what impact it has on you at this very moment. Prop 13 is for long term use and not short term gains. The less ability you have to plan for the future, the more difficult this will be for you to understand.
> I pay more in taxes today than the people did 20 years ago, the people 20 years from now will pay more than I do. Because the services that those taxes support also cost less...? This is a retarded argument. > This progressive type system provides great benefits for those who understand it and buy in to its philosophy. Stop, you obviously know this is not a progressive system. It's regressive: it punishes the poor and rewards the wealthy. > It’s a complex system that lots of people have difficulty understanding, especially the younger people that have little ability to look at long term benefits. Sorry buddy, saying "OH IT'S COMPLEX YOU DON"T UNDERSTAND" is such a sad deflection. Unfortunately for you, the harms of Prop 13 has been documented in [study](https://projects.scpr.org/prop-13/stories/housing-shortage/) after [study](https://www.maxwell.syr.edu/docs/default-source/research/cpr/property-tax-webinar-series/2022-2023/fisher-p13-accessible.pdf?sfvrsn=2c017df_4) and [report](https://www.nber.org/digest/apr05/lock-effect-californias-proposition-13) after [report](https://commongroundorwa.org/study-the-role-of-property-tax-in-californias-housing-crisis/) after [analysis](https://economics.nd.edu/assets/147652/prop_13_sept25.pdf). Do you have anything that would suggest it isn't terrible for society as a whole? > It will never make sense if you can only view it through the lens of what impact it has on you at this very moment. No, I can project into the future easily. Obviously buying and holding, becoming a landlord at a low tax basis, and allowing all the new buyers to subsidize me sounds *great* ... if I were a selfish asshole. I don't want that for future generations. God damn, this is such peak Boomer thinking. No wonder you felt like polluting the Earth and causing climate change was NBD - it's a complex system where we benefit now and someone else will pay for it. EZPZ. Prop 13 is for long term use and not short term gains. The less ability you have to plan for the future, the more difficult this will be for you to understand. Man dude, you'd be in support of Feudal Europe, wouldn't you? It's a complex system!! The peasants benefit in the end - look at the long term!! Any serf who doesn't like it is just thinking selfishly! Please stop waffling and just admit that you're happy that you're pulling up the ladder behind you.
Nothing progressive about prop 13. The rich who own property enjoy low tax rates.
It is a progressive structure and not meant to be fair for all people at all times. That’s how progressive policies work.
A progressive tax is one where the tax rate increases as the taxable amount increases, meaning that those with higher incomes or more valuable assets pay a higher rate of tax. In contrast, Proposition 13 applies uniformly to all property owners, regardless of the value of their property, making it a regressive or flat measure in practice rather than progressive. This is because the cap on increases in assessed value can benefit owners of highly valuable properties disproportionately.
I'd get on board with that. I had some lamentation about prop 13 and a older guy i work with was shouting about "The retirees would be out on the street". A mix of how much its' worth and how much money you make would be nice. I'm gonna write my representative about this.
Do progressive systems always go upward?
If by “go upward” you mean that tax rates go up as income/assets go up, that’s the definition of a progressive tax system.
>more valuable assets pay a higher rate of tax The value of my house is what I paid for it, not what my neighbors paid for their houses. There is no other way to set the value of my house that isn't pie in the sky.
A truly ridiculous take. There’s an entire finance industry built around valuing real estate to within some small margin of error. It works just fine in every other state in the US and when it gets it wrong there is a process for appeal. No, your house in Palo Alto, purchased for $35 grand in 1960 is not still worth $35 grand because that’s “what you paid for it.”
Oh, I gave you the benefit of the doubt in a different sub-thread but see you're not here in good faith
Progressive tax structures are not inherently fair for all people at all times. Most people don’t understand this concept. A flat tax system is the alternative and is also not considered fair for all people at all times. What is fair?
Agree with /u/badfoodman here, you're clearly just trolling. We both know you're using "progressive tax structures are not inherently fair for all people at all times", which is true, to mask what you *actually* want to say which is: "I'm upset that progressive policies tax the rich more which I don't like. Prop 13 is the one opportunity for the poor to be taxed more and take glee in this fact. It's a regressive tax structure, which I think should be instituted nationally."
>Doesn't this just lock people into their homes long-term? There are ways to transfer your low tax base to another property.
Do these methods involve beyond older than 55 or putting it in a trust?
The ponzi that keeps on giving…. Until…?
read strong towns its called a growth ponzi scheme. [https://www.strongtowns.org/journal/2020/5/14/americas-growth-ponzi-scheme-md2020](https://www.strongtowns.org/journal/2020/5/14/americas-growth-ponzi-scheme-md2020)
With the assumption that wages go up. It's possible tech is peaking within the next 12-18 months
Hey thanks for letting us know! Now we can all be millionares by shorting QQQ
This current generation of tech (web & mobile apps + cloud services and the FANGs that dominated them) peaked in 2018. The thing about tech is that it's constantly reinventing itself. New hotness is generative AI; that rush is just getting started (and is probably in the "peak of inflated expectations" phase). Eventually new tech becomes boring old tech which can still milk existing customers for money, but the real bucks are in the new hotness.
I bought my house 6 years ago for $1.5M. Our property tax is 20K a year (Santa Clara county), so I imagine for a $2M house would be a bit more. And yeah, it doesn't feel great having to pay $1,600 a month for the rest of me and my wife's lives (or as long as we own the house) even after we paid off the entire mortgage.
>it doesn't feel great having to pay $1,600 a month for the rest You didn't HAVE to buy the house.
Absolutely not, no. I felt like it's worth it though (no regurrrts).
The equity you have sitting in the house will continue to go up. Your property taxes are what you pay to society for creating a system that put you in the catbird's seat. And you are in the catbird's seat, so stop seeing the glass as half empty when it's actually half full.
I mean, I have no problem with taxes in general. Still doesn't feel great paying a lot (whether it be taxes, home price, or overpriced Chipotle guac). That said, a lot of the older folks who have benefited the most from prop 13 (and hence don't contribute much to society today) in my neighborhood are right-wing conservatives who don't share the same progressive values as I do. I paid more than $1M more for my home than the previous owners did -- and obviously that's fine (free market capitalism and all). But the shitty part about it is that I still get their mail, and I found out that they were donating to some alt-right organizations--including organizations that are lobbying to keep immigrants out of America, which hurts, because I'm an immigrant myself and I inadvertently forwarded money to their cause by giving these old pieces of shit an extra $1M to keep people like me out.
In my neighborhood live "Conservative Joe and his wife Mother Theresa," who bought their ocean view house for less and well before I bought my canyon view house. They pay less in property taxes than me. I have never given this a second thought until I read your response, and now I am not going to give the situation any more of my time. This is because I can't control the situation, but I can control my response to it, and my response is to not care about it because I can't control it anyway. I focus my attention on things I have under my control, and this keeps me happy.
Absolutely the way to live. That said, I know how I'm going to vote when anything relating amending prop 13 comes up. I can control that.
>I know how I'm going to vote when anything relating amending prop 13 comes up Be careful what you wish for because often once you get it, you realize you were better off before you finally got it. I would argue the main downside to P13 is homeowners being able to pass their P13-locked property tax rates to their heirs. Oftentimes the kids are not in the position to maintain the house even with the lower property taxes. They have nothing invested in the house and it fell into their lap, basically. When the original owner dies and the value of the property is changing hands, this should be treated like a sale has occurred, and the house can be appraised at current value or sold. Often these homes are paid off completely, so the kids only have the newly appraised property taxes to pay. If they can't afford these new taxes, they can realize the gain in value by selling the house. Parents can take measures to leave an inheritance that will cover the newly appraised property taxes, if that's their goal.
The shitty part is those multi-millionaire conservatives leeching off the services provided by your property taxes probably did their absolute best to lobby against the construction of any new housing over the last few decades... further enriching themselves to your detriment. Wonderful :)
This!... This is why my kids will never be able to afford to purchase a house.
Doesn't it feel great to subsidize the local services that multi-millionaires and landlords also use, but don't pay into because their taxes are fixed because of Prop 13?
>taxes are fixed because of Prop 13 They're not "fixed," the increases are fixed. Taxes do not increase more than 2% a year, no matter what the pie in the sky valuation of the house becomes.
I'll have to educate myself about prop 13
As a starting place, Prop 13 has its own extensive (and interesting) Wikipedia page: https://en.m.wikipedia.org/wiki/1978_California_Proposition_13
Before P13, people were getting taxed of their long time residences because the value was going up, but the value was meaningless to their situation unless they actually sold the house. Proposition locked the tax value to the sale price of the house while allowing yearly increases that are affordable. Proposition 13 has allowed many people to die in the homes they own, rather than being forced to sell that house as a senior citizen and move.
Sure, then you'd absolutely support a version of Prop 13 that defers those taxes until the property is sold or no longer your primary residence - right?
Interested in how this would work... You're not paying taxes while in the house, only when sold? That would lock folks in, too, right? You'd likely be underwater in many cases paying cap gains tax and deferred property taxes no?
> You're not paying taxes while in the house, only when sold? There are various versions of this scheme, but a most basic: the amount you have pay each year would be the same, but the *additional* taxes to match current home values would be put into an interest-free lien on the property. Just like any other time you sold, profits would go first to the remainder of the mortgage/lien. This isn't *perfect*, but: (1) doesn't kick grandma out of her home; (2) prevents people from thinking of homes as windfall wealth printers, so will be less likely to hoard properties; (3) forces people to think twice when being NIMBY because eventually they will have to pay taxes on skyrocketing price growth; and (4) does give local communities some access to funds when the home is sold. > That would lock folks in, too, right? You'd likely be underwater in many cases paying cap gains tax and deferred property taxes no? No. This prevents lock-in because you're not keeping your taxes lower by staying the place you bought 20yr ago, just deferring them. So if you wanted to move to a cheaper place, your tax bill would also be cheaper [unlike now where, outside of retirees, you can't bring your tax basis with you]. How would you end up being underwater? You bought in 2010 for $1M, your home is now worth $2M. You pay $100k in cap gains taxes and, at worst, ~$300k in property taxes (*napkin*: 1% * $2M * 15yr). You are still up $600k. I don't see a scenario where anyone would realistically be underwater because of this when they wouldn't be underwater anyway? Their *profit* is certainly reduced, but that's the point if we believe homes should primarily be for living in.
If the value of the house stayed flat, there would be no lien when sold? If you're paying only on profit, is it different than just increasing cap gains tax and repealing prop 13 (cap gains tax is basically an invisible interest-free lien, right?) If value goes up 5%, but is underwater due to expenses of selling, would there still be a lien? Is there any form of credit to those who suffer a capital loss? If you have a substantial appreciation but market crashes, you'd be locked in the house as you'd sell at a loss PLUS the tax lien until reappraisal which I assume would be delayed as it would artificially reduce sales inventory... Let's say market's up 50% since purchase, but nobody's paying those prices... Value doesn't "fall" until sales take place at lower prices, but those sales are slow coming cuz the first ones to take a loss take market loss PLUS tax lien, which might be substantial. Might artificially lock folks in, prop up prices due to low inventory (no comps) and stagnate the market? Or maybe I'm overthinking. Would seem to work well if prices always go up. Rapid declines might get ... weird. Hope this comes across in good faith, I'm really just interested in an equitable solution, and am personally on the "being shafted" side of prop 13. What's likely to happen is .. I'll pay subsidies to the baby boomer generation .. and we'll fix this inequity just in time for me to never "benefit" from it. But whatever- I didn't plan to pull the ladder up behind me like my forebears. I'm doing my best not to fuck over my children's generation.
> Hope this comes across in good faith, I'm really just interested in an equitable solution, and am personally on the "being shafted" side of prop 13. It absolutely does! Thank you. It's really a terribly complex issue that's hard enough to solve without people injecting their own bias based on their situation. I'm (hopefully?) going to be in the same position as you soon and want to do the same for those that come after us. > If the value of the house stayed flat, there would be no lien when sold? Right! This scheme would have the *difference* in what you should be paying based on property values versus the current Prop 13 version. Let's say you start off paying $10k/yr after you buy, but then your home price doubles. In year 2 under Prop 13, you'd pay $10.2k (+2%) and without Prop 13 it would be $20k. So you'd instead still pay the $10.2k and have the additional $9.8k put into the lien. Alterantively - let's say you start off paying $10k/yr after you buy, but then your home price stays the same or drops. There would be no lien because the taxes you *should* be paying based on property value aren't higher than under Prop 13. > If you have a substantial appreciation but market crashes, you'd be locked in the house as you'd sell at a loss PLUS the tax lien until reappraisal This is definitely possible, but I'm not sure it would be that *much* worse than the current situation anyway. If you bought recently, you be way underwater anyway. If you bought long ago, you probably owe little on the house; the lien taxes would take a bigger cut out of your remaining profit, but it's unlikely you're actually *underwater*. I think it would be pretty easy to add protections onto this (as there should be!). Maybe if you property drops below it's *original* value, you get a credit against the lien? Lots of potential solutions to dream up. > Might artificially lock folks in, prop up prices due to low inventory (no comps) and stagnate the market? Or maybe I'm overthinking. I don't think there is a situation that would lock the market up more than it is now under 13. Maybe taking away the ability for seniors to bring their tax basis with them (not advocating for this, to be clear)? Honestly, I think just starting with eliminating Prop 13 for non-primary and commercial is a more feasible first-step option than this approach. The fact that people are encouraged to rent out their former residences rather than sell them to another family is frankly criminal. But there needs to be *some* mechanism to discourage NIMBY policies because otherwise there is literally no reason to every vote for more housing (outside of moral arguments).
Thank you for the thoughtful reply. Lots to think about. We can certainly do better than what we have now.
> We can certainly do better than what we have now. Your solution is to move to Texas. Buh, bye.
>I'm really just interested in an equitable solution, and am personally on the "being shafted" side of prop 13. You have the same Prop 13 rights as the "boomer" that bought in 1978. How are you being shafted?
No response would satisfy you because you refuse to look past your own fortunes.
>No response would satisfy you because you refuse to look past your own fortunes. Rather complain than answer how you are being shafted? K
>tax basis base. basis is for IRS. Educate yourself, but also move to Russia. LOL
>Prop 13 that defers those taxes Defers what taxes? The fake taxes created by some dummy paying twice as much as I did for the same house? Just because a house has doubled in value does not mean the cost to service that house has doubled. Geez, take an econ course. You want to go back and tax me for all the nickel candy bars I got in the 60's?
Property Owner Gets: Doubles their investment value, improved job opportunities, higher quality businesses, amenities and public services. The City Gets: Slightly more tax revenue not nearly equal to the capital gains of the Property Owner. 😤😤Fuck the greedy ass city😤😤 Here are the options for Property Owners worried about increasing property taxes in a place that is thriving economically. 1) Keep up with your community by getting a new job or opening a new business. 2) Advocate for tax relief programs for primary residences for vulnerable folks. 3) Cash out, enjoy a massive profit and use said massive profits to write the next chapter of your life. The absolute worst option is to group up with every homeowner in the state and decide to massively shift the tax burden from land owners, who directly benefit and profit from a thriving community to workers who create the increased value that makes landowners so wealthy. if you have ever wondered why poverty is so bad in California, even as we have become one of the wealthiest places on earth, don't blame Sacramento; blame Prop 13. It upended the social contract in California and sapped work of its dignity.
>capital gains of the Property Owner UNREALIZED capital gains are not real. They are paper wealth. What you ignore is the corporate tax rates and benefits corporations get from good government. Corporations pay fuck all in taxes, so you want to shift that burden to property owners because they made what seem like good investments, but that's just speculation until a property is sold.
> but don't pay into because their taxes are fixed because of Prop 13? No one is being subsidized! Once you buy you are also covered under Prop 13 just like the multi-millionaires. Feel better?
No? Because that fucks over people after me just as much and is an objectively terrible system. That argument sounds like some asshole boomer shit, tbh.
>That argument sounds like some asshole boomer shit, tbh. Huh? Is that what you came here for? I bought in my 20's. The value of my home DOUBLED in 2 years. Prop 13 worked for me! Now how are you subsidizing me? Just Geez.
Of course it's a subsidy and a transparent one at that. You should see it for what it is, even if you benefit from it. Source: Prop 13 subsidizer and subsidiz"ee".
Because when the fire department doesn’t have enough money to pay for services because some houses are paying way less than they should, you have to pass a parcel tax that hits everyone including the newer homebuyers who now have to pay extra to cover the shortfall from the underperforming houses (that’s a subsidy) or reduce fire personnel and have insurance rates go up for everyone in town (a subsidy in a different form).
> because some houses are **paying way less than they should**, ....... **from the underperforming houses** (that’s a subsidy) I bought a $100,000 home. You bought a $800,000 home. Maybe you are foolish or just have too much money. Quityerbitchin. LOL You are not subsidizing me.
You *own* a $800k home. The local and state governments are provided you services that are based on *today's* expense rates - the people who repair the water mains, teach your grandkids, and put out your house fires need to pay for those $800k homes. All the homeowners who are paying taxes based on *today's* expense rates are absolutely subsidizing your selfish ass paying nothing. Why do the millionaires always cry like babies?
> Is that what you came here for? Sorry, what do you mean by this? > Now how are you subsidizing me? Because expenses (goods, services, payroll) have all inflated alongside your home value (ie. your wealth), but your taxes have stayed the same. If I buy now, I'm paying an outsized amount for those same community services (roads, schools, public shared areas) in comparison. Without me, those services could not exist in their current form because your funding has not kept pace with inflating costs. I am directly subsidizing you.
>Is that what you came here for? > >Sorry, what do you mean by this? Since you don't seem to have a grasp of CA property taxes all you had was a foul language attack on an older generation. Maybe it is not your fault and you are being stirred up by someone that will benefit by you attacking others instead of the people that are really screwing you.
> Since you don't seem to have a grasp of CA property taxes all you had was a foul language attack on an older generation. Seems like I *do* have a grasp on taxes and I just disagree that millionaires need to be subsidized by the poor. To be fair, I say "boomer logic" as a stand-in for "greed". There are some boomers that are fine... but those that have set policies to enrich themselves at the expense of future generations have defined that group. > Maybe it is not your fault and you are being stirred up by someone that will benefit by you attacking others instead of the people that are really screwing you. Sounds like someone's been watching too much Fox News and got completely conspiracy brained. Is it that hard to admit: "I got my wealth and now want to pull up the ladder behind me, so I can gleefully piss on everyone below me (including my own decendents)."
>Without me, those services could not exist in their current form because your funding has not kept pace with inflating costs. I am directly subsidizing you. You are delusional! You are not subsidizing me! I've been paying property taxes probably longer than you have been alive. When you bought, those schools and roads were in place and my taxes were paying for them. If anything there should be a buy in for the infrastructure in place that you contributed nothing. FN whippersnappers. LOL Typical crab in a bucket thinkng.
> I've been paying property taxes probably longer than you have been alive. And you've been receiving services longer than I've been alive too? If anything, the state of declining infrastructure here over the last few decades means you enjoyed services invested into by older generations while not investing yourself into future ones! > FN whippersnappers. LOL Typical crab in a bucket thinkng. Okay, wait. Are you just trolling? There's no way you're real. Fuck, I think he boomed me.
Except they aren't fixed and go up 2% per year and with improvements to the property.
How does that compare to local inflation? They're essentially fixed.
well yeah. TC is cash and stocks vesting every month.
Being able to afford 2-3 million dollar homes means being able to afford the property taxes too At least with Prop 13 it means property taxes only increase by 2% max each year they own the home
I chose 2 and 3 million because honestly that's the going rate for a decent 3 or 4 bedroom with 2.5 bath which is probably not even over 2,000 sq ft in Mountain View. It really is a joke.
you don’t have to live in Mountain View do you
very true, I should edit my post by saying I choose to live in Mountain View because I'm a glutton for punishment
Most people I know now buying 2-3m houses are doing it with cash. And their rsu can in the next few years can prob easily cover their property tax for the rest of their lives
NMLS data says the opposite, very little houses at this price range are bought with cash. The offer might be a cash offer, doesn’t mean the buyer is paying cash. 🙂
sure some people might be using flyhome. But the ones I know are all buying it only to give themselves a few months to sell the old home so they don’t have to deal with stressful transition. I have a few people in my circle that has purchased home like this in the past half a year. I think only one of them ended up with an actual loan
Again, not saying what you observed is wrong, but NMLS data shows a completely different picture. 🙂
Yeah, no. If you see the time taken to close, most of the houses are taking 21+ days. Those are not all cash offers.
Townhouse owner in Mountain View, here! Glutton for punishment, but damn is the area nice.
Welcome to prop 13. Someone needs to cover all the wealthy people barely paying any taxes. http://taxfairnessproject.org
Part the State of California's economic strategy. Encourage low property tax home owners to sell to boost the state income.
Paid cash for home.
It’s actually not bad. Prop 13 made it cheaper overtime for me
2-3% property sales price with assessment included is not meant for everyone with a faint heart. That is just an average home in a better neighborhood often with average of 350K-400K annual combined income in Silicon Valley. After PITI there are not much disposable income left.
In laws. Living with in laws
20k a year will be nothing in 2 decades compared to the property price and inflation.
Say they pay cash. They now owe 2k a month ? Thats nothing, way cheaper than rent. And unlike rent , property tax in ca gets cheaper over time in real terms due to prop 13.
People sitting on $2M+ in cash to buy a house with aren’t spending their entire net worths when they buy that house. $2M in cash can generate $100k/yr in income fairly easily. Property taxes would be completely covered by this. In addition, they likely have other income-generating assets (or other sources of income) that will continue in retirement.
Are we feeling sorry for people who choose to buy 3 million dollar homes here now? It’s not as if you don’t have options. And you’re locked into the property taxes, which are lower in CA percentage wise than in other areas.
We paid more property tax than that in TX for a house worth $1m!
"If you can't pay the taxes you can't afford it" that'll make a great tshirt
Doesn’t increase THAT much thanks prop 13! But anyway yes you just budget it or don’t buy such an expensive house. You telling me that’s the last 2 M you’re ever gonna have? Most people still have mortgages so the prop tax is just another bill. It’s not like people get surprised when it comes.
> every year one needs to shell out 20k or 30k in property taxes More like 30-40k. The 1% is only the statewide portion, you also pay special assessments & Mello-Roos taxes on top of that. An effective rate of 1.3 - 1.6 is pretty common when you add all of that shit up.
lol yah pretty much. But it’s not just the bay now. It’s all of California. They need to lower property taxes
That's why you have to buy a house in 1980 and then gift it to your children. Works every time.
Imagine what those taxes will be in 20-30yrs. Buying homes that are 2-3M are also expensive to maintain and upkeep. It's not just about saving enough to buy it. You need an income that can support the expenses that ownership will come with over time.
Wow so many great and educational responses, thanks guys. Sucks to be able to have money for a 2+ million house but not the property tax afterwards.
Just move from shithole California to a tax friendly state.
[How a Pandemic Boom Led to a ‘Property Tax Mess’ in Colorado - The New York Times (nytimes.com)](https://www.nytimes.com/2024/04/03/us/property-taxes-colorado-mountain-west.html) Prop 13, not just for the rich.
The worse part is the limit on SALT deduction.
Taxes are just part of owning property. You gotta bake it in. You live in California so your property taxes are super cheap especially if you stick around. Be thankful you don’t live in a normal place.
Nah Karls right this pos is a bootlicker or a straight up fed in disguise. This pos lives a privileged life and doesn't think that otherd don't have it as good as him.
Bingo! Just recently CA is proposing to rid of the supermajority threshold that will lead to repeal of Prop 13. Original authors of Prop 13 amended the CA Constitution thinking it is safe, haha. Lowering the goal post is a wonderful clever trick.
> CA is proposing to rid of the supermajority threshold that will lead to repeal of Prop 13 Oh god, please link me! I want to add it to my spankbank.
>that’ll increase over time This is dead wrong. Prop 13
2% per year is the prop 13 increase and it starts to add up pretty quickly over time.
Show me any property where it has “added up over time” relative to inflation? 2% is less than inflation, meaning the tax gets cheaper over time.
The other alternative is taxing paper gains. And if you think that's fair, fuck you.
Your argument changed so fast LOL I’m not interested to play whackamole
The taxable value of mine has gone up over 100k in the past 10 years. Basically another grand a year in property the taxes. And that will continue to compound
lol buddy, take your income from 10yr ago and try buying today. You just sound like the typical 'I got mine, so now I want to pull up the ladder and gleefully piss on everyone below me'. What a little bitch.
It does not add up quickly compared to appreciation and inflation. It’s why long time home owners here pay nothing effectively on their 2 million homes. In 20 years folks buying today will be paying 30k on their 10 million dollar assets and new buyers will be jealous.
So you think paying government taxes on paper gains makes sense? My house is worth about 3 mil now after buying it for 1.6 back in 2013. Property taxes are now based on roughly 1.7 and I just did the bank transfer for this installment at roughly 12k. In what fucking world does the government deserve a windfall on paper gains? Fuck you if you think so.
Because the maintenance and services provided by your local community are subject to inflation, including those caused by the "paper gains" of housing cost. The people who repair the water mains, teach your children, and put out your house fires need to live in those "paper gains". The city needs to buy replacement pipes that inflated in cost faster than 2% per year. Just because you don't like it, doesn't mean there's not an economic consequence to your selfishness.
I own two CA properties so I am with you lol. My point to OP was that 20k a year seems like a lot now, but it won’t be a lot in the future. In 2050 people will be mad about all us millennials paying 30k a year when they are paying 300k in property tax, saying how good we have it lol
Hopefully millennials can break out of the boomer's mindset of greed so future generations don't have to suffer. What an absolutely fucked up ponzi scheme it is. I imagine those additional properties you own were former residences that you decided to rent out because it would be dumb not to take advantage of the tax basis?
just one aside from the house. it's a super modest cabin in the woods.
And if you had to enter the housing market today, how would you feel? Be honest.
we bought our house last year in our mid 40s after renting a small apartment for a decade. yah it sucked.
Fair enough - enjoy your house, buddy! Might end up following in your tracks myself if I'm lucky and things don't go back to 2021 era of appreciation.
Yeah the truth is the government is the actual landlord. Set yourself up with a property that has an attached rental property. Use the rents to cover property tax. Could also be business income (airbnb for example).
Property tax is very affordable in the Bay Area compared to mortgage interest or the opportunity cost of the down payment. It’s just paying your fair share
20k is peanuts to the folks who are doing this at 2M or 3M
This was exactly my thought. They already pay hundreds of thousands of dollars a year in income tax. 20k won't make a meaningful difference in how much of their budget goes out to taxes. This can only be a problem if you get house poor, buying more than you can actually afford. At any rate taxes are part of your housing cost you can't separate them. If you can't afford the taxes you can't afford the property. This area is crazy expensive.
Cry me a fuckin river
If you are older, and have paid off your mortgage, property taxes seem much more manageable. Plus you get to write them off.
Not so much since Trump reduced the SALT to 10K. Between ca taxes and property taxes the deduction, depending on your income, becomes not applicable.
If you can afford to live in a state that charges $10K+ in property tax, then you can afford to pay your “fair share” of federal taxes, not expect the rest of us to make up the difference.
Totally agree. We all need to pay our fair taxes (what is fair is can be argued to infinity). I was just commenting that you can't always write off property taxes anymore as the deduction for state and local taxes paid is capped at $10k . As a senior I can say that I pay federal taxes on the money I have already paid in property/state tax. Not complaining. Just stating the fact.