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What is your theorized mechanism for the freezing of property tax rates at the purchase price causing inflated property values? I could see it making an upward
by adolph 5y ago
What is your theorized mechanism for the freezing of property tax rates at the purchase price causing inflated property values?
I could see it making an upward or downward trend worse. In an upward trend buying before increase would be tax advantaged. In a downward trend buying after anticipated decreases would have the advantage. All in all, more people would be advantaged by just staying in place. Maybe that reduces total inventory, making the remaining properties on the market cost more?
- jayd16 5y agoIts way more simple than you think. Lower taxes just lower the yearly cost of a house. That means you can get a bigger loan instead.
- chasebank 5y agoIt's really simple. California has a housing supply problem. If taxes are never raised, housing supply is even more suppressed. Owners have zero incentive to sell. Here's an example. My mother inherited a beach house in Carpinteria. My grandparents purchased it for $14k in 1924. It's worth north of $10M. Annual taxes are under $5k. She can rent this out during summer months for over $50k/mo. Why on earth would she ever sell? She has an asset that appreciates at or above index funds and pays amazing dividends. This is an extreme example but it works the same at every level. Prop 13 encourages people to accumulate housing / property and removes basic market economics. Artificially low housing supply leads to artificially inflated housing prices.