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Just to clarify some points: Yes, ofc You are still paying property tax, just way less than you would in nearly any other jurisdiction. It’s capped at 1% of to

by RC_ITR 5y ago

Just to clarify some points: Yes, ofc You are still paying property tax, just way less than you would in nearly any other jurisdiction. It’s capped at 1% of total assessed value and that value can only go up 2% a year (i.e. way less than market). That was the meaning of the word “nearly.” EDIT: Just to contextualize this a bit, let’s assume those four houses were bought ten years ago for a total of $4m at the time. They are now worth $10m, but the owner pays $50k a year in tax to carry that “investment” that has gained on average $600k a year. Not exactly a meaningful carrying cost.

jjav 5y ago
A few data points: > It’s capped at 1% of total assessed value Sort of. The California property tax bill has many line items, one of which is "General tax rate". That's the one everyone talks about and it is 1% of the assessed value. However, all applicable jurisdictions can (and thus, will) add all kinds of add-on percentage fees to the property taxes and those are not subject to any limitations. My property tax bill (California) which I just paid two weeks ago, was actually 1.4% of the assessed value. > that value can only go up 2% a year (i.e. way less than market) True on average over long term. Good to keep in mind though that it goes up 2% every year regardless of market. So when the market is up double percentages like 2020-2021, it only goes up 2%. But when the housing market crashes, it also goes up 2%. Which is fine, it's basically a damping function so that instead of having the taxes swing wildly up and down year to year, they just go steadily up. Also be aware that the 2% increase is on the "general tax rate". The additional fees which are included in the property taxes, those have no cap on increase rates. There have been many years when my property taxes have gone up quite a bit more than 2%. I feel that because the housing market has been on such a long bull run, people have either forgotten, or are too young to have experienced, that housing markets can also crash hard. Having an increased zestimate value of your home is not actual wealth unless you sell it, and the valuation on paper can evaporate any moment when the next housing crash comes. I've been through three market crashes in my current house, two of which left me underwater for a few years.

by RC_ITR 5y ago

jjav 5y ago

A few data points: > It’s capped at 1% of total assessed value Sort of. The California property tax bill has many line items, one of which is "General tax rate". That's the one everyone talks about and it is 1% of the assessed value. However, all applicable jurisdictions can (and thus, will) add all kinds of add-on percentage fees to the property taxes and those are not subject to any limitations. My property tax bill (California) which I just paid two weeks ago, was actually 1.4% of the assessed value. > that value can only go up 2% a year (i.e. way less than market) True on average over long term. Good to keep in mind though that it goes up 2% every year regardless of market. So when the market is up double percentages like 2020-2021, it only goes up 2%. But when the housing market crashes, it also goes up 2%. Which is fine, it's basically a damping function so that instead of having the taxes swing wildly up and down year to year, they just go steadily up. Also be aware that the 2% increase is on the "general tax rate". The additional fees which are included in the property taxes, those have no cap on increase rates. There have been many years when my property taxes have gone up quite a bit more than 2%. I feel that because the housing market has been on such a long bull run, people have either forgotten, or are too young to have experienced, that housing markets can also crash hard. Having an increased zestimate value of your home is not actual wealth unless you sell it, and the valuation on paper can evaporate any moment when the next housing crash comes. I've been through three market crashes in my current house, two of which left me underwater for a few years.