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You need to read the detail. If your home's value outpaces your wage increases (on an absolute basis, not for a like-for-like percentage), then you could pay mo

by mbesto 4y ago

You need to read the detail. If your home's value outpaces your wage increases (on an absolute basis, not for a like-for-like percentage), then you could pay more as a % of your income in TX than CA. Let's say you bought a house for $100k 10 years in a small town in Texas. People start moving in, but you still only make $50k/year. Now your house is worth $500k. That 1-3% property tax still hits your income.

reddog 4y ago
That’s true. But you’re also $400,000 wealthier. So you got that going for you. Which is nice.
jjk166 4y ago
Yeah but in addition to your $50k/yr salary, you're gaining $40k/yr in home equity. You can sell your house and move to a cheaper area and pocket the difference. Of course if you're struggling with day to day expenses you probably can't wait for 10 years for a big pay day, but even this can be dealt with by financing. Further, the big problem here is ridiculous growth in property prices. While obviously some areas do occasionally experience a few years of exceptional growth, it would be dumb to assume that any given area is going to 5x in property value in 10 years. Even if it did in the past, such growth should not be expected to continue in perpetuity. Over the long term, property appreciation rates average around 4% annually, over 10 years you ought to expect a 100k house to go up in value to 148k. By comparison, assuming a 3% raise every year on average and no job changes, someone starting at 50k/yr should be making 67k/yr after a decade. Under such normal circumstances, a 2% property tax with no income tax would have a tax to income ratio of 4% versus 12% for a 10% income tax and 1% property tax. The rate of change in tax to income ratio is better with the income tax, a 2% increase in 10 years versus a 10% increase, but still it takes 166 years for for the high property tax option to overtake the income tax option. While some people may get unlucky (if you can call your net worth skyrocketing unlucky), going with the high property tax option is objectively the better strategy.
- mbesto 4y ago
  Over 50 years, the difference is even more striking. After accounting for inflation, home prices have jumped 118% since 1965, while income has only increased by 15%, according to a separate report by online brokerage Clever Real Estate, based on Census data. https://www.cnbc.com/2021/11/10/home-prices-are-now-rising-much-faster-than-incomes-studies-show.html https://www.cnbc.com/2021/11/10/home-prices-are-now-rising-m...
  - jjk166 4y ago
    A 118% increase over 57 years is an average yearly growthrate of 3.8%. Wages for equivalent jobs have been pretty stagnant for the past 50 years, but people personally tend to make more money year over year as they gain experience. Or in otherwords, a 25 year old right now is not much better off than a 25 year old 20 years ago, but a 45 year old right now is likely much better off than a 25 year old 20 years ago.

by mbesto 4y ago

reddog 4y ago

That’s true. But you’re also $400,000 wealthier. So you got that going for you. Which is nice.

jjk166 4y ago

Yeah but in addition to your $50k/yr salary, you're gaining $40k/yr in home equity. You can sell your house and move to a cheaper area and pocket the difference. Of course if you're struggling with day to day expenses you probably can't wait for 10 years for a big pay day, but even this can be dealt with by financing. Further, the big problem here is ridiculous growth in property prices. While obviously some areas do occasionally experience a few years of exceptional growth, it would be dumb to assume that any given area is going to 5x in property value in 10 years. Even if it did in the past, such growth should not be expected to continue in perpetuity. Over the long term, property appreciation rates average around 4% annually, over 10 years you ought to expect a 100k house to go up in value to 148k. By comparison, assuming a 3% raise every year on average and no job changes, someone starting at 50k/yr should be making 67k/yr after a decade. Under such normal circumstances, a 2% property tax with no income tax would have a tax to income ratio of 4% versus 12% for a 10% income tax and 1% property tax. The rate of change in tax to income ratio is better with the income tax, a 2% increase in 10 years versus a 10% increase, but still it takes 166 years for for the high property tax option to overtake the income tax option. While some people may get unlucky (if you can call your net worth skyrocketing unlucky), going with the high property tax option is objectively the better strategy.

mbesto 4y ago
Over 50 years, the difference is even more striking. After accounting for inflation, home prices have jumped 118% since 1965, while income has only increased by 15%, according to a separate report by online brokerage Clever Real Estate, based on Census data. https://www.cnbc.com/2021/11/10/home-prices-are-now-rising-much-faster-than-incomes-studies-show.html https://www.cnbc.com/2021/11/10/home-prices-are-now-rising-m...
- jjk166 4y ago
  A 118% increase over 57 years is an average yearly growthrate of 3.8%. Wages for equivalent jobs have been pretty stagnant for the past 50 years, but people personally tend to make more money year over year as they gain experience. Or in otherwords, a 25 year old right now is not much better off than a 25 year old 20 years ago, but a 45 year old right now is likely much better off than a 25 year old 20 years ago.