HOUSTON HOME VALUES: THE PROPERTY TAX EFFECT A few of Andrew Burleson’s conclusions from a comparison of property taxes in Houston, Chicago, L.A., and New York: “When a person buys a $200,000 home in Houston they’re actually making payments worth $273,000 including taxes. When a person in Los Angeles buys a house for $200,000 they’re making payments worth $235,000. It costs the person in LA the equivalent of $37,000 less to obtain the same loan. . . . The greatest irony here is how this plays out at the high end of the market. Because our taxes are so high, the cost to own valuable property becomes significantly higher here. . . . What you can see in the chart is how the actual cost to own a property is much higher than the real value of the property, and how this gap becomes larger as a property increases in value. For instance, if you have enough cash flow to make payments worth $200,000, you can only actually afford about a $150,000 home in Houston. As you look up the scale the difference becomes more ridiculous. $750,000 worth of cash flow actually gets you $550,000 worth of property in Houston – that’s $200,000 in value lost to property taxes. Therefore, if you’re rich, and you’re planning on buying a mansion, you’re better off living in Los Angeles or New York.” [NeoHouston]
Sign up for the Newsletter
This is one of the major reasons we are facing imminent foreclosure. When we were gathering our financing, though we repeatedly asked about future property tax costs, the mortgage company based the payments on tax rates for a vacant lot (which it WAS, the year the house was built).
Fast forward a year: our property taxes increase by 500%, and we can no longer afford to live in our once-easily-affordable house.
You should have know that the next year the property tax was going to go to the valuation of the property with a structure.
My first year of property taxes were very little because it only viewed the vacant property. The next year is shot up. But I anticipated this from the beginning.
How could you not know this? It’s part of home ownership. And no, your realtor, builder, or loan officer are not responsible for telling.
A problem I have with Burleson’s comparison is that he doesn’t notify the reader of what can be bought with $200k. In LA it’ll be a shack when you are closer to the city. In Houston it can be about 1500sqft new construction. There are several townhomes near my house that are S210k. That’ll put you near TC Jester and I-10. Also, in Houston if you are willing to live further out, you can get a whole lot more.
Yes, our property taxes are high, but we also don’t pay any state income taxes as do people in Chicago and LA do. In the end for the average person/family, the property taxes come out to less than the property tax and state income tax to many in other states.
kjb434 said: “You should have know that the next year the property tax was going to go to the valuation of the property with a structure.
[snip]
How could you not know this? It’s part of home ownership. And no, your realtor, builder, or loan officer are not responsible for telling.”
The way I read it, CAD Monkey did know and asked repeatedly what it would be. I can’t imagine how any reasonable loan officer wouldn’t have a pretty good idea of the tax rate, and especially the likely appraised value, and not take those into account (as well as insurance). Mine certainly did, both initial purchase and re-finance. CAD Monkey has a legitimate beef. Whether that will get him/her anywhere is, unfortunately, a different question.
“When we were gathering our financing, though we repeatedly asked about future property tax costs, the mortgage company based the payments on tax rates for a vacant lot (which it WAS, the year the house was built).”
That means he knew it was going to go up. If the mortgage officer would use the future tax amount, would they have not closed on the house?
When you were pre-qualifying with your mtg loan officer as well as with the realtor you were working with, they should have both based your projected affordable monthly gross house payments on the area you were targeting including all of the taxes, insurance, principle, interest, etc. That’s how you determine what price home you can afford in what neighborhood. A good title co. escrow officer would have also provided the projected tax figures for the completed home, as well as what the taxes should be for the vacant lot which is what it should have been for the first year, if appraised correctly by the idiots at HCAD.
When we bought our last house, it was brand new and hadn’t been started before the end of January of that year. Naturally, the idiots at HCAD never got around to appraising the property until later on in the year when construction had been completed and based the tax appraised value not on vacant land, but on the improved value. When we received our tax bill the following year, it took quite a bit of aggravation to get them to correct it. Nothing like dealing with governmental employees. Yeah we really want the government in charge of our healthcare.
No state income tax = Higher property tax and gas taxes.
When I lived in Wilmington, DE, a few years ago the property taxes were ridiculously low, but by the time I tallied my state income tax AND city income tax, considering like valuations, the annual tax costs were very similar.
Does this guy have any idea how expensive it is to buy a home in Los Angeles? Obviously not. There’s no comparison between buying a mansion on Houston and Los Angeles because of the disparity in price.
And no, your realtor, builder, or loan officer are not responsible for telling.
__________________________________________
Only because most of the realtors, builders and loan officers have absolutely no sense of ethics and only care about commissions and and in the case of the builders about profit. But then of course you’re a builder, aren’t you?
Of course most builders screw the realtors every chance they get by making deals with buyers if they agree NOT to use their realtor, the “oh, I forgot I had looked at the house before I called you” game, so it’s really just a matter of non-disclosure by the builder and their lender of choice which is often their “in-house” lender of choice.
This is dumb, because property taxes are not the only taxes you pay. I moved to Houston from a place where my property taxes were a couple hundred bucks a year. OMG, what a deal! Oh, and there was the 9.5% income tax I paid. Even with property taxes, Houston is a better deal.
Oh, and when I look at the closest equivalent neighborhood to where I live in Houston, back there I could buy a house just like mine… for about three times as much.
(The place was the District of Columbia.)
So, yes, that $200K house is cheaper in Los Angeles, except for the part where it doesn’t actually exist, and you have to pay California income tax.
Most everything I was going to say has already been said by someone else, but there is one other thing. I actually PREFER property taxes over income taxes for two reasons.
First, for federal tax purposes, you can deduct both property and sales taxes, but you cannot (in most years) deduct both income and sales taxes. You must choose one or the other. So, if you live in a state that mostly taxes its residents through sales and income taxes, you cannot deduct a huge part of your state tax burden for federal tax purposes.
Second, a property tax is essentially a consumption tax, although admittedly with respect to one particular type of consumption (housing). Therefore, you can earn a million dollars a year in Texas and pay only a few thousand dollars (less than 1% of your income) in tax if you don’t buy a very expensive home. For those of us who don’t feel the need to always borrow the maximum we can for a home, this is a nice reward for limiting your consumption.
For what it’s worth, you all should check out the comments and replies on the actual blog posting.
My point in writing this had nothing whatsoever to do with comparing what you get for the money. Also, I agree that Texas has a lower overall tax burden, and am not complaining of over taxation.
What I’m saying is: the specific way we collect our taxes (mostly on property) significantly impacts the housing market. As property taxes go up, listing prices must go down for the monthly payment for a property to stay the same. High property taxes lower purchasing power.
The critical point here is this:
Houston is pretty affordable overall. However, people like to make statements about how affordable the city is and say “Prices are low because of __________”
My point is, property prices are low for a lot of reasons. One of the reasons is that property taxes are high.
That’s all :)
Obviously the cost to own real estate in Houston is much higher than the sticker price. Every once in a while you get a Darwin Award finalist who buys without understanding this (see above), but the market generally prices these properties efficiently.
I would argue that this has been a very good thing for the economy. Property tax insulated high end homes in Houston from the mortgage bubble. It keeps speculators and flippers out of the market by raising the cost to carry the property. It also keeps a lid on leverage because it’s an inescapable liability. And as Carl points out, because it is a consumption tax it doesn’t drive businesses and high earners out of the city/state like other states’ boneheaded income taxes.
Income tax + no property tax is the perfect regime for someone looking to retire or otherwise live off others. Property tax + no income tax attracts productive people and gives an incentive to live modestly. Give me the latter 10 times out of 10.
Kevin,
I think your point is good, and I’d agree that the high taxes had a calming effect on the real estate market here.
I do think it’s interesting, though, that in our conservative culture if you told someone “high taxes helped keep the market in check” they’d most likely be pissed off about it. It’s funny how we can be so opposed to things “in the abstract” that we actually like in reality.
Those numbers are ridiculous without being put in to context. How does a home in Houston possibly cost $37,000 more to obtain a loan. Is that the additional tax cost spread out over 30 years? I mean, are you predicting property tax rates for 30 years into the future? Are you accounting for the lack of state income tax? And what if you only own the house for 5 years? Are you accounting for the quality of house and the proximity to the city? Seriously…don’t complain about the cost fo an apple and compare it to an Orange County! I’d really like to see the calculations rather than just another whine about property taxes.
Every comment made is interesting and correct.
Howver, consider the people who have “benefited”? from being in the right place at the right time and now can no longer afford to stay in their home due to the property tax bill.
Say you bought a home in West U for $250k in 2003. Said home, with no improvements, is now fair valued and taxed by HCAD at $750k. The value of the dirt has soared.
Yes, you have made a lot of money. But you have to sell and move away because it is being taxed at $450K and rising 10% per year. You are being forced out of your home! Even worse, you are being forced out the community since the dirt has gone up everywhere in the 7005 zip code.
Somehow, this does not seem right to me.
bozo,
It may not seem right to you, but it’s the natural mechanics of a FREE market.
To me, damn with the community and sell the property and run. That’s what a lot of residents did around me in their cottages. The home itself is worth about $25-40k, but the land it worth $200-300k. Many of these families look very favorably on this.
Andrew while there might be some knee jerk “taxes are bad” reactions, I think most people would agree that the structure of taxation in Texas has been a huge benefit to both the health of the high-end real estate market and to business/employment generally. I’m obviously not disagreeing with you on the effects of the tax structure here, just expressing maybe a a little more confidence in the average Houstonian.
I single out the high end markets as beneficiaries of the stabilizing effects of our tax structure for two reasons. First, the homestead exemption makes property tax rates significantly lower for homes under about $300k, to the point that tax is not the primary financial consideration in the financing or ownership of a home. Second, most of the price stability in the middle and lower price ranges comes from the very deep supply of middle class housing available in Houston. This second factor is, IMO, the real key to affordable, comfortable housing for most Houstonians. I know that’s off topic here… just clarifying my earlier point.
Biggerintexas,
Is that the additional tax cost spread out over 30 years?
Yes
I mean, are you predicting property tax rates for 30 years into the future?
Most buyers do, and all lenders do.
Are you accounting for the lack of state income tax?
Yes, by not adjusting income downward for the nonexistent income taxation when evaluating the buyer’s ability to pay.
And what if you only own the house for 5 years?
You’ll sell it to someone facing the same tax regime, and your sales price will reflect it.
Are you accounting for the quality of house and the proximity to the city?
This is a good point. The article implies that a $750k house in Orange County is comparable to a $750k house in Houston, which is obviously not close to true. I think everyone would agree that, even adjusted for property taxes, housing is cheaper in Houston than in Orange County.
I have a friend who bought a new construction house and was very surprised when his payments shot up after the first appraisal. I tried to warn him but he just didn’t understand. I wouldn’t be surprised if there are a lot of people out there who are forclosed on for this reason.
When I bought my house it was like pulling teeth to get any information on taxes. I asked people and just got blank stares. I had to do all the research myself. Even my co-workers were no help at all. They had no idea how to predict what the taxes would be. People who have rented all their lives often have never even heard of HCAD and know nothing about property taxes. It’s much easier to do now that it’s all on the web though.
My loan officer and title company couldn’t even tell me how much money I needed at closing until the very last minute, much less anything about taxes. I wound up getting thousands more out of savings than I needed for closing.
Kevin/Andrew:
“Property tax insulated high end homes in Houston from the mortgage bubble.”
“…calming effect”
“price stability in the middle and lower price ranges”
Now that is all some genuinely funny stuff!!
JPSivco,
I guess what they say is right. There always truth to comedy.
Kevin and Andrew’s analysis is quite good. They have described quite well why even with the bubble burst, Houston prices remain fairly stable.
My post was not an attempt in any way shape or form to compare the total tax burden people face, nor the “quantity/quality” differences between various price points.
What I’m saying is that the amount that people pay in taxes is a lot of the monthly payment on a house. That cash flow has a dollar value. Based on the daily mortgage interest rate of 5.5% the value of the taxes due (pre exemptions) on a $200k house is nearly $75k. What that means is, if you weren’t paying taxes, you could have a $275k loan for the exact same monthly payment that you can get a $200k loan now.
I did not factor in exemptions into any of my comparisons because I don’t know enough about the exemption structures in other cities to accurately predict what the “average” person would get. The exception is the Chicago case, because they include an automatic deduction of $5k in the base tax computation. They have all kinds of other loopholes and stuff that I ignored because it’s too hard to get an apples / apples comparison.
Anyway, my observation has nothing to do with the overal cost of living here, nor any quality of life or other comparisons. I’m simply interested in the way that our tax structure impacts the market. The simple fact is, high property taxes result in reduced purchasing power, which means that property must “list” for less than it would with lower taxes.
When people talk about “how cheap housing is in Houston” they often like to say “it’s because of X and only because of X.” My point in writing the post is that there are a lot of factors that contribute to the market price of housing in a city, and that the tax structure is a big one. I specifically found this interesting because I hadn’t thought about it before, I think we’re all conditioned not to think too hard about our taxes, so we sometimes fail to notice what a huge effect they have on our lives.
Thanks for all the commentary and feedback everypne, this has been fun!
^^sorry, to be more specific in my comment above, what I mean is I’m not trying to compare “quality/quantity” between price points in different cities. I’m strictly interested in ability to finance purchases, and how purchasing power is affected by tax codes. I hope that makes sense.
“I’m strictly interested in ability to finance purchases, and how purchasing power is affected by tax codes.”
If you are looking at purchasing power, the potential house you could get in either market play into this big time.
If you were in LA or Chicago and was going to buy a $200k home, when you come to Houston, you could spend half that and get the same home. Taxes become a non-issue since you’ll still be paying less in Houston than your were expecting to pay.
One other related point – the extremely high carry costs that go along with high property taxes in Texas negatively effects redevelopment of large commercial tracts, especially in areas of redevelopment. It often takes a very long time to get the right retailers/loans/site plans/permits, etc. to get a large commercial development off the ground. Getting retailer commitment alone can take years and years. Every year, the property basis goes up and up, making tough developments with higher than typical rents for urban tracts even tougher. This often causes developers to just chop up their tracts, selling a little piece here to a bank, another to a fast food user, etc. When this happens, the city loses a great opportunity to obtain an attractive, coherent development. I think this is one key reason we haven’t seen more mixed use/urban projects in Houston.
I moved from San Diego to escape 9.3% CA state income tax and to find a real house I could afford.
Houston continues to be an overall bargain in housing costs even with the high property tax rates.
kjb434:
“That means he knew it was going to go up. If the mortgage officer would use the future tax amount, would they have not closed on the house?”
HELL NO.
I knew that taxes would go up. Despite popular opinion in the previous comments, I’m not an idiot. Had I known *how much* the taxes would be upon HCAD’s re-appraisal, or even had a remotely realistic figure, I would NEVER have closed, because -surprise!- that would have been a poor decision.
From the Texas Real Estate Commission’s website:
“TREC exists to protect and serve the citizens of Texas. The Commission’s programs of education, licensing and industry regulation ensure that real estate service providers are honest, trustworthy and competent.”
FAIL
“My loan officer and title company couldn’t even tell me how much money I needed at closing until the very last minute, much less anything about taxes.”
This is precisely what I was referring to in having a GOOD loan officer or realtor or title co. escrow officer
3-3.5% of the home’s value is the estimate I eventually found for property taxes. I had to dig hard for this. Once I found it, I starting checking HAR’s tax estimates and then HCAD’s ad valorem tax values for a couple of properties. Mine is closer to 3. I live in Houston in HISD’s territory. I know many suburban areas hit closer to 3.5% or a little higher pending their MUD and school portion of the taxes. If you go further out, the taxes drop to very little with the school district being the largest portion.
There are lots of resources if you look. Never ever assume your realtor, mortgage broker, etc. has all the information. It doesn’t mean I think they are idiots, but I take it upon myself to check and verify. Purchasing a home is the biggest purchase I’m likely to ever make in my life, so I’m didn’t want to go in all naive.
Yes, you have made a lot of money. But you have to sell and move away because it is being taxed at $450K and rising 10% per year. You are being forced out of your home! Even worse, you are being forced out the community since the dirt has gone up everywhere in the 7005 zip code.
___________________________________________
A number of the people in the $1 million homes in areas like West U are being forced out, slowly but surely, as well. Many were caught in the “10% per year” trap which they assumed they could keep up with. Until the economy collapsed.
California is not paradise when it comes to taxes but most Californians like things the way they are simply because the property taxes cannot exceed 1% of the appraised value and that appraised value goes up and down from time to time automatically based on market conditions rather than the whim, and greed, of the tax districts. At least 300,000 homes this year have seen significant reductions in their appraised values. That is one thing you will not see “across the board” in Texas.
Quite a few have also enjoyed various loopholes including “grandfathering” of the family home and if you drive around Los Angeles, you see a lot of older smaller homes that are out of place at this point even in areas like Bel-Air and Beverly Hills but the homes have “been in the family” so to speak, many of them in “family trusts” which were created because of course no one trusted the California legislature, and so their appraisals are $250,000 instead of $2.5 million. You can renovate, add rooms, put in a second floor, do most anything as long as you keep the original foundation and your appraisal will only reflect the added improvement value. The land value remains the same.
Just the same you can add county appraisers to the list of varmints who will lie, cheat and steal you blind when it comes to trying to figure out what you can and cannot afford as two people I know who tore down the family home and built a new one discovered. One was told, per the county approved plans, that the new appraisal would be $1.5 million. When they finally got around to the new appraisal, prices in Brentwood had gone through the roof and her appraisal went from a little over $150,000 to $3.5 million. That’s what the appraiser determined the house would have cost if they’d bought it instead of built it. The “acquisition value” as it’s called in California. And that is a low appraisal at this point in the area where she lives. A $2 million difference is a huge difference. But of course her house is worth it even in this depressed market. I suppose she could sell it and move to Santa Monica. Instead she and her husband cut out the new car every year and the boat and other “luxuries” including vacations some years. They pay about 9% in state income tax. They don’t complain. Despite it all, they know what their taxes are and can budget.
You cannot say the same in Texas. It’s a crap shoot each year. Particularly if you buy a new home that only has an appraised land value. And the real estate broker, the lender and the title company really don’t care if you are foreclosed on in a couple of years if you are since it is no longer their problem. It’s yours.
People sometimes do like to live where they grew up. My friend in Brentwood does. Many of her neighbors are her friends from elementary school. It’s sad when people cannot live in the neighborhood they grew up in, sometimes in the house they grew up in, simply because they cannot keep up with the taxes each year which go up 10% each year simply because our elected officials don’t know the word budget.
We are expected to live within our means and that often is what our elected officials tell us. We need to live within our means. That has become very difficult for quite a few because our elected officials don’t apply that same standard to themselves.
As for property values it’s hard to compare Houston’s market to the market in other large cities like Los Angeles and New York although what you can compare is the devaluation. To say that property values have risen in Houston is folly. And only fools believe it. But as long as there are fools there will be some realtors in Houston making some money along with lenders and title comjpanies. There just aren’t as many fools at this point. Some are making good buys. But they are also taking a chance that HCAD will reduce their valuation based on the sales price. In all probability only a lawsuit or two will achieve that. And that is making a difference in the market. People are looking at what the taxes are and realizing the taxes are going to keep going up and saying thanks but no thanks.
Some of course have the money to pay $750,000 for a house that really is only worth $500,000. The problem is that at some point the house will be worth $1 million according to HCAD and they won’t be able to afford it because they won’t be able to afford the taxes.
The same problem, by the way, faces the buyer who buys the house for $500,000. The taxes will continue to go up. And up. And up.
And that is what may keep our housing market from recovering.
matt,
So you are saying the alternative unreal universe that is preventing housing/land values to rise with the market in California is good thing? Do ever wonder why that state is in financial shambles. People over there vote for a decrease in taxes yet and increase in services. For all the green talk out of California, they quite unsustainable in the financial arena.
I much prefer Texas where reality exist. Home prices don’t stay the same. Your life doesn’t stay the same. It’s called living in reality.
“TREC exists to protect and serve the citizens of Texas. The Commission’s programs of education, licensing and industry regulation ensure that real estate service providers are honest, trustworthy and competent.â€
__________________________________________
In reality TREC is there to protect licensees, if they have the right attorney of course, from the public.
So you are saying the alternative unreal universe that is preventing housing/land values to rise with the market in California is good thing?
____________________________________
I’m saying the market was overvalued. But not by the tax districts. There are several estates in Bel-Air that a year ago were worth somewhere between $75 and 100 million but were appraised at around $10 million. Appraised at “acquisition value.” The Hilton estate sold for what is still an undetermined amount but for at least for $75 million back in the 1990s. Its acquistion value by Los Angeles County was $12 million. The realtors, of course, used the $75 million as a benchmark to start valuing other homes in Bel-Air. Even the little ranch houses in West Gate. And prices kept going up and up and up. And, well, what goes up goes down. The official devaluation in Los Angeles is around 30%. In the “upscale” areas it is probably closer to 50%. You have three homes on the market in Los Angeles at $125, 150, and 165 million. They are a joke to everyone except the sellers who truly are in “LaLaLand.”
The devaluation in New York is probably 20%. The crooks on Wall Street of course have to spend their bonuses from the bail-out and they are spending it. But even with them spending, there has been devaluation. And 20% is a significant devaluation particularly in Manhattan.
There is nothing wrong with increasing value. But there is something wrong with value increasing by 10% per year. Particularly when realtors start adding another 10% each year. Just because they can. What they’ve done is price themselves out of business in many areas of the country. Including Houston.
Of course they had a little help, didn’t they?
CAD Monkey,
Did the title company provide you with truth in lending documentation? If not you need to retain an attorney.
This article can actually be explained more easily. People can only budget so much for a home. Most smart people budget their mortgage payment at about 30% of their monthly take home pay. If you are bringing home $4,000 your mortgage payment should be around $1,200 on the high end. If you pay more of this in taxes and insurance you can afford less house. Smart people don’t say I can afford a $250,000 home. They say they can afford a $1,500 mortgage payment.
Property taxes here are higher but the analysis ignores a few things.
– Texas has no state income tax and those other states do.
– There is no $200,000 house in L.A.
– A $500,000 house in LA does not compare to a $500,000 house in Texas.
None of it really matters because people rarely ponder which state they are going to buy in unless they are retiring.
To: kjb434
You said: “To me, damn with the community and sell the property and run.”
How sad. How do you build a community if your goal is to “take the money and run”?
I grew up in a place where my grandparents lived down the block, aunts/uncles nearby, neighbors were friends, etc. West U was once like that; now, no more.
Bad property tax system in texas can drive people from their homes and tear the fabic of the community.
The “take the money an run” is to the people who are left and the community is already changed beyond recognition.
Community is nice, but a boost to your retirement from you home value skyrocketing is nice perk. You can always find a community if you want to.
This is a really stupid post. Ever heard of income taxes? In NYC you get slammed with city and state taxes, especially if you are rich.
California actually freezes your property taxes, but then there’s the income tax…
So, yea, your 2M mansion is cheaper there, assuming you have a magical pile of cash and not any income that gets hit with over 10% state taxes.
Everyone knows our property taxes are high — it’s still better than income taxes. Any property owner should know their taxes will increase. It’s obvious.
“Everyone knows our property taxes are high — it’s still better than income taxes. Any property owner should know their taxes will increase. It’s obvious.”
Why is it better?
My property taxes are less than the DC income tax I paid. But not a lot less and they will go up, and eventually overtake that figure.
On the other hand, those income taxes were unlikely to go up, and if my income dropped – if I got laid off, if I retired, etc. – the income taxes would drop in kind. So while I’d be facing all kinds of financial challenges, being taxed out of my home would not one.
And note that this is comparing to where I lived – one of the highest income-tax jurisdictions in America. If I were comparing it to other places I lived – Virginia, Massachusetts – the property taxes here would already be as much as my income tax there was.
For lots of ordinary middle-income people, income taxes elsewhere are a much better deal than property taxes here.
Right on the Money!
Forget no state income tax, what if you don’t live in the state, or unemployment, the person is talking about houston home values, ding dong.
There is more to ahouse than the square footage, there is weather, proximity to jobs and wealth, zoning, schools,etc
This is called the “Free market value” of the house, if people want to buy more for a smaller house there could be other reasons,
Houston property taxes, aahh, that’s why its cheap,
Home appraised at $300,000= 7500$ in taxes plus $1300 for insurance and additioanl 2400o for electricity.
Okay additional 3% of house’s value, lets assume inflation is set to zero.
300,000 house in 5 years loses $300,000 on this alone.
States with no income taxes such as tennesee have areas with low property taxes.
Case Williamson County Tennesee, a $300,000 house in Houston may cost $400,000 there, most income is not taxes , tn gets a small portion for dividens and income.
Tax: 0.6% of market value – $2,300 , insurance $600, electricity $1,000/year.
You lose $4,000 a year instead of $10,000 a year but the home is $4,000.
Seattle same case : $500,000 home = 4000k in taxes, $600 insurance, and $1000 in electricity, granted homes are smaller but that’s the free market , weather, jobs, zoning,other factors.
California is a special case because of prop 13, by the way not everybody has a mortgage on their home,
High property taxes and maintenance help avoid speculative bubbles, because you have to pay your tax if you decide to keep and not sell, you neeed capital to do so, due to h ouston’s market new construction and lack of zoning comb ined with this make a home almost like a car or computer that depreciates in value although it may still functionally be sastistifactory and is not the same thing value wise or material wise.
More on this , but the author is right
TO the last comment. Is there a particular reason why u only had typos in the Houston figures? Electricity at 2400o??? is there an extra zero or a 2 instead of a dollar sign?
Also can u explain how a $300,000 house in 5 years looses 300,000 alone? Please explain.
Also granted that u will pay an extra 700 in insurance and according to you 1400 in electricity.. please note that Below is what you wrote:
{”
Houston property taxes, aahh, that’s why its cheap,
Home appraised at $300,000= 7500$ in taxes plus $1300 for insurance and additioanl 2400o for electricity.
Okay additional 3% of house’s value, lets assume inflation is set to zero.
300,000 house in 5 years loses $300,000 on this alone. “}
Lastly, granted houston’s property tax %is high but that is minor considering the amount of home u get. Set aside the value for a moment, note that for new construction or even for a 10-20 yr old 4+ bedroom home plus game room, and maybe a pool, you would pay double if not more in cities such as CHicago, NY, Los Angeles and although would be taxed at a potoentially lesser % you would end up paying the same or more in tax amount.
This blog has brought about some intuitive and worthy of knowing and considering valid points, but lets compare apples to apples and not get hung up on %’s.
How many of the commentators actually live in big cities like Chgo/NY/LA etc.You gotta liver there to know what it costs tolive there.
Over all with the same tax amount u would pay for a much smaller home, a more spacious home with more ammenties, a smaller mortgage pymt, no state tax, a much cheaper sales taax (chicago is 10/5%) and cheaper essentials like car insurance (chicago liablity ins on a used car w a perfect record is 600/yr), no city stickers(90/year), no rediculous toll’s on roads (chgo 80c each way / NYC aprox 4.00 each way), and overall cheaper cost of living, my guess is that houston is a better deal for your buck.
OK there are some trade offs, u trade the snow in for humidity and the huge heating bill (Over 200/avg home/4mths a year min) in for an extra 100 in electrity costs and an extra 30 bucks in home owners insurance a month. Your still enjoying the same or better lifestyle for less considering you just shaved half of the principal you would have owed on your mortgage!!!!
Feel free to Drill holes in my logic!!