The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: deeno who wrote (18614)	3/15/2004 3:39:50 PM
From: Elroy Jetson	Read Replies (1) of 306849

Let's look at the same example with a 1% property tax rate. Let's examine one home owner. They sell their home and purchase one which costs 20% more. Their annual costs increase by 73%! $500k home (bought for $200k) ($200k mortgage and $300k equity) Annual mortgage payments $11k Annual Prop 13 real estate taxes $2k Total annual cost $13,000 Sell the $500k home and buy a better $600k home (mortgage increases from $200k to $300k, + $300k equity) Annual mortgage payments $16.5k Annual Prop 13 real estate taxes $6k Total annual cost $22,500 $22.5k is 73% larger than $13k just to buy a home 20% more expensive. As home prices rise, home owners cannot afford to sell, unless they move out of the area. The number of homes for sale declines as prices rise. When prices start to decline, more and more homes are put up for sale as home owners fear losing their equity and being stuck with a home worth less than their loans. The largest inventory of homes for sale occurs after home prices have been declining for several years.

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