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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Elroy Jetson who wrote (3720)	7/31/2002 12:25:56 AM
From: GraceZ	Read Replies (1) \| Respond to of 306849

Do you think Bakersfield is any hotter than Palm Springs? Its not simply rural vs populated. Its desirable vs. less desirable, marginal supply against marginal demand that dictate housing prices. I can show you houses that have had zero appreciation over a fifteen year period here in Baltimore that are within six blocks of homes that have had double the inflation rate appreciation. Both in well maintained condition and sometimes the exact same layout. Certain neighborhoods are high priced simply because there is no more available land in which to build and the marginal demand constantly outstrips the marginal supply. They are the kind of neighborhoods that one reads the obits to get into. Frankly it has little to do with what the government does or doesn't do, the Feds don't target wealthy neighborhoods with housing incentives to make people move there, to the contrary, they target poor ones to keep people from fleeing. In Baltimore homeowners fend for themselves. In the better neighborhoods its the neighborhood associations that take up the slack for the lack of local government services and the homeowners pay for that. Also, whatever tax breaks there are for mortgage interest is phased out at the top end as well as the cap gains exclusion (which we've pointed out previously fundamentally didn't change one iota for the majority of home sellers). They are both (mortgage interest deductibility and cap gain exclusion) weighted on the bottom and phased out at the top, yet houses at the very top appreciated at a higher rate (miraculously with reduced tax benefits). Although the deduction obviously means more to someone in a high tax bracket who carries a mortgage with the maximum deductible mortgage interest then it means to someone who is in the 15% bracket with mortgage interest below the standard deduction. (don't laugh I know quite a few people like that) More desirable areas become even more desirable even as other areas decline and prices stagnate or fall. In Baltimore the subsidies and incentives are all directed towards the low end yet if you read the Sun paper from fifty or a hundred years ago you see that the exact same neighborhoods were targeted back then for government largess and they are still low priced. Get in now before the price goes down! If you want to point a finger at government (especially in California) maybe look at the numerous fees attached to new housing, the local initiatives to limit growth and the zoning restrictions against high density housing all of which limit supply in the populous and desirable areas and lead developers to concentrate on building the higher end housing that has the highest profit margin. As for homeowners being on the dole, I think you have it mixed up. Take someone like my brother-in-law. He bought a million dollar home (rolled up his cap gains of a few 100k on house two) without a mortgage. Because it was a new house and everyone where he moved is grandfathered for property taxes, he pays the new guy rate of $25,000 in annual real estate tax (of course its deductible on the federal return) and his kids went to private school and he has to pay for his own garbage removal. Then the guy pays more in one quarterly estimated then most renters will pay in their entire lifetime of paying taxes. Hardly what I would call "on the dole". As for who it is who is on the dole if you examine who pays taxes you'd find that the top 50% of all filers pay 96% of all Federal income taxes (non-corporate). In 1999 the break point was $26,415. The top 25% paid 83% of all tax paid and the break point was $52,965. taxfoundation.org Now what were you saying about who was on the dole? I'd say those poor renters should think about getting off their duffs and start pulling their share.

To: Elroy Jetson who wrote (3720)	7/31/2002 3:39:39 AM
From: Jim McMannis	Read Replies (1) \| Respond to of 306849

RE:"The exception to this match with GDP is a demand preference shift from other wealth holding instruments driven by tax policy, or other change in preference. Make homes more desirable from a tax stand-point and you gain a one-time increase spread out over a period of time. All tax policy intended to make homes more affordable accomplish nothing in the end - as the rise in home price is equal to the subsidy. Home prices in Los Angeles County exactly matched GDP growth from 1890 until 1945. There were three distinct tax driven price adjustments above GDP after 1945. The most recent was the silly non-taxation of home appreciation. Imagine, an investment whose cost, like mortgage interest and property taxes, are subsidized by the public purse, yet the gain is entirely untaxed." I agree. Also the main reason housing prices have inflated so much over the last few years. RE:"A Public Welfare system for those who buy a building. I think its high time homeowners get off the dole and become self-supporting." When you weigh the tax advantages it's pretty easy to see why RE has appreciated. As for homeowners getting off the dole. Not likely until something really drastic happens.