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

To: Mr. Sunshine who wrote (10950)	6/2/2003 6:52:34 PM
From: Lizzie Tudor	Read Replies (2) \| Respond to of 306849

If you buy a house for $100K and it goes up in value to $1M how much does your standard of living improve? Other than bragging rights, it changes things Zilch, Nada, None! Same if the price goes down. Change in value of an asset is only realized when that asset is sold. Even the IRS pretty much understands that much! So why should someone's taxes increase 10X (in this example) when they recieve no proportional benefit? I don't agree with you, but just for arguments sake lets say I did. The problem with your argument is that there is an underlying assumption that we live in an inflationary society and "freezing" ones property taxes at some locked down amt means that even if the property didn't hyper-inflate, you'd still have people paying less than their share for services they use eventually. And that is exactly what we have, except guess what, properties did hyperinflate (which is of course a result of "freezing" the current owners costs to 75 levels) and now an entire generation of freeloaders is sucking off the new residents. These people use public services but don't pay for anything. They whine and cry because they are "house poor". Boo hoo. Just take their house and index it to standard inflation, the same amt of basic raise they would get in an inflationary society. They don't even pay that in their property tax rates. Ask any 25 year old if they want to trade their 75K/yr job with someone with a smaller income living in a million $$ house with no taxes vs. what they will pay for a house that costs half as much, and see what your answer is.

To: Mr. Sunshine who wrote (10950)	6/3/2003 9:28:10 AM
From: MulhollandDrive	Respond to of 306849

>>Most investment professionals advise not counting your home in your net worth. Having your home go up in value does you no good unless you sell it or refinance for cash out. << just because most investment professionals do this, doesn't mean it's accurate. the point being people who have had their net worth rise due to appreciation of RE use that rise to further increase their wealth either by extracting the appreciation to leverage their net worth even more...i.e...take money out to use as a downpayment for another property, rental perhaps? or they can extract the cash by selling and "downsizing" as we have seen one of the posters on this thread did when he sold his san diego house and moved to new mexico... so the rise in the selling price of the property certainly, quite tangibly increases net worth. even if the owner does not avail him/herself to that worth other than living in a home with "bragging rights" it is indeed a very real... now as to the proportional benefit and the current taxation scheme...the CA scheme is a relative anomoly....most states have regular reappraisals (ours is every 2 years) which have over the years allowed the RE taxes to keep pace with RE asset appreciation. now we can argue the tax structure itself and one might even use the fact that because RE taxation becoming such an issue as it now, it points to the underlying issue that recent RE gains confirms the notion of the price bubbles in certain areas. in other words, nobody expected the kind of double digit sequential appreciation rates we see in some markets...you could think of it as an extreme form of "bracket creep" similar to what we had back in the days when inflation was high and you'd get a big raise only to find out you were bumped into a higher bracket and therefore the net realized gain wasn't as the income earner had hoped. the CA situation will become more and more acute as the state continues to bleed cash. and obviously when you have to raise money, you have to go the well that's not already running dry....and in CA that well would be RE...but i'm really hard pressed to find an equitable solution that will normalize the taxation being "new owners" and "old owners"