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

To: Peter V who wrote (168766)	12/3/2008 4:49:13 PM
From: tejek	Read Replies (1) \| Respond to of 306849

Prop 13 did not REDUCE taxes for new buyers, it simply kept them somewhat level from the time they bought. Yes, it did. Before Prop 13, new buyers paid taxes at a much higher rate than 1.25%. CA had its first housing boom after the passage of Prop. 13. Up til 1976, CA's price median usually tracked below the national median. After the passage of Prop 13, its median moved pass the national median and never looked back. And it was enacted 30 years ago. So I don't buy your theory that it caused a bubble for new buyers, at least one that has any effect now. And now that the bubble has popped, why isn't Prop 13 keeping prices inflated? Prop 13 was the catalyst for the first housing boom in CA. After that, other factors have fed into that boom......availability of land, interest rates, population growth, the wealth factor etc. Nonetheless, just as in the beginning, Prop 13 continues to allow more bang for a first time homebuyer's buck or any buyer for that matter. That's the upside. The downside is that Prop 13 cut heavily into CA's tax revenues. In theory Prop 13 was to cause a boom in housing prices which it did. The boom was to cause prices to go up and lead to higher assessments which, in turn, would lead to increasing taxes that would make up for the initial tax revenue shortfall. However, it just never worked out that way, and since 1980, the state always has been short of money for essential improvements like maintaining infrastructure. And it shows. When I moved there in the early 90s, I was surprised at how poorly things like the freeways were maintained. And the condition of the state's infrastructure got progressively worse the longer I lived there. There is no free ride.......and Prop 13 is just another example of that adage. At first other states were going to ape CA but the more they dug into it the more they realized it was not the win-win it looked like at first blush.

To: Peter V who wrote (168766)	12/3/2008 4:55:15 PM
From: tejek	Respond to of 306849

Moreover, we saw plenty of bubbles in other states that don't have Prop 13. Prop 13 is not the only thing that causes bubbles. Shortage of land is a big factor.....fast population growth is another. In spite of fast population growth, FLA didn't experience its first bubble until the new millennium. Why? Because it had a lot of flat buildable land in which to expand. Now that land is running out. SF, San Diego and Los Angeles are ringed by mountains so that coupled with population growth caused housing prices to increase. The same thing is happening in Seattle. The city is built on hills and its growth is restricted by water and mountains. As the city has become more desirable, the price of housing has gone through the roof. Portland, OR has created a green beltway around its home county which restricts growth either to inside the beltway or to adjacent counties. The result....housing prices in Portland are growing quickly.