Trouble Ahead???

[Boost Buffalo]

Originally posted by Linda_D
There are also a lot more second-mortgages, too, and a lot of "financial advisors" advocating using second-mortgages as a means of getting money for investments

maybe you're confusing today with Clinton's dot.com bubble. The second mortgages were being written as fast as the stock certificates. When that phony economy crashed all people had to show for it was worthless pieces of paper, not real estate.

[moonshine]

When that phony economy crashed all people had to show for it was worthless pieces of paper, not real estate.

You're right. The worst case scenario I see is people with zero or negative equity in their homes will become prisoners of their homes. Of course this will reduce a family's mobility and cause greater employment risks, but I think we are dealing with a small portion of the population in this situation.

Plus, just because you owe more than your house is worth doesn't mean you can't sell it for less. It just takes some additional wheeling and dealing. Those who are in college right now might consider a career in the loss mitigation dept of a bank. There will be serious demand for that expertise IF the market flattens or declines.

[atotaltotalfan2001]

Originally posted by WestCoastPerspective
Here's what I see as Prop 13's biggest impact. Most people only have "x' to spend on housing (30 percent of income roughly). In WNY alot of 'x' is going towards taxes, in CA, taxes are set at 1.25 percent of selling price, so more of 'x' goes towards home price. Therefore, home prices here are outrageous where as in WNY home prices are held down due to high taxes. At least thats how I see it. I know there are other forces: supply/demand, incomes, etc. I never said I was an economist.

As far as government out here, taxes and services. The schools seem to be doing fine (except the big urban districts), they are struggling with keeping up with population growth however. Counties and cities have been forced to ween themselves off the property tax (with a booming real estate market- they're still raking in the dough, and will unless the market collapses and homes start selling for less than previous purchase prices- the homes are not reassessed until resold. If you bought high the assessment stays high). Now communities want to do two things: attract commercial development (SALES TAX!) and high-end homes (BIG SALES PRICE = MORE PROPERTY TAX). So we see goverment's cash needs dictating land use- not always a good thing.

It's interesting to me that homes aren't reassessed annually -- only when they are sold, which is illegal here.
Someone once told me not being reassessed until sale gives homeonwers incentive to fix up their places. They can put what they want to into a house without being quickly penalized by a higher assessment, as is the case here.


It also allows for some security. Owners don't have to worry about being taxed out of their homes.

Any thoughts on what a Prop 13 might do to this area?

[WNYresident]

Any thoughts on what a Prop 13 might do to this area?

It wouldn't hurt at all. IT would force local governments to realize they are spending too much money and paying themselves and the system far too much.

[WestCoastPerspective]

The also have a program called a 1031 exchange, seniors can buy a new house yet keep the same taxes as the home they were selling, presumably one they've had for decades- as long as both homes are in the same county or there is an agreement between the two.

[moonshine]

The also have a program called a 1031 exchange

1031's are a federal tax law, not state. They apply to anyone that meet the criteria. For example, I could parlay the profits of one of my rehab properties into a long-term purchase, tax deferred.

Maybe I misunderstood your reply. You say there is a state 1031? Is this a piggy-back on the existing fed 1031?

[Boost Buffalo]

westcoast, you're scaring me, where do you come uo with this stuff?

right on moonshine, 1031s are purely for the purpose of deferring capital gains taxes on income producing property or business property when you sell it and replace it with another. And it has nothing at all to do with property taxes or somebody's house.

[therising]

I don't think 1031's apply to owner-occupied properties.

Also, I'd rather spend my "X" building equity than throwing it out the window on taxes.

[WestCoastPerspective]

Oops sorry! Wrong program!

PROPOSITION 60: If you are selling your principal residence in a County, and buying a replacement residence of equal or lesser value in the same County or a County with an agreement with your current County, you may be eligible for transfer of your former assessed value to your new home under provisions of Proposition 60.

Forgive me- hope no one put their CA home up for sale!

http://www.placer.ca.gov/assessor/boe60ah.pdf

[atotaltotalfan2001]

Originally posted by WestCoastPerspective
Oops sorry! Wrong program!

PROPOSITION 60: If you are selling your principal residence in a County, and buying a replacement residence of equal or lesser value in the same County or a County with an agreement with your current County, you may be eligible for transfer of your former assessed value to your new home under provisions of Proposition 60.

Forgive me- hope no one put their CA home up for sale!

http://www.placer.ca.gov/assessor/boe60ah.pdf

So, does that mean the properties involved aren't reassessed upon transfer?

I think that's a wonderful break for senior citizens, although I wonder how California affords it.

[WestCoastPerspective]

The property you would buy wouldn't be assessed for a higher amount based on purchase price- you transfer your old assessment over. Someone under 55 buying your old home would then get a new full assessment.

In theory, you could have two identical homes next door to each other- one owned by someone since 1970 paying $100 month in taxes and the person next door who bought it this year paying $500/month due to Prop13.

[LaNdReW]

Originally posted by moonshine
1031's are a federal tax law, not state. They apply to anyone that meet the criteria. For example, I could parlay the profits of one of my rehab properties into a long-term purchase, tax deferred.

Maybe I misunderstood your reply. You say there is a state 1031? Is this a piggy-back on the existing fed 1031?

Is it possible to keep rolling the 1031's over and over?

[moonshine]

Is it possible to keep rolling the 1031's over and over?

Absolutely. It's one of the few federal laws that actually makes sense. At some point you will be expected to pay the feds the money they demand...unless you have a decent accountant

[biker]

Total:

Is that right? Reassessing or revaluing property while someone owns a home is illegal here?

In the City, all homes have been at FMV for the past five or six years.

I thought Rez had a new program when he said anyone 65 or older should never have their taxes go up.

[biker]

I'd rather have the monthly payment go to building equity also, rather than paying taxes.

A personal note:

Due to a thrifty (and, maybe, boring) lifestyle, I've been able to pay off my mortgage, have no car loans and the last kindern is just about through college with no student loans (them or me).

Looking back, the key was to plan on driving each car at least 10 years (which almost led to divorce!). Seems too simple a prescription for financial success, but that's a big part of what worked for me.

Here's the interesting thing.

Watch commercials on TV and radio (ok, listen). You'll be astounded at how many of them are for moving your debt load around or encouraging you to buy the car of your dreams.

If you're out of debt and don't need a car, most of those billions in ads are absolutely wasted on you.