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Old 05-08-2021, 02:51 AM   #21
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This is just an example where life is just one big crap shoot.

Unfortunately, we can all be victims of a balance between the costs of housing (including property taxes) and an equities market we don't have any control of.

The worst thing is that in SoCal you can spend $500K on a home, and it may not even be a very nice place in a decent neighborhood. Many of us just have higher standards of living than a $500K home in much of your state. And the only thing you can count on in SoCal is that you cannot count on your state and local governments for stability in anything. State and local taxes simply eat your retirement nest egg alive--on top of high r/e prices.

But home is home, despite the negative side of life.

We've chosen to live in ultra LCOL places our entire lives. And our comparable homes in the 3 states we've lived would be more like $2 million homes in SoCal. Until RMD's, we virtually have no state income taxes, and property taxes on a fine home might be $1,200 a year.

There are just so many places in this country where you could afford to live comfortably and where your hard earned money would afford a much higher standard of living.
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Old 05-08-2021, 05:19 AM   #22
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Iíll be following this closely as we are in a similar boat.

We took advantage of the market in our area (which was usually quite illiquid and homes often took 1-2 years to sell) and just sold our home and are looking to buy in another state. But the price acceleration in that area has really ramped up over the last few months. So we are also afraid of being priced out.

The idea to use the lower mortgage rates now and invest in the market is good since over the long term I think returns will exceed the 3% mortgage rate. however we were trying to keep AGI low (including div and stock sales which you need to pay the mortgage) to qualify for ACA when we stop working so itís tough to do that.

Hopefully this madness stops soon.
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Old 05-08-2021, 05:31 AM   #23
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A lot of those "just buy a $500k house they are cheaper in these other 17 states" is less and less true every day. Even houses listed at $500k (which were $300k 2 years ago...) are selling for cash for $550k and up with multiple offers.

In my neighborhood Zillow still has me at $450k, which was $400 last March. Nice right? No, it just hasn't caught up because the last 10 sales in my neighborhood, which are barely on the books, are all over $600k. An interior lot house 3 doors down sold for $650 despite being sorely outdated, no work done in 20+ years, and needs a new roof.

So you might look at my area and think "oh sure I can live there for $500k" but in reality nope, not anymore, not now.
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Old 05-08-2021, 08:07 AM   #24
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A lot of those "just buy a $500k house they are cheaper in these other 17 states" is less and less true every day. Even houses listed at $500k (which were $300k 2 years ago...) are selling for cash for $550k and up with multiple offers.

In my neighborhood Zillow still has me at $450k, which was $400 last March. Nice right? No, it just hasn't caught up because the last 10 sales in my neighborhood, which are barely on the books, are all over $600k. An interior lot house 3 doors down sold for $650 despite being sorely outdated, no work done in 20+ years, and needs a new roof.

So you might look at my area and think "oh sure I can live there for $500k" but in reality nope, not anymore, not now.
+1

We moved to this spot 5 years ago. We paid $155 a square foot for our then 6 year old home. The few remaining listings are now going for $300 a foot.

I saw one place, FSBO, absolutely fantastic views; the house was a tear down for only $880,000.
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Old 05-08-2021, 09:40 AM   #25
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This is just an example where life is just one big crap shoot.

Unfortunately, we can all be victims of a balance between the costs of housing (including property taxes) and an equities market we don't have any control of.

The worst thing is that in SoCal you can spend $500K on a home, and it may not even be a very nice place in a decent neighborhood. Many of us just have higher standards of living than a $500K home in much of your state. And the only thing you can count on in SoCal is that you cannot count on your state and local governments for stability in anything. State and local taxes simply eat your retirement nest egg alive--on top of high r/e prices.

But home is home, despite the negative side of life.

We've chosen to live in ultra LCOL places our entire lives. And our comparable homes in the 3 states we've lived would be more like $2 million homes in SoCal. Until RMD's, we virtually have no state income taxes, and property taxes on a fine home might be $1,200 a year.

There are just so many places in this country where you could afford to live comfortably and where your hard earned money would afford a much higher standard of living.
Interesting perspective. Have you ever lived in California or is what you are posting what you have read in certain media outlets? On the flip side of your post, we live in a Mediterranean climate, our house has been an appreciating asset that appreciated 7 figures since we bought it, and we can go to Redwood forests, wineries in Napa, an ocean beach or a play in the city for the afternoon. We don't spend a lot on travel as we can take long day trips or overnights to places like Carmel, Mendocino, and Lake Tahoe.

Our property taxes are around .33% of our home value, our kids went to college tuition free thanks to the state grant program, and our state income taxes are pretty low. California has high tax rates on the very wealthy, but Social Security isn't taxed and for middle class families the rates aren't bad.

From Kiplinger's The 10 Most Tax-Friendly States: "Wait, what? California is a tax-friendly state? Yes…for middle-class families. If you're a rich person, California taxes will cut deep into your earnings. But for other people, the Golden State's tax hit isn't really all that bad.Our hypothetical middle-class family's income tax bill was the third-lowest among states that impose an income tax......Although property taxes are sky high in Silicon Valley and certain other parts of the states, property taxes are below average for the state overall. For a $300,000 home in California, the statewide estimated property tax is only $2,187, which is the 16th-lowest amount in the country." https://www.kiplinger.com/taxes/stat...class-families

So there's that.
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Old 05-08-2021, 12:30 PM   #26
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tmitchell - If you are open to a townhouse instead of a single family home, are open to a retirement community and are 55+, there are many housing options well under $500K in Laguna Woods. Maybe other retirement villages have lower prices, too, since the age limits and income requirements limit the competition.
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Old 05-08-2021, 04:01 PM   #27
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Interesting perspective. Have you ever lived in California or is what you are posting what you have read in certain media outlets? On the flip side of your post, we live in a Mediterranean climate, our house has been an appreciating asset that appreciated 7 figures since we bought it, and we can go to Redwood forests, wineries in Napa, an ocean beach or a play in the city for the afternoon. We don't spend a lot on travel as we can take long day trips or overnights to places like Carmel, Mendocino, and Lake Tahoe.

Our property taxes are around .33% of our home value, our kids went to college tuition free thanks to the state grant program, and our state income taxes are pretty low.
California has high tax rates on the very wealthy, but Social Security isn't taxed and for middle class families the rates aren't bad.
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So there's that.
Sure, but you had to buy, what, 30 years ago to get the above result?

Might as well brag about having the foresight to put $100,000 into Apple/Amazon at their IPOs.

IIRC, Hawaii still beats everyone by averaging 0.28% in property tax.
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Old 05-08-2021, 04:17 PM   #28
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Sure, but you had to buy close to 30 years ago to get the above result.

Might as well brag about putting $100,000 into Apple/Amazon at their IPOs.
You are quoting my post outside the context of the other post about the high tax rates, unstable government and other California bashing. Initial housing cost may be less in lower cost of living areas, but housing costs aren't the only thing to consider in total retirement costs. Often in HCOL areas factoring in appreciation may make housing costs more reasonable, plus there's other factors to consider like taxes, climate, travel needs, government services and cultural amenities, etc.
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Old 05-08-2021, 05:37 PM   #29
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If you buy a house in California, the assessed value is equal to the purchase price. Its like 1.25% or so.
So yes buy a 700000 house and your property taxes start significantly higher than a 500000 house.
Thanks for that clarification. As I live in CA, like the OP, I based my comment on that. I don't know how property taxes work in other states, other than the fact that many places don't have the equivalent of Prop 13 to limit future increases on them.
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Old 05-08-2021, 09:30 PM   #30
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Thanks for that clarification. As I live in CA, like the OP, I based my comment on that. I don't know how property taxes work in other states, other than the fact that many places don't have the equivalent of Prop 13 to limit future increases on them.
Yeah, we came to SoCal in 07 until 12. Income taxes kicked our tales even after maximizing every possible tax deferral. Home values were starting at $800k after the correction in 08-09 in our area. Just wasn't worth staying with the crazy 10% (now 13%) max rate.

We returned back to Dallas and pay 2.2% on home only ($300k tax value with a 20% homestead exemption). Oh, and no income tax... Big deal until you retire. We paid $30k in Cali income tax in 1 year. That'll pay for almost 5 years of my property taxes here.
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Old 05-08-2021, 10:57 PM   #31
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Yeah, we came to SoCal in 07 until 12. Income taxes kicked our tales even after maximizing every possible tax deferral. Home values were starting at $800k after the correction in 08-09 in our area. Just wasn't worth staying with the crazy 10% (now 13%) max rate.

We returned back to Dallas and pay 2.2% on home only ($300k tax value with a 20% homestead exemption). Oh, and no income tax... Big deal until you retire. We paid $30k in Cali income tax in 1 year. That'll pay for almost 5 years of my property taxes here.
$30K in state taxes would mean around a $400K taxable income on married filing jointly, so yeah, if you have that high of an income that would hurt. A $400K safe withdrawal rate at 4% would need a $10M portfolio.

But for more middle class households, and retirees with much lower portfolios, California doesn't tax SS benefits, so a retiree married couple with $125K income with $50K from Social Security, the taxable income on the $75K after standard deductions would be around $1.5K.

Median household income in 2019 in California was $75K, meaning most middle class families aren't going to pay a whole lot in state income taxes. The 13% bracket only kicks in after over $1.2M in taxable income.
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Old 05-09-2021, 05:31 AM   #32
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$30K in state taxes would mean around a $400K taxable income on married filing jointly, so yeah, if you have that high of an income that would hurt. A $400K safe withdrawal rate at 4% would need a $10M portfolio.

But for more middle class households, and retirees with much lower portfolios, California doesn't tax SS benefits, so a retiree married couple with $125K income with $50K from Social Security, the taxable income on the $75K after standard deductions would be around $1.5K.

Median household income in 2019 in California was $75K, meaning most middle class families aren't going to pay a whole lot in state income taxes. The 13% bracket only kicks in after over $1.2M in taxable income.
Yeah, but 9.3% on $115k MFJ ($57k single) is a bit much for any state. That's like minimum wage out there...

We still get a lot of time out there, but without the taxes... We see a flood of Cali plates in TX these days. I totally understand why.
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Old 05-09-2021, 07:28 AM   #33
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Thanks for that clarification. As I live in CA, like the OP, I based my comment on that. I don't know how property taxes work in other states, other than the fact that many places don't have the equivalent of Prop 13 to limit future increases on them.
In many other states property taxes are a lot lower and the equivalent of Prop 13 isn't needed.
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Old 05-09-2021, 09:27 AM   #34
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Yeah, but 9.3% on $115k MFJ ($57k single) is a bit much for any state. That's like minimum wage out there...

We still get a lot of time out there, but without the taxes... We see a flood of Cali plates in TX these days. I totally understand why.
It is a progressive tax so the 9.3% isn't on for full $115K for MFJ. It is on taxable income over $115K. After standard deductions, (no deductions like property tax or retirement savings), the tax on $115K, married filing jointly, would be more like $4K. With $40K in deductions, the state tax would be around $2K. DH and I both had six figure jobs in the past and never paid much in state taxes on our combined incomes, after deductions like retirement savings and mortgage interest.

Despite the narrative pushed by some media outlets, and some high profile exceptions, most of the people leaving California aren't the wealthy leaving because of high state taxes. It is the poor and middle class leaving because of high housing costs. There has been an influx of households making over $100K in recent years. The poorer households are going to Texas, which is what you are seeing. What you are not seeing is the wealthier residents coming to California from other states.

More Californians left for other states in 2018 | The Sacramento Bee (sacbee.com)
A 2017 Bee analysis found that people leaving California tended to be relatively poor, and many lacked college degrees. Higher up the income spectrum, slightly more people were coming than going

California saw the biggest net loss of residents to Texas, Arizona, Nevada and Oregon, according to the census estimates, which are drawn from its annual American Community Survey. It gained residents from much of the northeast United States, along with parts of the upper Midwest.

'Not the Golden State anymore': Middle- and low-income people leaving California | CalMatters
Middle and Low Income People Leaving California - U.S. Census Bureau numbers show that the middle- and lower class are leaving California at a higher rate than the wealthy. Many who left in recent years say they simply couldn't afford to stay...The majority of people leaving reported an annual income of less than $100,000. while the state has seen an influx of those making $100,000 and more.
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Old 05-09-2021, 10:35 AM   #35
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tmitchell - If you are open to a townhouse instead of a single family home, are open to a retirement community and are 55+, there are many housing options well under $500K in Laguna Woods. Maybe other retirement villages have lower prices, too, since the age limits and income requirements limit the competition.
Thanks Iíll be 54 this summer so maybe this is a good case for OMY and see how things evolve?
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Old 05-09-2021, 10:40 AM   #36
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A lot of those "just buy a $500k house they are cheaper in these other 17 states" is less and less true every day. Even houses listed at $500k (which were $300k 2 years ago...) are selling for cash for $550k and up with multiple offers.

In my neighborhood Zillow still has me at $450k, which was $400 last March. Nice right? No, it just hasn't caught up because the last 10 sales in my neighborhood, which are barely on the books, are all over $600k. An interior lot house 3 doors down sold for $650 despite being sorely outdated, no work done in 20+ years, and needs a new roof.

So you might look at my area and think "oh sure I can live there for $500k" but in reality nope, not anymore, not now.
Yes the issue seems to be everywhere. I just spoke to a friend who put in around 20 offers here in SoCal, all of which went for 150-200k over asking. They finally landed a place in a neighborhood I definitely wouldnít want to live in.

Similarly my research in Boise and Missoula has desirable places selling in a matter of hours, also way over asking.

It all feels a bit desperate!
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Old 05-09-2021, 10:47 AM   #37
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Thanks I’ll be 54 this summer so maybe this is a good case for OMY and see how things evolve?
We haven't toured Laguna Woods but have looked at homes in a similar community by the same developer up here and liked what we saw. But for the price the SoCal ones seem like a much better deal, especially for that location.
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Old 05-09-2021, 11:04 AM   #38
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Our home prices where we are here in Florida have gone up, but not by that much. We purchased in 2010 when prices were coming down for $185 per sqft, and they are selling now for about ~$255 per sqft. That is only about 1.8% per year, not a great amount really. Yes I know it is not like California, but nowhere ever is, except NY and perhaps Hawaii. We used to live in SoCal so we do have experience with that market.
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Old 05-09-2021, 11:26 AM   #39
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We had sort of the reverse issue when we retired in '05 (sold out and moved in '07/'08). We paid "top dollar" for our last house. We put a lot of money into improvements and repairs. When we decided to move, we got less than we paid for the house almost 10 years earlier AND we lost the value of all the improvements. BUT we already had the house we were moving to so did not get to take advantage of the lower costs that had developed in the mean time. SO, housing costs can get you coming and going - depending on the breaks you get.

I would actually consider staying put, renting until you retire and THEN decide what to do. Once retired, you will have the whole country (world?) to chose from as far as a place to buy. We never wanted to live in Mississippi, but we could have found housing there for half what we sold our depressed house for - so it's possible to lower your housing costs IF that's the main thing keeping you from retiring. If you DO remain w*rking for One-More-Year (or 2) you may find housing prices returning to sanity or at least, you'll have the benefit of your investments making up most of the housing cost differences (usually.)

When things are in a state of flux as they are now, it's a tough call. My inclination is to do nothing rather than to do something. But that's just me and YMMV.
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Old 05-09-2021, 11:33 AM   #40
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The poorer households are going to Texas, which is what you are seeing.
What those coming to Texas are finding out is the high cost of property taxes here, even for a house in the $300K+ range. And a lot of Californians moving to Central Texas in and around Austin have sent real estate costs skyrocketing, along with the property taxes tied to the rising property values.

I think our California income taxes plus our old property taxes there would be less than what our Texas property taxes will be soon enough. A 10% cap on property tax hikes each year still allows for them to get out of control in a hurry.
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