Posted on 08/15/2017 6:42:18 AM PDT by Lorianne
Older Americans own half of the houses in the market. Many are simply refusing to sell and others have adult “kids” moving back in since they can’t afford a place to rent or buy. It is a Catch 22 and many people are looking at countries like Italy where the number of adults that live at home is enormous. Multi-generational families just don’t coincide with the “rugged American” worldview where you go out on your own and you make it with your own two hands. Of course, many house humpers had mom and dad chip in but that doesn’t make for such a sexy story. In the end, however there are many baby boomers that simply are not selling. This is actually an interesting problem that is not going away.
Refusing to sell
Housing used to be a young person’s game. The U.S. housing market and to a large extent, the economy was driven by home buying and big ticket purchases. But that has definitely changed since the housing market imploded with the 2000s. It has also changed in terms of people marrying later, having fewer kids, and basically preferring to live in city centers versus suburbs. In other words, not a big need for McMansions.
The oldies but goodies are now occupying a larger share of housing:
Over half of homeowners in the U.S. are now 55 and older. And this figure is only going to grow over time. In places like California, the Taco Tuesday baby boomers own the housing market. This is just a fact and has kept inventory to a very low level.
But housing has gotten more expensive across all U.S. metro areas so this is a much larger trend. It has absolutely crushed the available inventory out on the market:
SNIP
School tax breaks for seniors is an excellent thing for society.
It is most excellent!!
Screw that collectivist nonsense.
The Smallest Minority on earth is the individual. -Ayn Rand.
I am sure California skews that number a fair amount. Older folks there have no incentive to downsize because of the property tax penalty to trading houses for those who have been in the same place for decades. Housing prices have increased by more than an order of magnitude in the last 30 years but for people who bought them the property tax rate is locked in at the time of purchase. There is no value to trading to a smaller home because any savings in maintenance is more than offset by the increase in property taxes on the new home. The effect of this is to lock up housing inventory in markets that desperately need houses for young families.
When I lived there is was cheaper, by far, to pay rent than the cost of mortgage interest and taxes. Older folks would sit on million dollar properties until they died than their children would inherit the house with a low tax bill. A lady at church bought out half her mother’s house from her sister after the mother died and said the increase in the tax bill for the just the half purchased from here sister nearly gave her a heart attack.
Here in the Phoenix area, rental payments are often more than mortgage payments. My niece and her husband were paying $950 per month for a 800 sq ft two bedroom apartment, nothing fancy, and they have 3 little kids. A few months ago they bought an old simple 1300 sq ft home for $206,000. Their mortgage and interest payment is about $740 per month.
According to Zillow, we could get around $1750 per month rent for our 2000 sq ft home. If we took out a mortgage on our home the, P&I would be $1,169 per month.
The homestead tax ceiling is a state law:
It is a limit on the amount of taxes you must pay on your residence. If you qualify your home for an age 65 or older or disabled person homestead exemption for school taxes, the school taxes on that home cannot increase as long as you own and live in that home. The tax ceiling is the amount you pay in the year that you qualified for the age 65 or older or disabled person exemption. The school taxes on your home may go below the ceiling but not above the amount of the ceiling. However, if you improve the home (other than normal repairs or maintenance), the tax ceiling may go higher because of the new additions. For example, if you add on a garage or game room to the house after you have established a tax ceiling, the ceiling will be adjusted to a higher level to reflect the value of that addition
Our mortgage is $660 per month. Rents in our neighborhood are $1000-$1200 per month. The house has increased in value. We will shortly sell and pay cash for something smaller in the mountains. Win win.
Good topic. Good responses. Great site!
Italy is a beautiful country that has done a tremendous job preserving its history and antiquities. Hubby and I have visited Italy five times, have spent almost a total of 4 months there.
A typical middle class Italian family lives the same or lower standard of living that the working poor (and even welfare lifers) live in the U.S.: extremely small homes, usually no yards, no air conditioners or clothes dryers, most can’t afford cars, etc.
It’s a fabulous “life in the slow lane” place to visit, but I would not want to be stuck living there all the time.
“The homestead tax ceiling is a state law:”
This gives you an exemption of a few thousand but is minor if you house is valued at hundreds of thousands and does NOT limit increases in your tax bill.
“It is a limit on the amount of taxes you must pay on your residence. If you qualify your home for an age 65 or older or disabled person homestead exemption for school taxes, the school taxes on that home cannot increase as long as you own and live in that home.”
True, the school tax is capped but NOT the other many county taxes.
I know. I lived in Texas over the age of 65 and did formal protests each year so I learned the system pretty well.
“However, if you improve the home (other than normal repairs or maintenance), the tax ceiling may go higher because of the new additions. “
If your house appraised value goes up or the tax rates go up your taxes will go up!
You have to live somewhere. If you don't buy a place then you rent. With a 30 year fixed mortgage you are locking in the monthly expense. Rent tends to increase with inflation. What tends to happen is the before long rent raises far above your old mortgage. I couldn't rent an apartment for what I pay on my mortgage now.
"I've never researched the definition of "mortgage" but I've been told it literally translates into "death grip." Even if that's not what it translates into, it's true."
A mortgage is just a low interest loan. There's nothing sinister about it.
LOL. A few days ago I was downtown and saw an elderly man walking down the street carrying a shotgun. Patrol car saw him too. They and I and everyone else on the street ignored him.
That's the trouble with assisted living facilities, they NEVER ignore you.
The key is not to make any major improvement to the property after you have been locked in (an addition, ect).
You buy something very new, or very recently renovated just prior to turning 65 that might even be under valued on the tax rolls... then apply to lock in the current rate as soon as you turn 65 and then dont make any major improvements to the property which will reset it.
here is an article about how the freeze is affecting cities budgets:
https://www.dallasnews.com/news/news/2010/01/17/Property-tax-cap-for-seniors-puts-8031
“The key is not to make any major improvement to the property after you have been locked in (an addition, ect).”
You are only locked in on school taxes. All the other many taxes can still increase. Been there, done that.
That cap is for municipal taxes, NOT county taxes!
I asked a friend why the hell he agreed to crazy alimony and he said “for the tax deduction.”!
“It took us some time but we finally figured out how stupid the whole concept of paying a mortgage to get the tax deduction is.”
I don’t know what math you used, but it wasn’t correct if that is your conclusion. Even when renting, someone had to pay the taxes and mortgage and you pay beyond that.
“case not to pay off the mortgage because it is ‘cheap money’; personally I don’t agree with them”
If you earn more in investment more than you pay in interest, it makes sense to keep your money in the investments. It is as simple as that.
Slippery slope but some times you have to. We rolled our expensive debt into the mortgage. Had no choice really. But a bad practice to get into.
"Yes, this is a better arrangement, Comrades. More just."
Better numbers: Take what you pay in rent and write that down. It’s gone, no tax deductions for that.
Then, write down what you pay in a mortgage, subtract out what you save in taxes.
The mortgage will be smaller.
Not to mention the painfully obvious point that if buying properly there is also appreciation in the home that becomes free money when you sell.
I make more in appreciation every month than I pay in mortgage.
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