Will Property Taxes Kill Real Estate?

real estate property taxes

We received this anonymous email yesterday: Because local and state governments are losing so much money in tax receipts, you can not make money in Real Estate anymore, because municipalities are going to increase property taxes significantly over the next decade and force older residents to sell their homes and move to lower property tax cities. I remember this happened in 1987 to my father, who bought his house in Westchester County, New York in 1972 for $60,000.

The property taxes then were $1000 a year and in 1987 he was forced to sell the house because his taxes shot up to $15,000 and being retired he felt that they were out of control. In 2007 I went and visited the current owner of the house and the taxes then had shot up to $35,000. When my father bought his house he paid 1.6% property taxes on it each year and when he sold it he was paying 3.75%.

The current owner paid $800,000 for the house and pays 4.375% in house related taxes. But his problem currently is that the house is no longer worth $800,000, but is now worth about $550,000, so his real tax rate is now 6.36%. The municipality where the house is located is strapped for cash and can not afford to lower taxes, so how is this guy who bought this house for $800,000 ever going to get his money back? Who in their right mind would buy a house with a real property tax rate of 6.36% on it? There is your real problem with Real Estate and the reason why nobody is buying houses even with 4.99% 30 year fixed mortgage rates.

Del Mar real estate