It's really hard to compare because of how rates doubled in a period of 2 months.

At today's rates, which I'll enter at 5.2%,

A person making 200k at 8x is buying a house worth 1.6 million dollars.

Assuming a 320k down payment(ha), 20k in taxes, and 5k in insurance, the monthly payment comes out to over 9000 a month. I don't think anyone in CA at 200k is taking home that much monthly, but maybe my math is off.

I think 2.5x is also probably not the norm, but I'm extremely conservative with money and what I went with.

4 or 5 I can believe, but in today's market with today's rates, I can't see how 8x is even possible.

> 2.5x is completely ridiculous to expect - that’s going to be far below rental payments in most places that anybody would want to live.

That's because rental prices are ridiculous.

> 2.5x is completely ridiculous to expect - that’s going to be far below rental payments in most places that anybody would want to live. Its definitely not the norm. It’s obtainable in some areas of the northeast like Pittsburgh and the Midwest. But usually the catch is property taxes are outrageous.

The funny thing is: you just explained why property taxes are basically 'free'. (They are basically the best tax. Tweaking them to include only the value of the land, and not the house makes them even better.)

Basically, supply and demand in the housing market determine the sum of property taxes plus mortgage payments. If property taxes fall, real estate prices increase until the sum is the same as before.

If property taxes increase, real estate prices decrease accordingly.

Of course, existing property owners will feel the changes in price. But for someone young or from outside the area, who doesn't already own property, areas with high and low property taxes cost the same amount to live in.

The area with high property taxes can either spend more on public infrastructure or lower other taxes.

In the long run, all of society is made up of people who don't live yet today.

In the short run, votes are mostly cast by people alive now, many of them owning property.

That is not true. Property taxes are based on relative property values within a region such as a county or school district. Here in NY, appraisals are done at the county level and then that determines the amount you pay to the school district, town, county, etc. If budgets don’t increase, then your property tax stays the same even if your house is worth more. There are towns in my area with 1 million dollar houses that pay half the tax of a 500k house the next town over, because the town/school district tax gets spilt among the very valuable houses in that district. Whereas the poorer folks next door have to shoulder their tax burden among their less valuable homes.

Oh, that's weird. I assumed property tax was set at a fixed percentage of home value per year?

Thanks for explaining!

Though to be clear, most of what I explained still applies: if you are looking to buy real estate, the expected burden of property taxes will already be baked into the market price. Almost no matter how the taxes are set.

Yes it is true. Basically the formula for your taxes are (appraised home value / total appraised value of all houses in the town) * budget of the town. The market does absolutely take it in effect, like I said, towns with lower taxes sometimes become wealthy enclaves were people will drop 2 mil on a house and then have basically no taxes. My only issue with the system is it winds up being regressive sometimes because the wealthier an area is the lower the taxes tend to be.

We seem to mostly agree.

My observation is that the system is neither regressive nor progressive for people who don't already own a home.

Renters basically don't see this tax at all, and people who are considering buying a home see the same total burden of tax plus mortgage payments.

(Or for people who buy outright with spare cash instead of a mortgage, the constant burden is tax plus opportunity cost of capital.

A mortgage is just a way to rent some capital from a bank in return for compensating them for the opportunity cost.)

but total cost of home ownership is supposed to be 33% of take home. how do you pay electric, gas, internet, trash, water, sewer, umbrella insurance, AND routine maintenance on just 3%?

Utilities normally wouldn’t be included in the 33% of take home rule - the 33% rule applies to renting an apartment too, where most of the items you listed except trash are also separate costs not included in the 33%. (Also the 1/3 rule is of gross income not take home.)