Monday, October 26, 2009

Insanely high taxes

I pretty much took the summer off from seriously looking for a house. Now that the summer rush is over I have started looking again. I have not gotten too serious yet but lately I've been checking Redfin more and crunching some numbers on homes I might like. The payments are not too bad. Even though prices will probably fall a little more, with the low interest rates the payments are reasonable at the homes I'm looking at. The taxes however are insane on most of them. And on top of that many of them have HOA fees of $200 to $300 a month. I looked at a house in Norco Hills listed for $380k. It was a nice house with a pool although smaller than I want the price was good. But when I looked up the taxes it had nearly $5k per year in CFDs. That's over $400/mo! I could buy a pretty nice car for $400/mo. Another house I looked at had even higher taxes and had a $260 HOA. That one was the equivilent of a payment on a BMW 5 series or an E-class. I'm not talking total property tax, this is just the CFD (Mello Roos). And that Norco Hills CFD went to 2033, another 24 years.

This isn't news to me, I crunched the numbers last year too. But for some reason it didn't bother me nearly as much last year. Probably because I was more excited then about the prices finally falling. Now that I have snapped out of my state of euphoria, I am a little more unwilling to throw $500+ a month away. The problem is, there's not many tracts without mello roos or CFD's. And the few that don't have the taxes just don't excite me much (with the exception of Stellan Ridge, but those are still priced crazy high). So it's bite the bullet, settle for another area or find an older house or one without mello roos. The more I think about it the less I want to bite the bullet and pay those taxes. Over 20 or 30 years that is a shit load of money (or vacations or cars or nice whisky etc....)

The differnce in the price of the house you can buy is phenominal when you back out a $500/mo cost. That means you can buy a $500k home vs a $400k home and have the same monthly nut after taxes. Even using a less extreme home where the tax differnce is only say $300/mo, you could buy a $460k house vs a $400k one.

Taxes suck!


Kane said...

Yep ... there's a reason why I ended up buying a 29-year old house. I could've bought new in Chino, but I just couldn't fathom shelling out so much every month for CFDs and HOAs that aren't deductible. I'd still be paying for those even after my mortgage is paid off!

The thing is that these days, cities are unwilling or unable to shell out the dough for the infrastructure, so either the developer has to foot the bill or the more typical solution, sell bonds and recoup the money from the CFDs.

Sigma said...

I guess it depends if you're considering paying your loan off early or not. If you're going to pay it off early, then the tax is a huge hamper. If not, the tax affects the price home so that houses in mello roos areas are priced much lower than areas that don't have such as Rancho Cucamonga and Chino Hills. It all evens out that way.

Razor said...

i think its great that you're shining light on something that not a lot of people consider when buying a home. They will go back and forth over a 1/4 point on the loan when this issue is a much higher fixed cost and I emphasize "fixed". I am a pretty financially savvy person and I myself overlooked somewhat the impact of the insanely high special assessments when buying my home in Eastvale. Part of that is absolutely my fault and part of it is the builder's who really went out of their way to keep the real cost of those assessments as buried as possible in the paperwork. In fact, the property tax rate they quoted to us when we were buying was just the property tax without any special assessments factored in. It was only the percentage, no absolute figures were discussed. Its borderline fraud/false advertising in my opinion. Its definitely another buyer beware type situation as the disclosures are not clear, not complete and the builders certainly have very little incentive to point these things out as they would likely lose potential sales if they were to.
Oh and by the way i just got my property tax bill for this year and it went up again which makes ZERO sense in a declining market.

Sigma said...

We need to see more of this:

Sigma said...

Razor: it is my belief that also fuels a lot of the speculative first time buyers to withdraw their bid and or fall out of escrow, thus even further artificially inflating a lot of heated areas such as Corona, Murrieta, Temecula. They seem like much better deals than Rancho Cucamonga and Chino Hills until you are aware of the Mello Roos. I know there are some areas in R.C. that have mello roos but the majority of them do not (newer tracts).

Rob Dawg said...

Remember a nicer house adds value. Taxes are a burden, a negative. A monthly nut 50:50 asset:taxes is a much much worse deal than a 90:10 split.

Allison said...

Yep, can't even bring myself to look at the new tracts anymore. Can't imagine paying that much in taxes, what a waste.

Bridle Creek in Riverside is not as bad as Corona (but still high), and there is a small development in 92506 that doesn't have any extra taxes or fees:

If I end up buying new, those are the only ones I would consider. Or Stellan Ridge, if they ever went under 500k :)

Todd said...

Just about everything built in Rancho Cucamonga over the past 5-8 years or so has Mello Roos fees attached to it (usually in the form of CFDs, landscaping fees, and school bonds). Some of the worst areas that I have seen are off of Day Creek Blvd, north of the 210 freeway (especically near the top), and out near Wardman Bullock and Wilson. A lot of the homes built around the Victoria Gardens mall have high Mello Roos fees attached to them as well.

Here is an example from near the top of Day Creek Blvd:

Notice the following:
*RANCHO CUCA CFD 2004-01 $5,151.30

There are a few more fees attached to it as well and all are in addition to the assessed value of the house.

Take a look in the older parts of Rancho Cucamonga and you generally see a couple of school bonds and that's about it.

VectorzSigma said...

All the areas around Victoria Gardens built ~2001 do not have mello roos. They're still very new but you're right, anything less than 7 years probably does but fortunately most of the new tracts around Victoria Gardens should've been built prior.

Todd said...

Just about everything right around Victoria Gardens was built after 2001 though. The houses along the east side of Rochester, between Foothill and Baseline were built back in the '70s and for about 20 years they were about the ony things out there (besides the Cowgirl Theatre). North of Basline you'll find smaller homes that were built dating back to the mid 1980s (some as small as 758 sq ft).

Here are some examples from just north of the mall:

Mello Roos is lower in this area but I'm still seeing approximately $1700-3000 in additional fees on top of the assessed value. Mello Roos wasn't much of an issue in Rancho Cucamonga until this last housing boom. You'll find the lowest fees on homes built during the 1990s or earlier.

Sigma said...

Yeah, you're right. My friends and relatives must've lied to me. Woodchase Ct, Rancho Cucamonga special assessment = $700. Although that's a lot better than $2000-$3000.

Rob Schloss said...

What is the best place to look to find out if an area charges mello roos/CFD? I went to the tax assessor website for Los Angeles, typed in the address of a house we are interested in looking at. When I chose to see 2009 taxes it asked for
Your Business License Account Number or Assessor's Identification Number (whichever is appropriate). Any suggestions?