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GenXer
Joined: 20 Feb 2009
Posts: 703
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 Posted: Wed Apr 01, 2009 4:30 pm GMT Post subject: |
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admin: You have a great site 
Don't mind me - I'm trying to make people think as it seems that many are happy just plugging numbers into calculators without really considering all of the details. While you know your way around this data, most people do not - leading to misuse which is worse than not having a calculator in the first place. Maybe we can have a discussion of several of the most popular calculators such as NY times one, which are great tools if used properly, but which can quickly turn against their users if they put faith in the numbers they get out of them. Actually while we are on this topic, it seems to me that if people put as much effort creating THEIR OWN balance sheet as they are putting into playing with data they can not control, they'd be a lot better prepared in making the big decision to buy. |
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showgunx
Joined: 14 Jul 2005
Posts: 60
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| Posted: Wed Apr 01, 2009 4:45 pm GMT Post subject: |
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| Quote: | | ill I can't help but wonder: the median seems to be driven by a large number of homes in relatively 'cheap' neighborhoods as well as by expensive overpriced homes dropping their asking price, while the 'immune' towns still remain immune to big changes |
Using Brookline and Newton as immune town example, I recently found both these town's residental property tax rate are lower then city of Boston. Especially brookline, it allows about $158,100 residental tax examption beside the cheap rate of $10.18 per thousand dollars. I think Boston's residental rate is above $11 bucks per thousand. Would relatively cheap tax rate be the reason of why price not fall on Brookline and newton that much yet? Would this apply to other immune towns? Feedback guys, please.
Brookline property tax rate info.
Assessors Property Tax Rate
FY2008 Tax Rates
Residential $10.18
Commercial $16.70
Residential Exemption: $158,100
Residential Exemption Tax: $1609.46
FY2007 Tax Rates
Residential $9.73
Commercial $15.88
Residential Exemption: $166,331
Residential Exemption Tax: $1618.40
See Previous Rates Below
Three factors determine the property tax rate
1. The property tax levy.
2. The total assessed value of the community.
3. Classification.
Property Tax Levy
The tax levy is the amount of money to be raised by the property tax. Each year the amount to be raised must be determined in accordance with Proposition 2 ½. This is computed by taking the total of the previous year's tax levy increased by 2 ½ percent, plus overrides, exclusions, and growth. Increases due to growth are based on the increased value of new developments; additions, renovations and other growth in the tax base that is not the result of an increase in value due to market forces. An example of other growth would be a formerly tax exempt property which becomes taxable. The purpose of this provision is to recognize that new development results in additional municipal costs.
An exclusion is that amount of money needed to pay the principal and interest on debt incurred for special projects approved by referendum for exclusion from Proposition 2 ½ limits. The High School renovation and the construction of a new Lincoln School are the only current projects so excluded.
Determining the Tax Rate
The tax rate is calculated by dividing the total amount to be raised by the total assessed of all property divided by 1,000.
Tax rate = Tax Levy (or net amount to be raised)/Total Assessed Value/ 1,000
This rate is expressed in terms of dollars per 1,000. For example if a home is assessed for $350,000 and the tax rate is $14.83, the tax bill would be computed as follows:
$14.83 x ($350,000/1,000) = $5,190.50
Brookline uses a split tax rate, as do many communities, which means some of the tax burden is shifted from residential to commercial property. The Town chooses to shift the rate to the maximum allowable under the statute to the commercial/industrial/personal property class. This allows the greatest benefit to the residential properties. In FY 2000 the tax rate is $14.83 for residential and $24.52 for commercial properties. Generally, if values are rising, the tax rates will drop; conversely if values drop, the tax rates will rise.
The amount to be raised through taxation is determined by Town Meeting and the provisions of Proposition 2 1/2. The tax shift, the tax rate, and the residential exemption are voted on every year by the Board of Selectmen. In FY 2000, the residential exemption is $83,240 in value, which results in a $1,234.45 reduction in tax.
Previous Rates
FY2006 TAX RATES
Residential $9.55
Commercial $15.46
Residential Exemption: $165,014
Residential Exemption Tax: $1,575.88
FY2005 TAX RATES
Residential $10.23
Commercial $16.61
Residential Exemption: $149,610
Residential Exemption Tax: $1,530.51
FY2004 TAX RATES
Residential $10.63
Commercial $17.26
Residential Exemption: $139,870
Residential Exemption Tax: $1,486.82
FY2003 TAX RATES
Residential $11.21
Commercial $18.18
Residential Exemption: $127,220
Residential Exemption Tax: $1,426.14
FY2002 TAX RATES
Residential $12.90
Commercial $21.07
Residential Exemption: $105,210.00
Residential Exemption Tax: $1,357.21
FY2001 TAX RATES
Residential $13.46
Commercial $22.12
Residential Exemption Value: 96,110
FY2000 TAX RATES
Residential $14.83
Commercial $24.52
Residential Exemption Value: 83,240
FY1999 TAX RATES
Residential $16.91
Commercial $27.90
Residential Exemption Value: 71,170 |
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StallionMang
Joined: 29 Apr 2008
Posts: 54
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| Posted: Wed Apr 01, 2009 6:23 pm GMT Post subject: |
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I misspoke when I said the PaperEconomy calculator did the inflation adjustment for you...yes, CSI != inflation. Nonetheless, it's quick and gives a ballpark sense of how a given property has moved relative to the metro market.
There isn't anything like it out there as far as I know... the author is asking for feedback on how to make it better, soldatthetop --at-- gmail.com. |
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Renting in Mass
Joined: 26 Jun 2008
Posts: 381
Location: In a house I bought in December 2011
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| Posted: Wed Apr 01, 2009 7:11 pm GMT Post subject: |
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| GenXer wrote: | | Sometimes it is ok not to rely on any information other than the most objective one - what will somebody pay if this house was sold right now. |
Are you arguing that assets don't have any inherent worth? Wouldn't this thinking lead you to overpay if you were bidding against someone with the same mentality?
| GenXer wrote: | I'm trying to make people think as it seems that many are happy just plugging numbers into calculators without really considering all of the details. While you know your way around this data, most people do not - leading to misuse which is worse than not having a calculator in the first place.
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People would be better off using these calculators, even if they don't understand the details. The alternative is to pick a number out of thin air. We've seen where that leads. |
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GenXer
Joined: 20 Feb 2009
Posts: 703
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| Posted: Wed Apr 01, 2009 10:01 pm GMT Post subject: |
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| Quote: | | Are you arguing that assets don't have any inherent worth? Wouldn't this thinking lead you to overpay if you were bidding against someone with the same mentality? |
Now you are getting it, but only partially. Everybody is different, and markets work because there is disagreement. But in this case, people paid those sky high prices during the bubble - they outbid each other trying to pay the most for houses that weren't worth it. In fact, if they did the 'inflation adjustment' analysis - they would know that they were overpaying by a factor of 2 at least. So what went wrong? Nothing! People simply didn't care for what things were worth according to some academic 'objective' analysis - they were simply bidding on something they thought was worth it at the time. Just like people are not buying anything now. Its all relative!
| Quote: | | People would be better off using these calculators, even if they don't understand the details. The alternative is to pick a number out of thin air. We've seen where that leads. |
You were warned. This is the best way to overpay yourself. Just because some mathematical formula spits out a number doesn't mean you should trust it. And if people go ahead and use these calculators (instead of simply compounding the starting house price by the annualized rate of inflation, which in this case will be a better 'estimate'), they are bound to get answers that can potentially be completely wrong (not even in the ballpark). Now if you have 10 calculators that produce 10 different answers, how do you decide what is a good bid? Take an average? Would it instead make sense to simply bid only on houses you can afford to buy? In that case, extra 10k or 20k won't make a difference, while the error of those calculators will surely be higher, possibly leading to overbidding by a much larger amount. |
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GenXer
Joined: 20 Feb 2009
Posts: 703
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| Posted: Thu Apr 02, 2009 12:01 am GMT Post subject: |
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I think we need to get a couple of good examples from papereconomy.com calculator. Lets start with a simple one. I know somebody who bought a house in Newton in 1992 for about $200,000. But suppose the 'calculator' doesn't know that. Suppose that person actually bought it at a foreclosure and paid only $100,000. Inflation gives us $165,284 if we bought the house for $100,000, and $330,569 if we bought it for $200,000, assuming inflation is 3% on average.
These are the two estimates from the calculator:
price: $100,000
estimate: $253,900
estimate (adjusted for inflation): $171,649
price: $200,000
estimate: $472,552
estimate (adjusted for inflation): $319,469
Question: what should I bid for this house? What is the price of this house? Suppose this estimate is for the same house but bought in a parallel universe?
The problem I have with this calculator is that when you either got a good deal or overpaid, your estimate will be extremely sensitive to the price, and if the price deviates from the index by a factor of 2, your estimate will be off roughly by a factor of 2. It wouldn't matter to you whether the owner paid $100k for that house, or $400k - the only thing that matters is what YOU are willing to pay, which makes an estimate based on a single price meaningless.
One way to use this calculator is to take the lowest and the highest price for this type of house in Newton in 1992, and use the two inputs as upper and lower bounds. Now you've (sort of) bounded the problem. So now you can intersect this set of values with the price you can afford and rank your affordability by percentile, etc. However, the range of values is quite large, so what should the bid be?
How do I narrow it down? What is the real price of that house? When I look on Zillow, it says $488,000. Is this the price? Or is it 30% lower than that? Is there a way to calculate the right price? I believe it is impossible, because there is no fixed reference. One calculator or many, combining a bunch of meaningless answers will not provide a meaningful one.
The seller may have different ideas, though. You can try to show them the index and the estimates, but they will only sell when the price is right, regardless of what you think a 'fair' price for the house is.
Bottom line: if you don't know what you are doing, you'll end up in a la-la land of imaginary prices which have no connection to reality, much like the people who don't use calculators, but still bid up the prices during the bubble. Bid what you can afford, ignore the noise, play with calculators for fun but don't take them too seriously. |
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Renting in Mass
Joined: 26 Jun 2008
Posts: 381
Location: In a house I bought in December 2011
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| Posted: Thu Apr 02, 2009 1:16 am GMT Post subject: |
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| Quote: | | So what went wrong? Nothing! |
That's an interesting perspective...
| Quote: | | Would it instead make sense to simply bid only on houses you can afford to buy? In that case, extra 10k or 20k won't make a difference, while the error of those calculators will surely be higher, possibly leading to overbidding by a much larger amount. |
I wish I could simply bid on houses I can afford. Unfortunately, my 75th percentile household income can only afford a 10th percentile house. That's unsustainable.
I've used lots of these calculators. I'm thinking in particular of calculators that figure out how much house you can afford to buy based on your income and debt load. (Although I'm not clear on whether or not you are opposed to those). Without exception, those calculators tell me not to bid at all at the current prices (and my debt load is low). They never tell me to bid a larger amount. This is also true of the estimated value type of calculators.
| Quote: | | I know somebody who bought a house in Newton in 1992 for about $200,000. But suppose the 'calculator' doesn't know that. Suppose that person actually bought it at a foreclosure and paid only $100,000. |
Well, yeah, if you use an imaginary number for the purchase price, you wouldn't get very good data. We can agree on that. I don't think that example goes very far to demonstrate the calculators don't have value. |
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balor123
Joined: 08 Mar 2008
Posts: 1204
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| Posted: Thu Apr 02, 2009 3:52 am GMT Post subject: |
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| Renting in Mass wrote: |
I wish I could simply bid on houses I can afford. Unfortunately, my 75th percentile household income can only afford a 10th percentile house. That's unsustainable.
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I'm in the same camp renting. It seems like making six figures isn't enough for Boston, even the the median income in even the immune towns is generally barely six figures. I feel like to buy in the 50th percentile of neighborhoods you have to make at least 150k and be willing to buy 4x income. Hearing what other people on this board make, though, it seems like 150k makes you poor. |
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GenXer
Joined: 20 Feb 2009
Posts: 703
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| Posted: Thu Apr 02, 2009 11:12 am GMT Post subject: |
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balor123: Exactly. This is the point - this is why we rent in the first place. Let me rephrase what you've said. If we are to use the calculator, it would say that we should pay the median for Newton or Waltham, which is STILL way higher than most of us afford. Does it mean that the median from the calculator is a FAIR price?
Renting in Mass: I think you missed my point again. It does not matter what anybody paid for that house. The price can vary a lot, and its irrelevant when considering the price of the house now.
Let me put it all in perspective. Suppose you know what the median price is from the calculator. Yes, it is good enough to tell you that, but again, only when assuming that the price paid for that house is MEDIAN.
Now what will you do with this (useless) information? The point of this website (correct me if I'm wrong) is to make people aware that houses in many areas in Boston are severely overpriced. All of us here would like to buy a house WAY BELOW what is considered median (and normal or 'fair' value, for some). How is knowing the median going to help you to value that house? It will not, because most of us believe that it is too high. Relative to what? Most likely, relative to what we can afford (i.e. 3x income, for example, or relative to rent). So in that sense, this calculator is useless. You can look at Zillow and get a sense of a median, because the houses on Zillow are priced relative to the other sales/prices in the area, but this will in no way help you.
Do we know things will change significantly? We hope, but there is no way to know whether prices stay at this level, or go down. The longer this recession lasts, the more chance there is that prices will go down, but we never know where and when.
Bottom line: nobody says you can not offer 25% less than the house is priced at now. |
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admin
Site Admin
Joined: 14 Jul 2005
Posts: 1826
Location: Greater Boston
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GenXer
Joined: 20 Feb 2009
Posts: 703
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| Posted: Thu Apr 02, 2009 12:36 pm GMT Post subject: |
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| Isn't that lovely. Well, this is not a reason to overpay. On the flip side, if sellers can not sell their houses for a long time, they will start lowering prices. Is the market so agent-dominated? This sounds to me like price controls, which tells me that the prices will move in big jumps rather than gradually. |
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JCK
Joined: 15 Feb 2007
Posts: 559
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| Posted: Thu Apr 02, 2009 1:17 pm GMT Post subject: |
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I think if you're going to burst someone's bubble (pun intended) by putting in an offer that 25% below asking, you need to "prep" the buyer into considering a bid that low. You'll need to make them happy to accept that bid; just throwing it out there will probably get you nowhere.
This is both psychology and economics; you might have better luck with a bid 10% below asking, where you are nice about it, as opposed to a gruff "take it or leave bid" of 5% below asking. |
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GenXer
Joined: 20 Feb 2009
Posts: 703
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| Posted: Thu Apr 02, 2009 2:23 pm GMT Post subject: |
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| Now we are talking about a different thing altogether - making the transaction. The original discussion was about a price estimate. You are 100% right - just because something is overvalued, does not mean that it will be sold at lesser value. This why we are still waiting, can can be waiting for years (last housing 'bottom' lasted for a while). There are two possible scenarios here. One - sellers just dump the houses for whatever they can get if they have to sell or declare bancruptcy (alternatively, houses will be foreclosed or sold short), or the sellers just hold out and don't sell. Prices will move wildly with a small inventory changing hands, and not a lot of good choices will exist as people will still be overpaying for a small number of desirable properties. Do I expect a sudden increase of inventory and high-end homes all of a sudden becoming cheap? Doesn't seem that is happening, or will happen in the near term, not until the unemployment in the 'immune' cities doubles. |
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Boston ITer
Guest
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| Posted: Thu Apr 02, 2009 3:45 pm GMT Post subject: |
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| Quote: | | Doesn't seem that is happening, or will happen in the near term, not until the unemployment in the 'immune' cities doubles |
It's interesting you'd brought up unemployment, in terms of geographic densities.
http://www.newgeography.com/content/00706-kansas-city-and-great-plains-a-zone-sanity
This article seems to be hinting that where there wasn't an original run up in housing, that the local economies are more stable. In essence, it's a midwestern (outside of the rust belt) to great plains view, an indirect correlation between a non-financial economy and economic stability.
Now, the part where there's some contention in the data is the state of Missouri, which is a major lynchpin in the midwest. They seem to have a similar unemployment profile as other northeast states and for the most part, they weren't as bubble prone as the coastal cities. And St Louis, in no way, has the same cosmopolitan appeal as let's say a Chicago for condo flippers. |
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