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The negative side of rising home values in Phoenix, and Los Angeles

Whenever I'm hanging around with people who talk about their houses, and money is mentioned, most people proudly tell me how much more their house is worth than when they bought it. I guess it's just human nature, like buying something at a garage sale and later finding out that's worth a lot on ebay. But if you're like me, you really don't want the value of your house to go way up. I saw the negative aspects of that when I lived in Los Angeles, and it's while it's good for Real Estate Agents, and investors, it's very bad for people like me who just want to live in a house. Please let me explain.

I bought the house that I'm in right now, here in Glendale, when I was in my mid-thirties. I just love it here. It's a great neighborhood, and besides, my dog likes it here. I never want to leave here. No, this house is not for sale. Not until I'm done with it, if you know what I mean. And I plan on living for a very long time!

So, let's do some math. I'm not very good at math, but I know that although my mortgage is fixed, other factors around owning a house aren't. Yes, I'm talking about taxes. The taxes that are paid on a house are based on its value. The higher the appraised value, the more taxes you have to pay on a property. And I guess that's fair. I know that taxes help support the infrastructure that help to make this a nice neighborhood, and I'm willing to pay my share, as most people are. But this is where it gets complicated, and it's a lesson I learned in Los Angeles in the 1980s - when the value of the houses goes way, way, up, like ridiculously way up, so do the property taxes, and it can have devastating effects on the people who live in them.

Time-travel with me to the 1960s, and 1970s, in Los Angeles, especially places like Woodland Hills, which is in the San Fernando Valley. At the time, you could have bought a nice new house there for as little as $50,000. And, if you're following me here, you paid property taxes based on $50,000. But by the 1980s, those houses were being appraised at a quarter of a million dollars, and are now closer to a million. That sounds great, if you're a Real Estate agent, or if you want to sell the house, but terrible for people who just want to stay, and live in those houses. It meant that their property taxes were spiraling out of control. People who were unable to pay their mortgage along with the higher property taxes were simply losing their houses.

A law was passed in California, called Proposition 13, which changed all of that for people who were at risk of losing their house because of the increase in appraised value and the subsequent rise in property taxes. That law is still in effect for many people in California who would be crushed by the payment of taxes based on current appraised value.

Of course, house values in Phoenix have never done that. The house that I'm in hit its highest appraised value just before the crash of 2008. And yes, my taxes did go up, and it did worry me. But the crash brought the value back down, and it's still fairly low, which is what I want. Like I say, I'm happy to pay my fair share of taxes, but not if this house were to be appraised so high that I couldn't afford to pay it, along with the mortgage.

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