So why did we choose to move where we did? Why did we stay in California instead of moving to a lower tax state? How did we still do it affordably?
First off, we did consider moving out. California is a very high tax state and it's getting higher every year. Now they want to tax our soda, water, and even ding us for every mile we drive...in addition to the other myriad taxes we already pay.
We looked...Arizona, Colorado, Nevada, and even a few states farther away, like Tennessee and North Carolina...but, in the end there's no place like home. California is still the best we've seen and we don't want to be too far away from family.
How did we make it affordable? Well, contrary to common belief, not everywhere in California is suffering from sky-high home prices. Yes, you can pay well into the seven figures for a hovel in places like Los Angeles, Silicon Valley, and San Francisco, but there vast swaths of the state that are away from those high-priced locales where you can get some bargains.
We found it was almost impossible to live near the coast on our budget...however you can find reasonable near ocean house prices in the far north in places like Eureka...so we explore in the other direction. Home prices in the Central Valley, Redding, Red Bluff, Chico, the deserts, and Sierras are very reasonable, it just became a search of where it would be reasonable and desirable.
The Motherlode region ended up being the most appealing. This is the historic area where gold was mined from the Motherlode in the foothills of the Sierra Nevada mountains during the Gold Rush. It extends...roughly...along highway 49 from the area around Auburn in the north down to Mariposa and Oakhurst in the south.
Great homes could be found here for our $400,000 maximum price. Heck, I can still go out and find decent homes in the area (and in the other areas mentioned above) for less than $200,000.
Why was that our maximum price? One reason...property taxes. We would not have a mortgage payment, since we could pay cash, but we'd need to keep those taxes down to a manageable level to be able to afford it on our fixed and small retirement income.
One tax that is under control in our Golden State is property taxes. Thanks to Proposition 13, passed four decades ago, property taxes are strictly controlled and not allowed to jump dramatically. It's something the politicians in Sacramento hate but it makes the state liveable for the rest of us.
The gist of it is this:
- Basic property tax is 1% of the assessed value at the time of the sale, usually the sale price.
- Only if 2/3 of the property owners in a defined area vote for an increase can that basic amount go higher than that...for instance, the local school district can put a 1/4% increase on the ballot to get more funds. If 2/3 of the property owners agree, then the local property tax would go to 1.25% of the assessed value at the time the sale.
- The property tax can only be raised by a maximum of 2% a year so, if you paid $1,000 this year in property tax, next year expect to pay $1,020 - even if the assessed value of your house doubles or triples or more.
- When the property is sold, the new buyer pays on the newly assessed amount.
It's this last point that makes it hard to relocate within the state sometimes. If you paid $100,000 for your house 30 years ago and, over time, your tax is now around $2,000...you could be on the hook for a lot more if the houses you're looking at cost half a million or more (an extremely common and low price in this state). That's at least $5,000 per year.
We figured we could afford up to $4,000 per year which defined our top end house price.
It took a year of very casually looking at houses up here and, believe it or not, one day of intense house hunting to find the home we ended up with in Amador County in the heart of the state's gold country.
There are also two other propositions out there, Prop 60 and Prop 90, aimed at tax relief for seniors 55 or older. Both are able to be used one time.
Prop 60 states that if you move to another part of the same county you live in, you can take your tax rate with you so, if you paying tax on the $50,000 house you bought in the 70's and buy a million dollar McMansion a few towns away, your property tax will not rise.
Prop 90 works the same way if you move to another county that reciprocates. Currently, there are 10 counties that do:
Alameda
Los Angeles
Orange
Riverside
San Bernardino
San Diego
San Mateo
Santa Clara
Tuolumne
Ventura
These counties include some pricey and desirable real estate such as La Jolla, Newport Beach, Palm Springs, Claremont, Pasadena, Palo Alto, Ojai, and Thousand Oaks.
In short, you might have to give up your dream of living beachfront in Malibu or Monterey, but there are plenty of areas in this 3rd largest state in the nation where you can find a new dream.
Darryl Musick
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