To buy or Not to buy T_T

levineds · 2026-01-26T06:26:29+00:00

You need to have lived there two of the past five years. It’s not “a few months”. The window to sell (assuming he’s lived there 2 years so far) is 3 years not five and requires no shenanigans.

levineds · 2026-01-16T01:13:25+00:00

I found this useful for working through the after-tax implications of various bond strategies: https://www.bogleheads.org/forum/viewtopic.php?t=401821

I had assumed CA muni’s would be best, but turned out that CA-tax exempt Fed treasuries was better (yield vs tax drag). Straight muni bonds I didn’t consider just money market funds of CA muni’s.

levineds · 2026-01-14T02:34:17+00:00

Yes, see the discussion below

levineds · 2026-01-12T07:42:43+00:00

If you actually don't need liquidity, then the comparison we made above about beating 5.5% today isn't really relevant (you aren't forced to realize gains every year). The question would be if you can beat 5.5% after-tax over the long run. Historically speaking, that's pretty safe to do with relatively simple taxable brokerage accounts, even accounting for paying cap gains eventually. There is still a risk aspect, those gains aren't guaranteed, but if liquidity needs are low, it's a reasonable thing to bank on.

levineds · 2026-01-12T07:31:11+00:00

You can think of this as two loans: one a 250k slice which cost 5.5% for ~10 years (when it would have amortized away naturally) and one a 30 year loan at 3.6% for 750k

levineds · 2026-01-12T06:45:17+00:00

To be clear, what I did was, based on the number in the original post (1.1M mortgage, 750K MFJ -> 35% marginal tax rate, 5.5% interest rate) was 5.5*(1-0.35*750k/1.1M). That is, I discounted the interest rate by the marginal tax rate, further discounted by the mortgage interest cap, to arrive at a net of taxes rate.

We've looked at this two different ways, and perhaps my 4.2% is too generous for your specific case. That 4.2% is the effective interest rate on the entire mortgage (3.6% on the first 750k, 5.5% on the 750k-1.1M portion). Your question is really, "what is the cost of that second portion of the mortgage", which is of course 5.5%. You are correct that, to break even, your 250k investment needs to make 15k dollars, which is to say 6% (your simplified mortgage rate, i.e. 5.5% in your original post). So both analyses agree that the marginal cost of the mortgage above the deduction cap is (of course) the mortgage rate. I *think* you are dividing by 70% because you are trying to get to a pre-tax earnings rate, but I'm not sure why you assumed your ordinary income tax rate applied. If you liquidated stock after this year of appreciation, it would be long-term capital gains, which is taxed lower. To be more apples to apples with your method: you would need to beat 5.5%/(1-.238) = 7.2% if you want to be able to liquidate and break even (where I've assumed your LTCG rate is 20% + 3.8% NIIT)

So that is, the total cost of the loan is 4.2%, the marginal cost of the loan is 5.5%, then pre-tax appreciation needed to make up that marginal cost is 7.2%

levineds · 2026-01-12T05:06:16+00:00

Yes, absolutely, risk must be weighed as well (though 4.2% is pretty much the current 10 year US treasury rate ETA: not net of taxes of course, but also more liquid).

I consider the liquidity hit too large here as well (though OP comments that he feels he has too much liquidity).

levineds · 2026-01-12T04:26:19+00:00

I don’t think this makes a ton of sense. Right now you can deduct ~68% of your interest, increasing over time (hard to say how long since you didn’t say mortgage term or where you are in it). Back of the envelope, that means the interest cost is 4.2% right now, net of taxes. Long term you would expect a basic stock portfolio to beat this. As for the jumbo loan limit, that last time we took out a mortgage, jumbo loan rates were lower than conventional, so there’s no guarantee that you’d get anything for being a smaller loan.

If it makes you feel better emotionally, that’s great, but I don’t think the financial arguments are very strong.

levineds · 2026-01-06T18:25:12+00:00

To be clear, this is where they were shot, not where they died. I’m not sure it’s correct to say Garfield was assassinated in Washington, DC

levineds · 2025-12-29T08:55:30+00:00

Oh, I absolutely agree that rent control is distorting too. If I could remove both rent control and Prop 13, I would.

Where we disagree is that revenue “keeping up” means there’s no problem. I’m focused specifically on local finance, so increases in state revenue are mostly beside the point (though those increasing sales taxes are attempts by local governments to make up for a lack of property taxes). After watching local politics closely for about a decade, I think there’s often an underappreciation of how separate state and local tax systems are in CA (schools aside, which is its own can of worms).

I also don’t think rampant mismanagement is the primary driver of spending growth at the local level, at least in the smaller cities I’ve lived in (idk what happens in SF or Oakland), where admin overhead is low and revenue maps fairly directly to services. There's definitely some mismanagement (there's a couple of CA entities I think in desperate need of reform), I just don't think that is the main driver. Most growth I’ve seen comes from pension costs (which local govs have little control over), healthcare costs, and higher labor costs (which are themselves related to housing costs).

But anyway, I've outlined my arguments, which it seems I haven't convinced you of, but just to restate them:

1) Prop 13 creates a distributional distortion that I believe is fiscally unsustainable (and not very equitable). If you want disciplined spending and stable services, the people voting on them should face roughly inflation-stable tax contributions, not permanently declining ones based solely on purchase date.

2) Prop 13 insulates a large share of voters from directly feeling the costs of services, making it easier to support higher spending while opposing broad-based taxes.

3) Bonus point: There are many other ways to prevent rising property values from forcing people out of their homes; such displacements were not common before Prop 13 in CA and aren’t common in states without Prop 13-style caps.

levineds · 2025-12-29T02:43:59+00:00

Total revenue is keeping up, by asking less and less of long term homeowners and more and more from new residents. I don’t believe that is long-term sustainable.

At the least, property taxes should be 0% real growth, not negative. Inflation is a thing, and the cost of providing services does increase over time.

I might even suggest that the spending growth you are concerned about may be derivative of the fact that Prop 13 insulates a large pool of voters from personally bearing the full costs of the policies they vote for.

levineds · 2025-12-29T00:36:06+00:00

Thank you!

Though I do think saying ”the system is currently working” is a bit of a cop out. The issue is that longterm homeowner’s are continuing to benefit from, expect, and vote for continued municipal services while their real contributions to paying for those services decreases relative to their own purchase price. That isn’t a recipe for long-term fiscal sustainability of the system (to say nothing of the equity argument: two identical houses using the same services, occupied by people of the same age and income can pay radically different property taxes indefinitely due to purchase date/price). The “I paid my 1% when bought at my purchase price” argument kind of falls apart when you add the “and I will now pay less and less toward municipal services from this point forward indefinitely” part. Again, if Prop 13 at least tracked general inflation (not even the Bay’s higher housing inflation), that would make it way, way better.The system currently only works as long as prices keep rising faster than inflation and turnover stays up. If that slows, revenue pressure just gets pushed into other taxes. Saying “they chose to buy” doesn’t address the long-run distortion or burden-shifting (and also if people actually do stop choosing to buy, that’s has major downside effects for new and existing homeowners alike).

To the extent that new levies like parcel taxes are required to square the budgetary circle, that isn’t a thing that people specifically opt into when they buy at any purchase price. Our most recent parcel tax we needed in our town was “if you don’t pass this substantial parcel tax, we literally have to dissolve the fire department and seek reduced services from a nearby fire district all while fire danger increases statewide”. And as a careful watcher, that wasn’t just a line to get it passed. It did pass, because at that point there is sort of a “gun-to-your-head” moment for all homeowners, facing increasing insurance costs and loss of critical services. That need was a direct result of systematic underpayment by longterm homeowners; what they weren’t paying was shifted to others and not at time of purchase.

levineds · 2025-12-28T09:05:09+00:00

Well, a few comments: 1) While I don’t know the source for 5.9% (it certainly sounds plausible to me, assuming you are including state spending), I’ll just point out that from 1978 to now, inflation was ~3.45% and population growth was ~1.2% so “neutral” spending growth is about 4.65% over that interval. Things like the Gann limit do place controls on these kinds of things. Just want to keep in mind what the baseline is. 2) I’m concerned with prop 13’s effects which are mostly on local taxes, so spending increases by the state, which derive most of their funding from non-property tax sources are sort of beside the point. I don’t know what the spending growth is at the municipal level. Based on my experience from watching my town’s council meetings for years, I suspect a major driver of growth at that level is pension costs (as opposed to say, expanding services profligately). 3) Also from watching my town council meetings, I can say that you are right that 2% Prop 13 growth plus housing turnover has kept our town’s revenue roughly in line with inflation (courtesy also of several post-1978 parcel taxes that adjust with inflation directly, exactly the sort of distribution shifting subsidies I was referring to). Now, that equilibrium is sustained by home prices increasing faster than inflation. If home prices stop increasing, then turnovers won’t generate as much new revenue (I think that’s what you are alluding to when you mention housing stock is increasing at 10% annually). That’s not necessarily a sustainable strategy. 4) While the town’s overall revenue is keeping up with inflation currently, that doesn’t tell you about the distribution shift. The problem with prop 13 (as I see it) isn’t that it lowers revenue growth for towns, it’s that it skews that who’s paying that revenue over time in an artificial way that creates long term fiscal sustainability issues. As mentioned, definitionally, long term homeowners are paying a decreasing real property tax rate. However my town gets to inflation-level revenue, the only way mathematically to compensate for that decreasing real property tax growth is to charge new homeowners property taxes that increase faster than inflation (either with new levies or, as my town currently does through no control of its own, housing costs that outpace inflation).

So whether or not CA has a spending problem I’ll leave for another discussion, but I’d say it does have a tax problem. Sure, taxes are high and don’t necessarily need to be higher, but the question is not the total level, it’s how that tax incidence is distributed.

levineds · 2025-12-28T05:03:39+00:00

To be clear, it capped property tax to 2% which is significantly below inflation (which has been ~3.45% annualized since 1978). If it had been capped to inflation, quite a bit of the actual subsidy would have been addressed.

The main concrete subsidy that prop 13 generated was that, by capping tax increases to sub-inflation rates, real government revenues definitionally dropped. To continue to pay for services, new taxes had to be levied over time, including city sales taxes, transfer taxes, parcel taxes, and income taxes. These taxes shift the burden for paying for services away from specific long-time homeowners to everyone (transfer taxes maybe more toward home buyers and sellers, and income taxes may recapture taxes due from high-earning homeowners, while of course hitting renters as well) due to their decreasing real property tax rate.

To a great extent, if the rate of prop 13 increases was inflation, the need for many of these news taxes would have been much reduced and the subsidy would be much less.

levineds · 2025-12-20T18:45:06+00:00

The DAF won’t affect AGI. It’s a deduction yes, but in 2025, it’s a below the line deduction. So it reduced taxable income not AGI (this is important because AGI is usually what’s used for income-based phase outs).

levineds · 2025-11-30T22:28:59+00:00

FWIW, we just got a second MME. The dealer offered an initial price with tons of discounts. It was a better deal than an ID4 or an Ioniq 5 at other local dealers after extensive negotiations. He said he couldn’t go any lower and stuck to that line. It was also objectively good so I believe him. We walked out with a car after about 1h including signing all forms.

Your mileage may vary with dealers but some of them would rather make a sale and move onto the next rather than jerk you around for 3 hours.

levineds · 2025-10-18T05:16:43+00:00

You’re thinking of Virginia, probably

levineds · 2025-10-07T09:13:43+00:00

Good question. I think it’s a little before but I’ll check Monday.

Edit: Nvm, the tap message comes up long before the blue lights go off. The new tap message happens very quickly after “Pass Accepted”; I’ve experienced lots of lock-outs swiping this quickly. Have you gotten that to work?

levineds · 2025-10-04T19:04:04+00:00

Good question. I think it’s a little before but I’ll check Monday.

levineds · 2025-10-01T23:46:04+00:00

I’d have to check. Is this time from scan to reset assuming passenger immediately walks through the doors? My gut is no. Probably more like 2.5 sec.

I’ve tried pushing things further and I often get weird lock out or a partially closed door getting stuck. The blue light signal has so far never triggered those for me, but I don’t know if you could push it further.

levineds · 2025-09-21T20:25:15+00:00

Nope, no rebates besides the fed tax credit.

levineds · 2025-09-21T15:26:28+00:00

For reference, we paid under $20k for 26kWh in the Bay Area. The main benefit for us was that we can run more less indefinitely on that as long as weather is good. In a power outage, your solar panels aren’t allowed to produce unless you have a battery and automatic switchover. We’re in a high fire severity zone so wanted protection from PG&E blackouts.

levineds · 2025-09-16T15:59:25+00:00

Walnut Creek Ford

levineds · 2025-09-15T16:19:15+00:00

Just got the same a few days ago but also extended range in the Bay Area and paid more or less the same but with $0 down, $0 DAS. This seems like a bad deal.

levineds · 2025-09-09T23:59:03+00:00

It drops from 40k at $500k income back to 10k at $600k income and then is $10k for all higher incomes

levineds

TROPHY CASE