Live from Austin!

We filed our taxes today. We’ve been hit with a sudden tax bill to the tune of over $20,000. It turns out that after a certain number of years, property you aren’t living in automatically gets taxed on the assumption that it’s a profitable side business, rather than your only piece of real estate. Worse, standard practice in the US is to pay taxes on real estate on the basis that it gradually loses its value (yeah, right), and then pay the difference when you sell it.

Still, at least we can pay it off by wiping out the savings account. If you can’t cough up immediately, the IRS charges you 6% interest per month.

Still, Jesus H. Christ in a chicken basket. If this doesn’t make me turn Republican, nothing will.

Yesterday was house inspection time. Although it’s a brand-new house, we opted to pay to have an experienced independent inspector spend the afternoon looking at it with us.

The short summary: If you ever buy a house, even a new house, you must get it inspected. If you’re buying a house in Austin TX, I would highly recommend contacting Brent Hays.

The construction has some major structural defects. For instance, someone decided it would be a good idea to build the decks with no gaps between the boards and the boards sandwiched into load-bearing columns. The worst thing, though, is that the foundations are a disaster waiting to happen—the builders had used narrow wooden shims instead of steel plates, so eventually the breezeblocks underneath would have cracked and the entire house would have started to subside.

The garage is also a disaster. The entire thing needs to be 8″ higher, apparently. Right now, rain trickles down the garden, piles up along the garage wall, and forms a small pond. Oh, and the roof isn’t actually fixed properly to the rest of the garage.

Supposedly the house stuff is fixable, so we’re going to get a structural engineer to put together a plan and costing, and then approach the sellers with that. The garage ought to be torn down and rebuild properly, but could possibly be patched up with quite lot of work. The question is whether we want to wait around for the fixes, or whether there’s something else out there.

Crystal posts a link to a Boston Globe story about property prices in Massachusetts.

Houses here cost so much because there are too few of them for all the people who have been drawn to Boston because it’s such a great place for great minds to do great things. But that reputation, which has kept Boston competitive all these years, is beginning to buckle under the weight of absurd home prices. Even in a recession, Boston’s world-renowned hospitals, higher-education institutions, and biotech firms admit they are seeing their job offers turned down like never before, largely because of housing costs.

[...]

The Census Bureau says Cambridge is the city with the highest percentage of $1-million- plus single-family homes in the country. But this is a surprisingly recent phenomenon. Beaty has to go back only as far as 1986 to find Cambridge’s first million-dollar sale.

It’s the beginning of the end for Davis Square. Diesel only just survived being priced out, and there now appear to be two swanky upscale cocktail bars opening at once, each complete with chic frosted glass windows and ultra-modern designer furniture.

Meanwhile in Harvard Square, it’s so bad that the clothing chain stores like Abercrombie and Fitch are being priced out and replaced by boutiques selling Swiss watches.

An insightful comment from Robert Blatman, an obstetrician quoted in the Globe article:

“The crazy thing is, if I can’t afford to live in these areas, what about the teachers and the firemen? It really worries me that, at some point, this has to erode the quality of life that made the real estate around here so desirable in the first place.”

And that’s the problem. It’s not sustainable. As people making normal wages leave the state (10,000 a year on average), their homes go to developers and owner-speculators, not to another normal family. Ordinary businesses can’t get staff, because the only people within an hour’s commute who can survive on normal wages are the few still living with their parents. Which, in turn, means that everything from groceries to medical bills to utility bills gets jacked up 40% or more to compensate for the increased overheads.

So sooner or later, people start to look at their crummy 2 bedroom rented apartment with the rattling windows and chronic dust bunny infestation, and look at their bills, and then look at other parts of the country…and that’s why we’re leaving. Even if we had a million bucks, we wouldn’t be spending it to get a 2 bedroom house here. Cambridge is nice, but it’s not that nice.

Furthermore, it’s plain that the local powers-that-be aren’t going to do anything about the problem. If they’re lucky, the Boston metro area will turn into another Manhattan. If they’re unlucky, there will be a big crash. I don’t want to be around for either of those scenarios.

As suspected, the buyers of my UK flat were stalling so they wouldn’t have to pay an extra month of mortgage payments. As soon as September rolled around they suddenly decided they wanted to exchange documents as soon as possible, with completion set for the 13th.

In related news, UK mortgage lenders have just announced that property prices just dropped for the first time in years:

Martin Ellis, chief economist at Halifax, said: “This looks like the start of a genuine downturn. It has been coming through in some surveys and lending numbers, and now it is showing up in our price data.

“We are not really surprised. It was only a matter of when it would come, rather than if.”

House prices have more than doubled in seven years, driven by falling interest rates and strong growth in incomes and employment.

Their rise of more than 20% in the past year means homes are overvalued by any long-term measure, especially when compared with average income growth.

And I bought the place right after a price crash, paying less than the first owner had paid. Excuse me while I cackle gleefully. Now, if Bush can just get the dollar to drop a little further against the pound… it’s back to £=$1.77, which is pretty good, but not as good as a few weeks ago.