What does it really cost to own a home?

Property taxes stay predictable, thanks to Prop 13

California has one of the most buyer-friendly property tax systems in the country. Under Proposition 13, the base rate is capped at 1 percent of your purchase price, and annual increases on that assessed value are limited to no more than 2 percent, no matter how much the market value rises. Your taxes are calculated on what you pay, not what the previous owner paid decades ago, so expect them to reset to the current purchase price.

In practice, effective rates are slightly above the base because of local voter-approved bonds and special assessments. Sacramento County runs around 1.19 to 1.20 percent, roughly $5,950 to $6,000 on a $500,000 home. Placer County, around Lincoln, runs about 0.84 to 1.12 percent, and Sutter County, around Yuba City, about 1.08 to 1.18 percent. Some newer communities, particularly master-planned developments in Lincoln and Plumas Lake, may also have Mello-Roos or Community Facilities Districts, so I always make sure clients know about those before making an offer.

Insurance, closing costs, and the expenses people forget

Homeowners insurance in California averages $1,300 to $1,700 per year for a standard policy, which is lower than the national average, though homes in higher wildfire-risk areas can see premiums two to six times higher. Most communities I serve in Sacramento, Lincoln, Yuba City, Plumas Lake, and Wheatland sit in lower-risk zones relative to the foothills, so costs tend to be manageable, and your lender will require proof of insurance before closing.

Closing costs typically range from 2 to 5 percent of the purchase price: think lender fees, title insurance and escrow, recording and transfer taxes, prepaid property taxes and insurance, and an inspection. Some of these can be negotiated with the seller, especially where homes are sitting a little longer. On top of all that, budget for maintenance, utilities, landscaping, and HOA fees where they apply, about 1 to 2 percent of your home's value each year for upkeep.

Prop 19: a real advantage for downsizers

If you are 55 or older, Proposition 19 lets you transfer your property tax base to a new home anywhere in California up to three times. If you have owned your current home for decades and pay very low property taxes, you can take that benefit with you when you downsize or relocate, which is a significant advantage for empty nesters and retirees who want to move without a massive tax increase. For inherited properties the rules have tightened, so if that situation applies to you, it is worth a conversation with a tax professional and your agent.

Build the full picture into your budget

The key is to look at the whole picture, not just the mortgage payment. Whether you are choosing a master-planned community with HOA amenities in Lincoln or Plumas Lake, or a no-HOA neighborhood in Sacramento or Yuba City, I help every client build a realistic monthly cost estimate before they start looking, so they know exactly what they are comfortable with.