Many people are drawn to Palm Springs because its home prices are lower than those in other Southern California cities, but when it comes time to sign a contract, they often wonder, 'Is it really affordable when you factor in property taxes and maintenance costs?'

In California, Proposition 13 keeps the basic property tax rate at 1% of the assessed value, and the final effective tax rate is determined by adding local bond repayments. In Riverside County, areas with many new communities may see effective tax rates rise to over 1.5% due to special assessments.

The recent median home price in Palm Springs is around $630,000. Applying a typical effective tax rate of 1.2% means annual property taxes would be approximately $7,560, but communities like Escena, which have not been established for long, may have higher rates.

When preparing for insurance, you should consider the extreme heat typical of desert climates and the earthquake risk from the San Andreas Fault that runs through the Coachella Valley. While the flat areas of the city have a relatively low risk of wildfires, communities on the hills face a higher risk of brush fires, leading to varying insurance costs, which you can expect to be around $1,300 to $1,900 per year.

Maintenance costs are typically 1-2% of the home price, but many mid-century modern homes built in the 1950s and 60s in Palm Springs may soon need stucco exterior repairs or air conditioning system replacements. Considering this, applying the upper end of 1.5-2% is safer, which means for a $630,000 home, you should budget around $9,500 to $12,600 annually.

Since Palm Springs has a high proportion of condos and gated communities, checking the HOA fees is essential. Monthly fees can range from $300 to $600, totaling $3,600 to $7,200 annually, which is a significant part of the overall ownership costs.

Compared to nearby Desert Hot Springs or Cathedral City, home prices are lower, but the tax rate structure is not significantly different, and ultimately, the choice of community will affect the burden of HOA and insurance costs.

For homeowners, a homestead exemption allows a $7,000 deduction from the assessed value, and if you are over 55, Proposition 19 allows you to transfer the lower assessed value from your previous home to a new purchase, so if you are considering relocating after retirement, be sure to take advantage of this.

When you add property taxes, insurance, maintenance, and HOA fees, the annual ownership cost for a median home in Palm Springs is approximately $22,000 to $24,000. Rather than just looking at the sale price and thinking it's affordable for Southern California, I recommend calculating these additional costs before making a decision.