AN, you have to include the $100K whether you sell the house or not. The expense is incurred as principal payments over the course of the loan. I do get why you were thinking of it another way, since if you do sell before 30 years, you will have to figure the principal payed down offset by sales price. (and I’m not picking on you either. can’t forget I had a $90K oops).

So, this means that you have to use your second scenario where the lower price wins by $52K. The reason I have it as less that you do ($14K) is because I used 28% for the tax break (vs. 37%), 1.05% for the property tax rate (vs. 1.09%), and most importantly, didn’t apply annual prop 13 basis increase. I had considered that, but also knew that it would take more work and just improve my numbers anyway (also, isn’t it a 2% annual increase?)

That said, I’ve since realized that along those lines, the buyer of the more expensive house can help themselves tremendously by appealing the value when the prices drop. E.g., just a few years in, you can get the basis dropped to the $500K number. I don’t remember how long you can keep it there, but you can probably do it until real appreciation occurs. When/if this happens, the advantage swings back to the lower priced house because the original bases will come back into play. Even so, if you got to take advantage of that for like 10 years or something, that would be great.