The way I see it, your assessment basis from a 1989 sale in 2006 would have increased about 25% or so above the purchase price. What’s at issue here is the difference in property taxes between your current assessment and whatever your new assessment would be on a 2001-2003 home in northern SD in 06/2008.
Given the price ranges involved, I’d be surprised if it was more than about $5,000/year.
So the question here is really whether you think it’s likley that the pricing in those areas will recede enough after 06/2008 to justify foregoing the advantage of buying by then.
For the sake of argument let’s say that you were buying a home in 4S that at its peak would have sold for $850k. Let’s say that by 06/2008 the pricing drops to $700k. If you think it likely that this home would stabilize at $600k or more you could conclude that it’s better to pay the $700k because of the break in your property tax bill. Bird-in-the-hand type of thing.
However, if you think that the market declines still have a couple years to go after 06/2008, it might make some sense to forego the property tax break. Don’t forget that renting will still be cheaper than buying after 06/2008 and you’ll still have some funds available for other investing while you wait. Play that well and your $5,000/year savings in property taxes – if that – could turn out to be peanuts.
It all comes down to what your opinions are about how long this downtrend will last and how far these prices will retreat.