The volume of house sales is looking a little more robust these days, but the prices they sell at continue to plummet. In most metropolitan areas, home prices are down more than 10% from last year.
Like most renters who hope to buy, I'm rooting for a continued fall, at least in the DC area. (Sorry, homeowners). For people like me in other cities, a new report from Deutsche Bank provides some reason for pessimism about the economy, but optimism about their personal prospects for homeownership: they rate overvalued cities, and are looking for price drops from 20% in San Luis Obispo all the way to 47% in New York City.
This actually won't hurt New York as badly as it sounds; only 30% of people there own their own homes, and property taxes aren't nearly as vital to the local tax base as they are in most places. Indeed, it might slightly ease New York's notoriously tight vacancy rate--unless the legislature gets in there and rolls back stabilization decontrol, as it currently seems to be planning. Unlike places like Florida, where the real estate market actually drives much local economic development, the price drops will be more a symptom of New York's decline than a likely cause.
Still, 30% of New Yorkers is a lot of people. And a fair number of them probably need to sell their largest asset so that they can get the heck out of New York, and the finance industry, and start over with a more sustainable life.
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I still don't understand why people think falling property prices are likely to mean declining property taxes. I will believe that property taxes decline with property values when I actually see a real life example of it.
If revenues fall, it will be because the property owners have greater trouble paying the bill, but then the local government can seize and sell said property.
I don't understand the first part of your comment. Taxes are tied to property assessment, and if the property is reassessed at a lower value, that means less taxes owed. Unless, of course, thee tax rate is raised to make up for the revenue shortfall, and good luck with that one in this economy.
Local governments, in my experience, can rarely muster the will to reassess property when prices are going up. I can't imagine them putting a whole lot of effort into doing it when prices go down.
I can't imagine them putting a whole lot of effort into doing it when prices go down.
In California, assessed values don't increase very fast until the property is sold. Many people here will see their property tax increase this year because their assessed values are still far below the market price for the property. If your assessed price is above the market price, then you just need to fill out a form with proof of market value (appraisal, comps etc.). From what I've heard, it's a relatively painless process. This doesn't speak for New York, but it's not difficult to do everywhere.
They are, but good luck getting that appraisal revised. Here in Colorado most of the county governments get a majority of their operating budget from property taxes, and will henpeck your application royally if you file a request. Unless you want the trouble of suing the county -- always riskier and more expensive than just paying the taxes -- you have to live with the bureacracy's decision.
Routine re-assessment is done on the basis of average selling prices in the area, so there can be a year or more lagtime in seeing a significant change in taxable value.
Yancy is refering the fact, which seems to be remarkably little-known, that most property taxes fix the total levy, not the rate.
For example, when a $10M/year passes, the county tax office divides $10M by the total value of all property in the county each year to calculate the rate for that year. The property tax is a way to ensure that each person contributes in proportion to the value of their residence, but the county is going to get its $10M regardless of what happens to total value of property. Changes in the value of your house relative to others will change your contribution, but not uniform changes to the value of all homes.
(There are some property taxes that really do fix a rate, but in my experience they are small ones like a "noxious weed abatement tax".)
In the days of endlessly rising home prices, levy supporters would ofter use this fact as a disenginuous argument. "Approve the renewal of this levy and your property taxes will still go down!" What they meant was that, because property values were projected to rise, the tax per assessed value would fall -- but the average payment would stay the same or rise since the levy was for the same or a larger ammount.
I agree- in most places I've lived, reassessments are purely voluntary and the whole assessment business, or racket, is magical thinking rather than the kind of assessment you'd make on a property you were thinking of buying or selling.
Where I live, property values were reassessed in 2006, at the height of the boom. There's no way to get it revised downward for current home owners, but I'm told that if I sell my place for less, the next owner can appeal to have his property value assessed at his purchase price, rather than that 2006 price.
Don't all property owners pay property tax? So renters will see higher taxes in their higher rents... oh, wait, this is NYC... they'll see higher taxes in reduced services and maintenance.
StanB - I suspect that most municipalities just raise the rate if the property assessments drop significantly.
P.S. Please no more threaded commments!
right now is an excellent time to rent in NYC.
Wish I had the money, though, to buy.
Stan B,
The mill rate will be raised even if they are actually honest enough to reevaluate the property's value downwards. In my town, the property values and the mill rate have both risen at every adjustment in the last 10 years.
I have yet to live in a local government jurisdiction that ever cut its budget from one year to the next. I will get to see my town's coming budget in the next few weeks, and I expect to see nothing different this time.
Housing in LA still has another 30% to go, in my opinion. In certain neighborhoods, one out of every three houses is on the market, and that's in urban core areas that were thought to be more resistant than far-flung suburbs. Volumes may be up, but that's only because of foreclosures or short sales. I think we have another two years before we see the bottom out here.
Even after falling 47%, NYC housing prices would STILL be ridiculous.
"Like most renters who hope to buy, I'm rooting for a continued fall, at least in the DC area. (Sorry, homeowners)."
I wouldn't wait too long if I were you. First, the national average declines are skewed by the enormous declines in bubble states such as CA and FL. Second, our new era of big government means boom times for your area, D.C. Third, I wouldn't count on mortgage rates staying this low indefinitely.
"47% in New York City"
No. 47% in the New York-Wayne-White Plains, NY-NJ Metropolitan Division.
No amount of tax credits or deductions can change the fact that, while land is an investment, houses are a depreciating consumer good.
House prices may not fall much more in nominal terms, but adjusted for inflation they have a lot more plummeting to do. It's not just the unoccupied houses that we have too many of. It's the under-occupied houses.
El Paso, Texas is right across the river from Ciudad Juarez, Mexico. El Paso has twice the housing and half the population at its sister city, which means Juarez has four times the density. The average worker north of the border makes four times his Mexican counterpart's wages. What this suggests is that as the U.S. gets poorer (and therefor more like Mexico), we will pack more people into fewer and smaller houses.
Resale values are going to go down for a long time. Don't buy a casa grande unless you plan on keeping it for a long, long time or unless you enjoy parting with your dinero.