Wikinvest Wire

Assessors mark to market

Sunday, July 05, 2009

Those of you who were around during the late-1980s/early-1990s real estate boom/bust will surely remember all the homeowners who requested that their property taxes be reduced after home values declined. The situation seems much more dire this time around as detailed in this story in the New York Times and codified in the caption for the photo below.
IMAGE What struck me as very surprising, something that, here on the West Coast, falls into the category of "unthinkable", were the exorbitantly high tax rates in places like New Jersey.

I've long heard of people fleeing to Pennsylvania to escape property taxes to the east, but the figures for Ms. Tombro's tax situation detailed below are just mind-boggling.

New Jersey, which has the nation’s highest property taxes, has been besieged by tax appeals from homeowners like Peggy Tombro, whose rambling home in Bound Brook is assessed at a value of $1.8 million but is languishing on the market with an asking price of $1.3 million. Her taxes are increasing to $53,000 a year.

“I don’t know what else to do,” said Ms. Tombro, 63, who has gone back to work selling antiques to pay her tax bill.
She's going to have to sell a lot of antiques...

With entire neighborhoods populated by million dollar homes quickly vanishing, the days of plentiful $25,000 a year property tax bills also appear to be numbered, boding ill for the spendthrift ways of many local and state governments.

Surely, the case of New Jersey property taxes is an extreme one.

For example, in California, the tax bill that comes after the purchase of a $1.3 million home would be around $16,000 rather than an amount that approaches the national median household income.

Of course, the State of California also has a bit of a budget problem these days, so maybe that's not the best example to use.

Perhaps even more intriguing than the ongoing adjustments being made by typical Americans as a result of the new economic reality that has arrived on all our doorsteps will be the changes that state and local governments are forced to undergo, kicking and screaming all the way, most likely, a process that has just begun.

Naturally, the biggest and baddest adjustment of them all will someday come at the Federal government level where spending beyond ones' means has not only become accepted practice, but a way of life.

That too will change someday...


This week's cartoon from The Economist: IMAGE
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GawainsGhost said...

Well down here in the lower Rio Grande Valley, in deep South Texas, we didn't see the rapid price appreciation that the bubble areas saw. But we did see overbuilding, much like everywhere else. And this area does have a high foreclosure rate, which is good for us since our company deals mainly with repossessed homes.

An article in the local paper last week said that the McAllen area was the only metropolitan area in the country to experience job growth and wage increases. I'm not sure I believe that, because I don't think anyone is immune from the recession. Home prices here have declined 6-10% from last year.

But that didn't stop the county appraisers from raising property taxes by basically doubling the valuation on just about every property in the county at the beginning of the year. It caused quite an uproar. Thousands of people stormed the appraisal office in protest.

Our partner happens to be the head of the appraisal district, which is nice work if you can get it. He was hospitalized with high blood pressure last month.

Anonymous said...

How are older home owners to keep up with increasing property taxes? The house payment stays constant but property taxes never stop going up and up. Schools have a voracious appetite for more dollars and don't seem to care about the harm this does to those on fixed incomes.

Many older folks count on fixed income investments to generate at least part of their property tax bill. But Greenspan and Bernanke keep sending interest rates to 0% to help their elite Wall Street buddies, killing the income that helps pay the property tax bill.

Part of my retirement plan is to work hard to pay off my mortgage so that when I retire and have no earned income, I would also have no principal and interest house payment. It is a shame that you could work your entire life to pay off your mortgage only to find that you can't afford your property taxes.

Now we could all work until we drop dead, but that assumes somebody will hire an old person with the inevitable health problems that occur as our minds and bodies age. What if nobody will hire you?

Tim said...

Welcome to the "new normal"...


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