A double whammy for homeowners
Here’s the next shoe to drop with the collapse of the real estate market: rising local taxes.
For most homeowners the plunge in values, which has left a significant portion of the market under water, is bad enough.
But the real estate crash is now poised to devastate local cities and towns across the country, many of which are now faced with tax bases that have shrunk dramatically overnight.
So while the assessment on your home may be going down, your local tax assessor will have to boost the tax rate to make up for all those home values that have vanished over the past two years. Roughly $3.3 trillion in property values disappeared last year amid the downturn, Zillow.com has reported.
Bloomberg offers a pair of interesting stats that get to the heart of this budding crisis
City officials across the country have budgeted for a 3.6 percent drop in residential taxes, according to a recent survey. But home values declined 12.4 percent in the fourth quarter over the same period in 2007.
So to make up for the gap, local officials are increasingly boosting tax rates. Even laws aimed at curbing property tax increases – Proposition 2 ½ override anyone – aren’t enough to stop desperate local officials.
Compounding matters, other sources of local revenue, such as sales taxes, are also down.
Property taxes in Manhattan, for example, soared 7 percent in December, even as prices of condos and apartments dropped 4 percent, the story notes.
Don’t gloat, though, because this is one story bound to be coming to your town too.
