A warning to homeowners

[VCJIM]

A simple, well-written warning to homeowners. Finally, what we’ve been asking for!

http://www.nctimes.com/articles/2006/07/25/opinion/strickland/22_37_407_24_06.txt

[powayseller]

Strickland did a great job of giving an alternate view. Of course, I agree with him, but what is amazing, is that he has the guts to write it.

[VCJIM]

Most homeowners care what is going on, but do not have / want to take the time to research like we are. So an article full of statistics and graphs, etc. would fall on deaf ears. A simple, well written article will hopefully be effective in preventing some people from financial turmoil.

[rankandfile]

Phil is just giving it to us straight. I got the impression from his words that he was fighting back from sounding too pessimistic. Here’s one particularly alarming excerpt from that article:

“Further, more than half of the 243,000 private payroll jobs added in California since 2003 are linked to real estate in one way or another from construction to mortgage processing.”

This worries me and does not speak of a “well-diversified” economy. I am worried because the more I read, the more I get the feeling that the housing bubble is what got us through the Dot Com bust, 911, and is the reason why our economy is where it is today. All the consumption that has pulled us through these events was driven largely by housing speculation and cheap money from the banks.

[desmond]

If the average homeowner has trouble with the RE market today what excuse will the State (CA) Government use? The State receives tax revenue on transactions (sales) and look at what has happened in CA with sales down 26% in June. I read an article that overall employment in CA was up recently. There were job loses in construction and finance (Mortgage, RE. etc) but that was “offset” with jobs created in Travel (lower paying jobs with less tax revenue). It looks to me at the end of the year the state is going to be deeper in the red and won’t know why.

[powayseller]

rankandfile – the employment numbers are right on, and they were NEVER mentioned by Alan Gin. I asked him about this in my post More Lies by Alan Gin,but neither he nor his students wanted to answer that question: Why are you saying we have a strong economy, when in reality half of new jobs added since 2003 are in real estate?

desmond – yes, government revenue will take a serious hit. As Thornburg said, there go the infrastructure dreams of the current CA Administration. What will happen to San Diego’s budget? I bet their turnaround depends on current income continuing on for decades. Will SD file bankruptcy next year, as sales tax and property tax revenues shrivel up?

[VCJIM]

The aspect of goverment revenue has been on my mind a lot lately too. I believe our governments (local, state, fed) tend to spend what it takes in; it does not tend toward conservation or saving. This is a blanket statement that may have exceptions, but I believe it is the natural tendency.

Moreover, I am doubtful that many financialists within these governments are mindful of housing as it relates to government revenue, specifically what would a housing downturn mean to them?

I can think of two main aspects:

first, the re-evaluation of the house’s tax base one it’s sold. If fewer and fewer homes are sold, there will be that many fewer being re-evaluated.

Second, if property values are declining, there can hardly be a basis for increased property taxes.

So, if our governments are currently spending all of their property tax revenue, what will they do when it is no longer increasing? What will they do when sales tax revenue drops significantly due to lowered consumer spending?

[powayseller]

This is a serious concern. I think the city of San Diego could face bankruptcy, and we will see more budget cuts in Sacramento.

[LookoutBelow]

I see BK on the near horizon for San Diego also. How can it not happen ?

[PerryChase]

Homeowners who have homes drop in value can file appeal for reassessment. I remember in 1990, I got a 20% decrease in my assessed value thus resulting in a 20% decrease in property taxes. The re-assessment is no automatic. Homeowners have to apply to get it. The only problem is the base on which future increases are calculated is not permanent adjusted down. By law, assessments can increase 2% per year compounded annually.

I expect a drop in tax revenue in the next few years. Not only will individual homeowners appeal but so will owners of large hotels and business buildings. That will mean many millions in decreased tax revenue. In the 1990 downturn, SF lost millions from the TransAmerica building alone.

Reporters in the media should periodically ask the County Assessor about the number of appeals. That would clearly indicate a downward trend.

[sdrealtor]

Good common sense article. What I find interesting is that he’s in Temecula which is one of the outlying areas that will likely get hit hardest. My impression is that many working class folks who should be renters in SD went to Temecula and bought McMansions with 2% tax rates. iiiii Thats an area set for a real bust as many of the homeowners there probably should never have been homeowners to begin with.

[SD Realtor]

As PerryChase stated you absolutely can petition a reassesment that will decrease your property tax rate. You do have to apply to have that done.

One of the candidates for mayor was Pat Shea. Of course he had no chance of winning because he made way to much sense. The best medicine is the worst tasting and his platform was one of a BK for the city. Not only would this give the city the best leverage in negotiations with the labor unions, it would also lead the city to a much quicker path of recovery. I believe the current budget proposal by Sanders is shaky at best and I do not feel our city will be on firm financial footing (IN THE BEST CASE) for many many years. Without a BK the city will continue to plod along, suffering through the chokehold of benefits for the pension plan and medical payments that are almost as much or more then the pension fund itself.

[PerryChase]

I agree that bankruptcy is the best way out for the City of San Diego. We need a fresh start instead of plodding along. We need to spend money on city infrastrure rather than slowly paying all those illegal pension benefits. Those benefits need to be taken back.

[equalizer]

SD Realtor

Are you sure you a realtor? You make way too much sense!
Shea should have been elected and fixed the mess. But we got another bozo who is pushing for a library downtown that is completely useless except for his vanity. (name on plaque, etc) He should be pushing for more convention centers. Friends went to comic/con last week and waited in 99 degree heat for 4 hours before leaving. Heard that hour later the Fire Marhall shut down the line because max cap exceeded!!! Only in this city!

[desmond]

The only problem is the base on which future increases are calculated is not permanent adjusted down. By law, assessments can increase 2% per year compounded annually.

When housing prices fall you can have your property re-assessed downward. But if property values rise back to or above your original assessment, the assessor can raise the value all the way back to original amount regardless of the 2% law. This was being challenge in court by a homeowner but I never did hear what the outcome was.

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