The lag time between property tax values and the true reality prices causes shortfalls in local governments. Cities, counties and school districts had been sheltered from the full impact of the slump because of the lag between when realty prices fluctuate and values are reset by local tax assessors. That’s changing as property rolls are adjusted to the current market and residents push to have their taxes cut.
Local officials are now facing the consequences. Property- tax revenue dropped in the last three months of 2010 at the fastest pace since home prices slipped from their peak more than four years ago. The decline may continue as values fall further, adding strains to cash- strapped localities that already fired workers, halted projects and cut spending because of the recession that began in 2007.
The decline for local governments contrasts with a recovery for U.S. states led by income and sales taxes. Collections in the fourth quarter climbed by $13 billion to $177.8 billion. This is the biggest jump since 2006.
In Maricopa County, Arizona, it was reported last month that values of all property dropped by 12 percent for the next tax year, the second straight double-digit decline. In Los Angeles, the second most-populous U.S. city, property taxes for the year ending June 30 are projected to fall 1.7 percent to $1.42 billion.
The strain may mean credit-rating cuts this year for local- government debt, which trades in the $2.93 trillion municipal bond market.
Local and state property-tax revenue slid $5.3 billion, or 2.9 percent, in the fourth quarter from a year earlier to $177.1 billion. All but $3.7 billion went to municipalities.
The slump in the most-active period for real estate revenue outpaced a
2.5 percent drop in the first quarter of 2010, the only other significant decline since prices peaked in 2006.
Residential real estate prices in 20 U.S. cities dropped by the most in more than a year in January. Property values fell 3.1 percent from January 2010, the biggest year-on-year decrease since December 2009. That’s prompting homeowners to seek reductions in the assessed value of their properties.
A symptom of a depressed real estate market has been a proliferation of successful tax appeals. This causes problems because a municipality has already assessed a property, collected taxes and made payments to local school boards and county governments.
Montclair, New Jersey, officials had to remake their budget when tax appeals reduced revenue to $51 million from an expected $53 million in the current budget year. They were forced to make large changes in library services, abolish community pre-kindergarten and lay off 12 municipal workers.
Only 15 percent of counties raised property taxes to make up for the lost revenue. Such a strategy can draw voters’ ire, as Carlos Alvarez, the former mayor of Miami-Dade County, Florida, found out. He was thrown out in a recall election on March 15 after he boosted property-tax rates last year to make up for a drop in home values.
Many local governments have been anticipating the revenue slide and cutting budgets to compensate. They’ve eliminated 377,000 jobs, or 2.7 percent of payrolls, since employment peaked in September 2008. The usual cost cutting has already happened and now deeper cuts are being made to compensate for the loss of revenue.
15 March 2011
Upswing Expected To the Home Remodeling Market
During the recession many home owners saved their dollars, however, this year is forcasted to show an upswing in home improvement. Spending on remodeling probably will rise 9.2 percent to $125.1 billion in the first quarter from $114.6 billion a year earlier. A 13 percent increase forecast for April through June would be the largest jump in five years. which is good news for those in home remodeling Parma, Ohio and home remodeling Chagrin Falls, both areas that were hit hard by the recession. Home-improvement retailers are preparing for a spring sales bump as homeowners consider upgrading rather than selling their houses at a discount in a struggling market. These are signs of recovery in the economy are encouraging people to spend money on work they may have been putting off for years.
Spending on renovations may increase 3.5 percent annually through 2015. The data measured includes hours worked by remodelers and retail sales at building materials stores. The gain follows a decline that started in the third quarter of 2007 and sent spending to a six- year low of $112 billion in 2009.
New owners of discounted, foreclosed properties and a tax credit for energy-efficient windows and modifications will help drive remodeling demand. The bulk of spending during the next five years will be on replacements and upgrades rather than high-end projects.
The Residential Remodeling Index by Asheville, North Carolina-based BuildFax showed demand for remodeling rose 18 percent in December from a year earlier, the property data provider said Feb. 15. The index tracks the number of construction permits issued for home improvements in specific metropolitan regions.
Home Depot and Lowe’s, the largest U.S. home-improvement retailers, said they plan to hire additional seasonal workers during the next few months. Both companies in February reported fourth-quarter profits that exceeded analyst estimates, and Home Depot raised its earnings forecast for the year.
Improving employment and consumer confidence are drawing customers back stores.
The U.S. unemployment rate fell to 8.9 percent in February, the lowest in almost two years, the Bureau of Labor Statistics reported last week. Retail spending probably will increase 4 percent in 2011, according to the National Retail Federation.
Many people are holding onto their homes until the value can improve. While they are holding onto these properties they are putting some well deserved money into renovating.
Some property owners are stuck in their homes after falling values left almost a quarter of mortgage holders owing more than their residences are worth. U.S. home prices fell 2.4 percent in December from a year earlier and are down 31 percent from the July 2006 peak, based on the S&P/Case-Shiller index of values in 20 cities. A Chapel Hill Real Estate Agent was hopeful that the increase in home remodeling would eventually lead to improvement in the home sales market.
The negative equity may limit remodeling projects as it dries up a source of funding. Americans spent about $63 billion a year from home-equity loans on renovations during the 2000 to 2005 real estate boom.
Home Depot, the largest U.S. home-improvement retailer, said on Feb. 22 that earnings per share excluding some items will increase as much as 9.5 percent this year, up from a December forecast of no more than 9 percent. The company is hiring more than 60,000 temporary workers to handle an expected spring sales surge.
The average Home Depot purchase jumped 2.6 percent in the fourth quarter, the most in more than four years, though consumers are favoring smaller improvements and are still cautious about spending on major renovations.
Lowe’s plans to hire 50,000 seasonal workers this spring which is up from 43,000 a year ago.
The driving force behind this year’s spending increases will be baby boomers, the first of whom are reaching 65 and preparing their homes for retirement. Raleigh Homes and Cary homes in North Caroline are expected to see a small increase in home sales as the baby boomers look to relocate to desirable locations.
Spending on renovations may increase 3.5 percent annually through 2015. The data measured includes hours worked by remodelers and retail sales at building materials stores. The gain follows a decline that started in the third quarter of 2007 and sent spending to a six- year low of $112 billion in 2009.
New owners of discounted, foreclosed properties and a tax credit for energy-efficient windows and modifications will help drive remodeling demand. The bulk of spending during the next five years will be on replacements and upgrades rather than high-end projects.
The Residential Remodeling Index by Asheville, North Carolina-based BuildFax showed demand for remodeling rose 18 percent in December from a year earlier, the property data provider said Feb. 15. The index tracks the number of construction permits issued for home improvements in specific metropolitan regions.
Home Depot and Lowe’s, the largest U.S. home-improvement retailers, said they plan to hire additional seasonal workers during the next few months. Both companies in February reported fourth-quarter profits that exceeded analyst estimates, and Home Depot raised its earnings forecast for the year.
Improving employment and consumer confidence are drawing customers back stores.
The U.S. unemployment rate fell to 8.9 percent in February, the lowest in almost two years, the Bureau of Labor Statistics reported last week. Retail spending probably will increase 4 percent in 2011, according to the National Retail Federation.
Many people are holding onto their homes until the value can improve. While they are holding onto these properties they are putting some well deserved money into renovating.
Some property owners are stuck in their homes after falling values left almost a quarter of mortgage holders owing more than their residences are worth. U.S. home prices fell 2.4 percent in December from a year earlier and are down 31 percent from the July 2006 peak, based on the S&P/Case-Shiller index of values in 20 cities. A Chapel Hill Real Estate Agent was hopeful that the increase in home remodeling would eventually lead to improvement in the home sales market.
The negative equity may limit remodeling projects as it dries up a source of funding. Americans spent about $63 billion a year from home-equity loans on renovations during the 2000 to 2005 real estate boom.
Home Depot, the largest U.S. home-improvement retailer, said on Feb. 22 that earnings per share excluding some items will increase as much as 9.5 percent this year, up from a December forecast of no more than 9 percent. The company is hiring more than 60,000 temporary workers to handle an expected spring sales surge.
The average Home Depot purchase jumped 2.6 percent in the fourth quarter, the most in more than four years, though consumers are favoring smaller improvements and are still cautious about spending on major renovations.
Lowe’s plans to hire 50,000 seasonal workers this spring which is up from 43,000 a year ago.
The driving force behind this year’s spending increases will be baby boomers, the first of whom are reaching 65 and preparing their homes for retirement. Raleigh Homes and Cary homes in North Caroline are expected to see a small increase in home sales as the baby boomers look to relocate to desirable locations.
Subscribe to:
Posts (Atom)
