Feb 6, 2010

Average people have taken a lot of well-deserved grief these past couple of years about the housing crisis. People bought houses they couldn't afford with money they didn't have or they used the artificially high value of their homes to borrow money for stuff they didn't need. Blah, blah, blah.

People assumed that housing prices would just climb and climb and climb.

In most of the country, probably all of the country, state, school and local taxes are levied on the value of real estate. So while real estate value soared, so did local tax collections. State and local governments did what they always do when tax collections are high, they found new and improved ways to spend it on stuff. There is never a shortage of needs, when it comes to government.

Governments assumed that housing prices would just climb and climb and climb.

But, you know what they say about assume, it makes an ASS of U and ME.  One day the money train breaks down.

We got our 2011 tax assessment today. It is 11% lower than this year, meaning the tax man thinks our house is worth 11% less than it was in 2009. There is some kind of two-year lag in valuations.

The various governments in our area, each set a tax rate for each $1000 of assessed value of a house. Then they multiple the number of thousands by that rate to set a tax bill. Our rate last year was $11.77 per thousand.

While houses prices rose the past few years, our taxes also rose. In fact, we pay 25% more in property taxes than we did five years ago, so an 11% drop next year will be quite a relief.

But of course we will never see any of that 11% drop in taxes because our local governments and our school district are broke. Just like governments all over the country.

Once government spends money on programs or operating expenses, there is really no way to lower that spending next year.

Just look at what happened to Social Security this year. Inflation was basically non-existent according to the CPI, so SS recipients got no annual increase. All hell broke loose. Imagine what would happen if people had to take a real decease.

In fact, only in government can reducing annual increases in spending from a 10% increase to a 7% increase be called a cut in spending.

So, our tax bill next year will no doubt be higher. Our rate will likely rise at least 11%, just to keep things as they are. Which you might recall is broke.

Things in this blog represented to be fact, may or may not actually be true. The writer is frequently wrong, sometimes just full of it, but always judgmental and cranky


maggie's garden said...

Sometimes I feel the need to come to the defense of those like myself that were lead by good salesmanship of investment firms. I am a person that lives on a fixed income and was advised by my investment firm that I should redo my home mortgage at an arm rate to take advantage of the earnings. What a mistake...at the time I had a comfortable 30 yr fixed and was made to believe by the salesmanship of the firm that my thinking was something out of the dark ages. I know a lot of others that were coerced into making the same move with their money.
So somehow I get offended when a good percentage of people out there seem to think it was a decision made out of greed or stupidity.
Just my thoughts.
I am now in a position of lack, and the investment firm long gone. I feel raked over the coals.

The Bug said...

I know there are advantages to owning your own home, but for now I'm glad that Dr. M & I haven't ever bought a house. Someday we will - but for now it's working out for us pretty well.

Steve said...

What's scary is how drastically governments overspent during the boom years. You're right -- they're all broke now!

Reya Mellicker said...

Sometimes I'm really glad I am not a homeowner. Really, I am.

Barbara said...

I can't believe we're still paying off a mortgage on the house we bought in 1977 for $80,000. We pay more in taxes than in mortgage payment each month, but we still don't own this place free and clear. I don't think you ever win when it comes to mortgages or taxes. Well, maybe if you sell your house and make a big profit, but some of us will never sell.

Catskill Snap said...

I'm happy to be a homeowner (I've owned many houses over the decades, and purchased my first place--a tiny condo right after college) My significant other and I both have little non-wasteful streaks that work well for us. After much thought we opted for two very small very very affordable homes so we could enjoy a Catskill retreat and a place that was an easy commute into the city. If times get extremely rough, we have a choice of where to live, though we should be fine with both as long as we don't go crazy and live to 110 or something.