Will The Housing Market Bubble Burst?
Steve Greenhut, of the Orange County Register, wrote an interesting piece on his concerns about what will happen if housing prices take a big hit, which some say is inevitable and others say won't happen. I happen to think it can't go on like this forever, with fewer and fewer people being able to afford to rent, much less own a home. I know the place next door to us is renting for $1000 a month, too pricey for me, and that's about the norm. It might be good to see the bubble burst in that respect although, of course, those that have bought homes in the recent past would be taking a hit.
I had one other concern about the high prices, though: With the increase in home values, also comes an increase in property taxes, since homes are reassessed when bought and/ or sold. The person buying the property may pay many times more in property tax than the previous owner who benefitted from Prop 13 tax increase protections. So, should the housing market bubble burst, and home prices drop as dramatically as they've gone up the last few years, what will happen to the revenues that local governments have enjoyed as a result of the past increase in housing prices?
I'm not really sure how the reassessment of property works and I'm sure it would take a few years to actually take place and make an effect. Seems to me, though, it might be like the state's .com boom of a few years ago in smaller scale. Sure, the county doesn't have a big surplus, but it seems to be making do. You can rest assured, though, that local governments will spend every penny of the increased property tax revenues and, when that bubble bursts, will have set the prior year's budget as the baseline on which to build so screams will be heard around the state because of lack of property tax revenue.
We'll see if I'm right, assuming the bubble bursts. I e-mailed Steve Greenhut and told him of my concerns. Wonder if he'll respond? He has before.
posted by Fred Mangels @ 9:10 AM
4 comments
4 Comments:
And the answer is... some regional bubbles will burst, but Humboldt's bubble will continue to grow because there is no shortage of wealthy out-of-area buyers who want summer and retirement homes.
I'll have to ask my brother in law, who's a fairly well to do real estate broker, how much of his clientel are wealthy out of the area buyers.
That is somewhat true, though, since housing prices are much lower here than in other parts of the state so that would appeal to people even if they weren't wealthy.
The property tax issue is a big deal. Here in Dutchess County, we have "relatively" low taxes (crippling but less than neighbors to the south), but the Westchesterites who move up here think the taxes are a bargain compared to what they have been trained to accept. They don't think twice about voting for tax increases on themselves and the rest of us.
That's a problem with intrastate migration and I think it will eventually be a problem here, if it hasn't started being one already.
When people move places, they bring their politics with them. They think they're moving away from a problem but don't realize they are the problem.
I read on an e-mail list where one of our state legislators was welcoming all the people from the Los Angeles area that were migrating to his area. I wrote him back and suggested he shouldn't be welcoming these people as they're likely the kind of people that are responsible for turning the LA area into such a shit hole. They'll likely end up turning his turf into the same type of place they thought they were escaping from, not realizing they're the problem.
As an aside, along the same line: I used to work in the Humboldt Juvenile Hall. A latino kid was transferred up here from LA Juvenile Hall. I spoke with his father once who told me he moved up here to get his son "away from the gangs". He didn't realize his some WAS the gang.
A few years later, after I'd left Juvenile Hall, there was a drive by shooting at one of the local malls. Arrested as the ring leader of the gang that did it, and now spending life in prison, was that same latino kid who was moved here to "get away from the gangs". He eventually got out of the Hall and started his own gang.
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