This week's post on contaminated housing data from Miami-Dade County was picked up by several national blogs like Patrick.net; showing that there are many readers interested in ways that facts of the housing market crash are being concealed.
The Miami-Dade property appraiser selectively excludes foreclosure sale prices from last sale data. His defense: the Florida Department of Revenue allows local jurisdictions leeway in how to account for foreclosures. That was complete news to me, and I thought I had heard everything. Because foreclosures were once so rare, the state apparently allowed local appraisals for the purposes of tax assessment to ignore them. In Florida, the worst economic crisis since the Depression has made the exception--foreclosures--very nearly the rule. In some Homestead suburbs, for instance, a clear majority of sales are through properties in one stage or another of foreclosure.
The impact of failing to uniformly account for foreclosures is contaminating databases and allowing politicians to sidestep reality. Otherwise, there would be even greater pressure for these officials to raise taxes to cover budget shortfalls. Since Florida is entirely reliant on property transaction taxes, this is a very big deal. It is a new principle of public accounting: "shit in/ shit out" (SISO).
In so far as the actual, real and not imagined real estate market is concerned, it may be that the only bottom being formed in Miami is an artificial one: banks are restricting the number of foreclosures they are leaking into the marketplace. They can do this, because their balance sheets are now "solvent" thanks to gerrymandering financial rules and guarantees by federal taxpayers through TARP and "mark to market rules" and God knows what other favorable treatment is given to the new SISO accounting rules.
Here are what some of our readers wrote earlier this week: "If overall values go down, guess what, the millage rate will go up. The county has bills to pay. The point of the matter is that a record is a record and it should be accurate. I don't look to the MLS. I look to the county for the real number." Predictably, the nation's mainstream newspapers are filled with stories of home owners flooding local tax assessor offices with complaints and requests to re-assess property at lower and more realistic market values. (A story The Miami Herald ought to consider picking up.)
Another commenter wrote, "I've got a question for you all. Did anybody here check to see if MLS "SOLD" prices for these foreclosures in Miami Dade were reported at the foreclosed upon "SOLD" price or the last "SOLD" price before the foreclosure? The reason I ask is the obvious: should the MLS be massaging the foreclosure sales (or not even reporting them) then median and average prices reported to Case/Shiller's Miami's Index is way above what it really is." I agree. I've sent an email to Case/Shiller to ask for clarification of its data source. "This smells very fishy to me. Before you say "case closed" I think you'd do Miami Dade watchers a real service to see if the local MLS is reporting accurate sales data too." Agreed.
Are Case/Shiller statistics and other indicators of the housing market performance picking up bad data? Data that is purposefully being skewed to cancel out the effect of foreclosures? Beyond the personal misery and effect on neighborhoods, a wholesale revaluation of property would require--as the first commenter notes-- increased taxes to cover government budget liabilities "... if 80% of the homes were ... short sales, at what point do the foreclosures start to become relavent to appraiser's numbers." Exactly.
The second commenter: "The bottom line is that the numbers are the numbers. The PT office needs to go back a few years and start correcting the numbers. We can analyze where we go from there when we know WTF we are in all this mess. If we don't fix those numbers now, we will lose all integrity in the data base."
Contaminated data bases are popping up everywhere in the effort to paint the economy as "recovering", along the lines of former US Senator and UBS co-chairman Phil Gramm's "mental recession". The blow-up of the housing market has inflicted deep pain on consumers and consumer demand. One cannot help but feel that the thinking behind the understatement of foreclosures is to make the housing markets seem "less bad" than they are in fact. But this also has the effect of compounding consumer anxiety, especially the middle class where the lack of liquidity, mobility, and stability continues to weigh heavily. The Treasury Department Inspector General has issued a report condemning the lack of transparency in the distribution and effectiveness of TARP distribution to banks and financial institutions. Only a few days ago, a raft of news reported "stabilization" of housing sales and the stock market took off like a butterfly. But no information about the role of foreclosures in the faint signs of life. How can anyone have confidence in capital markets under these circumstances?
The stock market continues to hyperventilate on any whiff of positive news. Yet job cuts continue to outpace economic decline (Wall Street Journal, July 23, 2009) The doubt accumulates for thinking investors who no longer laugh themselves to sleep about others who put gold coins under their mattresses. There is another name for investments based on bad data: speculation. Isn't that just where we have come from?
Also see: July 26 - Property Appraiser’s Records Are NOT Accurate in Florida
6 comments:
Speculation indeed is what drove real estate prices artificially high. Realtors conducted business in fraudulent ways, convincing people out there to buy overpriced homes. Appraisers were bribed to value homes higher in order to obtain more money from the banks. The mortgage brokers found ways to get everyone and anyone to qualify for these unrealistic loans that they knew these people could not afford. All this wrongdoing was ignored by the everyone in government who saw their coffers fatten up through obviously illegal practices. As long as they benefited there was no need to investigate into the matter.
Now the market is attempting to correct itself, but our county is too greedy to let go of that overblown budget they have so quickly accustomed themselves to. Thanks to some the alleged leeway that the FDR gives the county to ignore foreclosures we as taxpayers are once again being victimized by the greed of our government, and not much can be done about it.
The fact that real sales prices are being ignored and concealed is pretty much an insult to the residents of Miami-Dade, an outright lie that is being fed to us as "official" data. The price at which a house got sold during the peak of the inflated boom does not reflect the current value of that home, even without being foreclosed on. If regular sales by average are close to 10% lower than they were 2 years ago (not short sales or foreclosures), then that price correction is not being reflected on any of these homes the county is still listing at it's highest price. Does that make any sense?
The only way for the US economy to revive, is to first wring out all the speculators. What we are witnessing today is incredible: the financial industries are ALL resisting re-regulation that would prevent profitable lines of speculation from blowing up again. The bankers are all hoping for an instant revival of the multi-million dollar pay packages that characterized the unsustainable boom in derivative debt. And at the bottom of the pile, local municipal and county elected officials are manipulating housing data. This is all being done in the hope that speculation will be restored and that there will be NO accountability for the past sins of unsustainable growth. Judging from the news, they might be right. But at the end of the day, this spells catastrophe for the US economy and for taxpayers. We are living in a dual reality world: just like The Matrix.
I think also that the 2008 assessment is the assessment as of the date 1 2008 not 12 2008. The tax rolls are a year behind the actual year. However, it used to be the sale of a property "resets" the property value, to the higher number, of course... And somehow I don't see it going the other direction these days when it sells lower than the last price... I wonder why.
I my n'hood there're only 4 "regular" sales within 0.5 square miles of where I live for 2009. I know for a fact there were 3 foreclosure sales on my block since the beginning of the year. That leads me to believe that the vast majority of sales where I live are bank sales. None of the foreclosures show up in the county record. Eppraisal.com shows some but not all of the foreclosure sales.
Records are being systematically manipulated to reflect an alternate reality and to cheat taxpayers out of money. There should be some class action lawsuit to force the county into accurate record keeping. What are the chances of that? Does anybody have any insight into how to proceed legally?
A few notes: -
The county appraiser's site was never intended to be a repository for sales data. The data and tools that "consumers" have been using have always been for county assessment purposes only. Read the disclaimer on the web site. Yeah, that one you clicked right through.
-The Florida DOR rule do indeed prevent the use of foreclosed properties in the calculation of assessed values. The mandatory definition of value used by Florida county assessors includes the term "not under undue duress". Take this up with your legislators, not the county appraisers.
-The county does NOT use MLS as a source of closed sales. They may only use recorded deeds.
-As the previous commentor noted, assessed values lag by a year. In Miami's case this will result in an assessment a good 25% higher than this year. The flip of this is that assessed values lagged by a year when property values were going up. A corollary to this is that 72% of all homesteaded Miami properties have assessed values less than their just values due to the Save our Homes amendment (3% max increase in assessment per year).
-Case-Shiller uses public record data to calculate the CS index, not MLS "sales".
All of these facts are publicly available online, or from the source had you bothered to check.
In response to: "The county appraiser's site was never intended to be a repository for sales data. The data and tools that "consumers" have been using have always been for county assessment purposes only. Read the disclaimer on the web site. Yeah, that one you clicked right through."
Never the less, this data base is being used. Data is data. It is misleading and problems can stem from it. It is as simple as that.
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