According to a Miami Herald report, based on figures from Zillow.com, "the percentage of South Florida homeowners underwater in their mortgages grew between the first and second quarter of the year" to 47 percent. That astounding number raises several questions about the so-called leveling off of the economy and prospects for a rebound; questions that are not easily answered by government statistics which may or may not be correct in the first place. ('Spinning the economic news: Concocting the appearance of recovery", August 12, Counterpunch)
In July Florida was number 2 in the nation, with 56,486 properties receiving a foreclosure filing; a 23 percent increase from July 2008 (Source: RealtyTrak). There is a second layer of trouble for the economy: homeowners whose mortgages are underwater and also owe home equity lines of credit and other forms of consumer debt incurred on the basis of an inflated, now vanished, home value. Many of those homeowners underwater with their mortgages are likely to walk away from their obligations, using foreclosure and bankruptcy. So much for a consumer society built on mountains of debt.
On August 1, The Herald noted, "The Preliminary Tax Roll released by the Miami-Dade County Property Appraiser's Office shows a substantial decline -- 13 percent -- in the countywide taxable value of existing properties in Miami-Dade County." This number predicts increases in property taxes, but it badly understates the depth of the economic crisis. The Property Appraiser has leeway how to value properties in distress or foreclosure. According to rules established by the Legislature, only "arm's length" transactions must be included.
Why foreclosures are not considered "arm's length" transactions is a mystery to me, but the net effect is to exclude from valuation nearly most sales that are occurring in Miami-Dade County today. So the question is: if those sales were included, what would they predict for property tax rolls? A decline of 40 or 50 percent.
That 13 percent decline is fiction. The truth is this economic bust has been an economic earthquake measuring 9.0 on the economic scale. There will be no return to pre-bust property levels unless the federal government adopts inflation as its defacto policy medicine of choice. We are not there yet. But there is a gargantuan volume of money sloshing around the financial system, accounting in part for the buoyancy of stock markets. Many Americans have given up on the stock market: burned by the dot.com boom and smashed by the bust.
Wall Street might be reviving with dreams of pre-bust compensation packages; guaranteed on the backs of US taxpayers, but US taxpayers are an increasingly angry lot. That anger has been tapped by the insurance industry, fomenting outrage at Town Hall meetings this summer. For the time being, the outrage is focused on the federal government. But as this Depression manifests (an "L" shaped recovery) anger will shift from government-- that people need-- to corporations, bailouts, insider dealing and massive wage inequality. Let's get the facts out into the open air.
In Miami Today, publisher Michael Lewis argues for the establishment by civic leaders of a Miami Dade taxpayer alliance. Perhaps. But I'd start with a simpler goal: honest accounting of the property tax rolls to include property valuations based on distressed sales and foreclosures.
6 comments:
The Miami-Dade County Appraiser, Pedro Garcia, must facts facts. Short sales, foreclosures and all distress sales ARE the market. He should record and consider all sales. Someone should tell him many properties have no buyers.
How about vacant lots? Most vacant lots should be assesed down 80%.
Let's count the number of Miami land speculators and banks who don't want the true value of property stated: Ocean Bank, Century Bank, and all their shareholders and investors whose loans and balance sheets depend on fiction in order to keep the regulatory wolves at bay. Meanwhile, the taxpayer sops up the mess they created. I would say people should run to their tax assessor and demand revaluations. Where I live, if that happened, the line would stretch for blocks.
I completely agree with the notion that short sales and foreclosures SHOULD indeed be included in the appraisal of taxes.
Almost nothing is being sold otherwise.
The sad part is that we the taxpayers, as the Miami Today article stated, have absolutely no one to represent us. Many county residents are still blissfully ignorant about the shock they are about to receive in the mail later this month. It is a shame that we are a community lack the kind of cohesion needed to have our voice be heard regarding this unfair and oppresive situation.
The "debt" that the county is facing can be mostly blamed on an unsustainable increase on the pensions of people who no longer work for the city, but will continue to receive the same amt of $ they did when they actually did any work. Somewhere else (probably the herald) I read that more than 1/2 of Miami-Dade employees receive a salary of over $100k, and that the unions have ensured that salary increases of 13% are given to firefighters, cops and so forth.
In the meantime, everyone else needs to fork up more money to support the system, while the people employed by the private sector has to take pay cuts, reduce hours of work, and forego salary increases.
Add on top of that the fact that almost 1/2 of the mortgage holders are underwater, and more likely than not will become the next wave of foreclosures. Those who have not budgeted to pay $500K taxes on a house they paid $100K for may as well consider walking away from their investment.
Something needs to be done, but it's hard to figure out how to before total collapse occurs.
Let me get this straight, the county budget is based on real estate taxes, which are based on the county property appraiser's estimate of assessed value times the tax rate. So, if we artificially inflate the property tax rolls, then we overestimate the projected revenue. Then, are the municipalities projecting revenue on actual property values, or the artificially inflated "boom" property values? Obviously, someone doesn't see the big picture here.
Great credit to "Eye on Miami" in Sunday's Miami Herald.
The Property Appraiser, Pedro Garcia, should definitely include foreclosures, short sales, bank sales and every other kind of sale. That is the market. To do otherwise is to steal from the taxpayers.
If you all think this year is bad, wait til next year's budget comes up. Its gonna be real bad folks. Get ready.
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