Another Inconvenient Truth -- Another Reason Folks Are Avoiding the Housing Market

Update

June 21, 2011: William McGrun, in the June 21, 2011 issue of the Wall Street Journal discusses why South Bend, Indiana, is on Newsweek's list of the top ten (10) dying cities in the US. He notes: "When Governor Daniels (R) succeeded in getting a property tax cap through in 2008, South Bend responded by pressing the county to raise local income taxes -- threatening that otherwise it would have to cut police and crossing guards and the like."


June 19, 2011: Marblehead, Massachusetts, chose to override Proposition 2 1/2 and will be raising property taxes. Median home property tax will go up $300 the first year, and under $250 for years 2-20.

As word spread through the building that three out of the four proposals had passed, Jean Eldridge looked on glumly and wondered how some residents would pay for the tax increases.

“I’m so disappointed,” said Eldridge, who opposed the school and transfer station proposals.

“There are so many people out of work, losing their homes, and there are a lot of people in town on a fixed income – including myself. This makes me sick.”

Do you think that will be the last property tax hike for Marblehead for the next 20 years?

June 4, 2011: I see that the mayor of Philadelphia is considering raising property taxes again this year to bailout the schools after raising property taxes ten (10) percent last year. As noted below, there is no limit on how much they can raise property taxes in most states.

Also being discussed as part of the School District bailout is a hike in property taxes similar to last year’s nearly 10-percent hike (see related story), which the administration says could bring in $95 million.

Original Post

Front page story of New York Times: Housing Index Expected To Show A New Low In Home Prices

The desire to own your own home, long a bedrock of the American Dream, is fast becoming a casualty of the worst housing downturn since the Great Depression.

Even as the economy began to fitfully recover in the last year, the percentage of homeowners dropped sharply, to 66.4 percent, from a peak of 69.2 percent in 2004. The ownership rate is now back to the level of 1998, and some housing experts say it could decline to the level of the 1980s or even earlier.

The article goes on:

Housing is locked in a downward spiral, industry analysts say, not only because so many people are blocked from the market — being unemployed, in foreclosure or trapped in homes that are worth less than the mortgage — but because even those who are solvent are opting out.

“The emotional scars left by the collapse are changing the American psyche,” said Pete Flint, chief executive of the housing Web site Trulia. “There was a time when owning a home was a symbol you had made it. Now it’s O.K. not to own.” 

Go ahead and read the article. See if you notice something unsaid. See if you notice another reason -- perhaps one of the biggest reasons why folks are not rushing to get back into the housing market.

Jump To Below the Fold

I didn't read the entire article but I read enough of it to get the feeling the writer did not address one of the biggest reasons why folks are not rushing to get back into the housing market.

There is a joke about home ownership in several communities. Once the final mortgage payment is made, a homeowner is now renting his/her home from members of the local teachers' union, firemen's union, police union, or the city's "fathers." We saw it most recently in Wisconsin and in Bell, California.

Theoretically, there is no limit to what one might end up paying in property taxes.