Fun Under the Water:

[c1ue]

http://www.usatoday.com/money/econom...er-chart_N.htm

Deeply underwater At least half of homeowners with a mortgage owe more than their homes are worth in 17 of 386 U.S. counties. Counties with the highest percentage of mortgages under water as of Sept. 30. Rank County State Mortgages under water 1 Clark Nev. 71.1% 2 Osceola Fla. 66.5% 3 Merced Calif. 63.1% 4 St Lucie Fla. 62.4% 5 San Joaquin Calif. 59.6% 6 Stanislaus Calif. 57.5% 7 Clayton Ga. 56.1% 8 Orange Fla. 56.1% 9 Solano Calif. 55.6% 10 Maricopa Ariz. 54.4% 11 Washoe Nev. 53.3% 12 Pinal Ariz. 52.6% 13 Flagler Fla. 52.5% 14 Pasco Fla. 51.5% 15 Riverside Calif. 50.5% 16 Kern Calif. 50.2% 17 Broward Fla. 50.1% 18 Lee Fla. 49.5% 19 Canyon Idaho 49.0% 20 Henry Ga. 48.8% 21 Polk Fla. 48.5% 22 Hillsborough Fla. 48.5% 23 Dade Fla. 48.2% 24 Sacramento Calif. 47.9% 25 Paulding Ga. 47.5% 26 Prince William Va. 47.4% 27 San Bernardino Calif. 46.9% 28 Brevard Fla. 46.9% 29 Wayne Mich. 46.6% 30 Hernando Fla. 46.5% Source: CoreLogic

In the black U.S. counties with the lowest percentage of homeowners whose mortgages were under water as of Sept. 30: Rank County State Mortgages under water 357 Shawnee Kan. 6.5% 358 Washington R.I. 6.5% 359 Buncombe N.C. 6.4% 360 Boulder Colo. 6.3% 361 Bucks Pa. 6.2% 362 Boone Ky. 6.1% 363 Tulsa Okla. 6.0% 364 Staten Island (Richmond) N.Y. 6.0% 365 Linn Iowa 5.9% 366 Hennepin Minn. 5.7% 367 Chester Pa. 5.7% 368 Montgomery Pa. 5.6% 369 Berkshire County Mass. 5.6% 370 El Paso Texas 5.5% 371 Nueces Texas 5.3% 372 Monroe N.Y. 5.2% 373 Hampshire County Mass. 5.2% 374 Sangamon Ill. 5.2% 375 Oklahoma Okla. 5.2% 376 Lancaster Pa. 5.0% 377 Yellowstone Mont. 5.0% 378 Allegheny Pa. 4.7% 379 Madison Ala. 4.7% 380 Benton Wash. 4.3% 381 Cleveland Okla. 4.2% 382 Cumberland N.C. 4.2% 383 Erie N.Y. 4.2% 384 Manhattan N.Y. 4.2% 385 Suffolk N.Y. 2.1% 386 Orange N.Y. 1.0% Source: CoreLogic

At least half of homeowners with a mortgage owe more than their homes are worth in 17 of 386 U.S. counties.

Just for kicks, the property tax paid as a percentage of median house price in a number of the above states: (median house price in parentheses)

California: 0.61% ($467,000)
Florida: 0.85% ($218,700)
Georgia: 0.77% ($169,100)
Nevada: 0.63% ($271,500)
Arizona: 0.57% ($229,200)

Pennsylvania: 1.34% ($164,700)
Texas: 1.76% ($126,800)
New York: 1.14% ($318,900)

From: http://articles.moneycentral.msn.com...StateRank.aspx
(2008 data)

Notice a pattern yet?

[goodrich4bk]

Re: Fun Under the Water:

http://www.usatoday.com/money/econom...er-chart_N.htm



Just for kicks, the property tax paid as a percentage of median house price in a number of the above states: (median house price in parentheses)

California: 0.61% ($467,000)
Florida: 0.85% ($218,700)
Georgia: 0.77% ($169,100)
Nevada: 0.63% ($271,500)
Arizona: 0.57% ($229,200)

Pennsylvania: 1.34% ($164,700)
Texas: 1.76% ($126,800)
New York: 1.14% ($318,900)

From: http://articles.moneycentral.msn.com...StateRank.aspx
(2008 data)

Notice a pattern yet?

Great information! I was born in Sacra-tomatoe and have been closely following that foreclosure market for years. I am a bankruptcy attorney and believe the biggest issue that the MSM is missing is the AGE of those underwater. If they took on their mortgages within the last 8 years (very likely) and are more than 50 years old (also likely, though less so), they will reach retirement with insufficient equity to sell -- and that is assuming they don't lose a job between now and then. This is what I call the shadow defaults -- people that will be forced to default because they will see an involuntary drop in income before the value of their homes rise above their debts.

On the other hand, I've never seen any data on this issue. Perhaps most of those underwater are less than 40? Still, divorces will trigger the same issue, and we certainly see plenty of those in California.

[housingcrashsurvivor]

Re: Fun Under the Water:

Perhaps most of those underwater are less than 40?

found this

http://pewresearch.org/pubs/1128/hom...age-underwater which shows in 2009...

[housingcrashsurvivor]

Re: Fun Under the Water:

...Just for kicks, the property tax paid as a percentage of median house price in a number of the above states: (median house price in parentheses)

Florida: 0.85% ($218,700)

Osceola https://ira.property-appraiser.org/taxestimator/ shows (picked random property) $2,527.07 to $3,249.09 (1.16% - 1.49%)
Broward http://www.bcpa.net/TaxCalc.asp shows $3,139 homesteaded or $4,033 without (1.43% - 1.84%)
St Lucie http://www.paslc.org/main-taxestimator.asp (for Fort Pierce, main city there) shows $3,592.18 To $4,406.76 homesteaded or 4,615.96 To $5,430.54 without (1.64% - 2.48%)
Orange http://vwebtpp.ocpafl.org/TaxEstimator/Search.aspx shows (picked random property) $2,886 to $3,501 (1.32% to 1.6%)
etc
etc
etc

My FL prop taxes based upon what I paid & given portablity (of "save our home" value) from where I downsized is currently 0.4%. woohoo! But that can increase by max 3%/yr so next year i could go up to 0.41%. Not to worry. They'll probably get me on fees.

[c1ue]

Re: Fun Under the Water:

But that can increase by max 3%/yr so next year i could go up to 0.41%

That is the key. It isn't the rate per se, it is laws equivalent to Proposition 13. Texas, for example, reassesses home value regularly with no upper limit.

The numbers I put up above are the actual taxes paid as a percentage of median home value.

Again, Texas has property tax rates of 3% or more offset by homestead exemptions.

Note also states like Illinois have regular reassessments, but Cook County (Chicago) is different and has a Proposition 13 type system.

[flintlock]

Re: Fun Under the Water:

I just heard a tale yesterday from a friend of mine. Seems he was remodeling an old condo for a 80 year old uncle of his wife. He was a Judge and attorney still working at 80. My friend assumed it was because he was just dedicated. Nope, seems the guy was moving into the condo because his home had been foreclosed and he was broke. So it's not just the young people .

[BigBagel]

Re: Fun Under the Water:

I live one county over from Orange County, NY and used to live and own a home there. I don't believe the stats. Housing took a real hit there. Many of the people who live there commute to New York City to work because the local job market is low paying and not adequate to employ the locals. Mass transit is sub par on that side of the Hudson. People use their cars to get to work and that usually involves long commutes with high gas prices.
They build a lot there in the 90's and early in this decade so a significant number of people moved there in the last 10 years. I've seen prices go back close to the early 90's levels in some areas.
It doesn't make sense.
Manhattan is another story. The majority of mortgages are on coop apartments where the boards demand significant down payments so people don't go underwater.
If Orange County's the best that's pretty bad. Given the Wikileak info about pumping up Saudi oil reserves exurban communities like Orange Co. are DOA's waiting to happen.

[housingcrashsurvivor]

Re: Fun Under the Water:

That is the key. It isn't the rate per se, it is laws equivalent to Proposition 13. Texas, for example, reassesses home value regularly with no upper limit.

The numbers I put up above are the actual taxes paid as a percentage of median home value.

Again, Texas has property tax rates of 3% or more offset by homestead exemptions.

Note also states like Illinois have regular reassessments, but Cook County (Chicago) is different and has a Proposition 13 type system.

I don't know where your 0.85% Florida figure comes from, but the appraiser sites I checked on homes valued at your reported median show higher tax rates all. I don't know if you or your source averaged in those of us with any remaining "save our home" value. Many here who bought even as far back as eight to 10 years ago now have none or only little of that value left. And the SOH amendment only kicked in early to mid 1990s I think. So while I pay a relatively small percentage of my purchase price into taxes, especially having owned long-term and now downsized to a property priced below prebubble value, I don't know that there are many like me who would have brought the overall taxes collected down to 0.85%, even with exemptions. Though I haven't seen the figures so I don't know.

In related news, currently the new governor here is working to reduce property taxes further (removing $1 billion from revenues now allocated to public schools--while increasing private school vouchers by $250 million, or something like that). Will reducing our property taxes more incline us towards further foreclosures in the future?

So I don't get what pattern I'm supposed to see. Are you saying that there is a correlation between lower tax rates and higher foreclosure rates or one between states with laws that protect people from being priced out of their own houses (the original stated purpose of our SOH amendment) and people actually losing their homes in this market? I don't see how such protection might have encouraged any bubble or the ill-effects we are now experiencing from that. In fact, we didn't even get portability of our SOH values until the bubble popped, so most who benefited from SOH were stuck in their original houses, unable to move or flip because they'd have lost their reduced tax benefits. So, again, I don't see how those past stabilizing efforts contributed to this current insanity. Could there be something else in play; could the pattern just be a coincidence. Or could you please explain to me how it works so that I understand. Thank you.

[don]

Re: Fun Under the Water:

Note also states like Illinois have regular reassessments, but Cook County (Chicago) is different and has a Proposition 13 type system.

As discussed previously, Prop 13 type legislation has its own more subtle costs, including double taxation for homeowners and businesses (loss tax revenue makeup bonds, fees, etc) and higher house pricing. Like the home mortgage deduction, it's pernicious, enlisting the homeowner into essentially FIRE RE/usury finagling.

[Mashuri]

Re: Fun Under the Water:

This is only a small part of the picture. Soon after Prop 13 passed, CA was able to coopt all property taxes from local minicipalites with Bill 8. In other words, state revenues from property taxes, percentage-wise, have actually increased since before 13 and 8. As for the local munis, they have made up for their loss of revenues by massively increasing pretty much every fee they can come up with regarding developments. Those taxes (excuse me -- fees) have been baked into the price of the properties as developers pass on the new costs.

The problem, as usual, isn't that governments aren't getting enough, it's that they're spending too much.

[don]

Re: Fun Under the Water:

The problem, as usual, isn't that governments aren't getting enough, it's that they're spending too much.

Government debt is more the symptom than the cause, the conduit that shifts wealth from the productive economy to FIRE. Nothing rings FIRE's bell like debt. Government, at all levels, has proven to be a highly effective means to that end.

[housingcrashsurvivor]

Re: Fun Under the Water:

Are tax savings of Prop 13-type restrictions passed onto new purchasers such that they enjoy the same advantages as the seller of a particular property, because I could see how that could increase prices. But with SOH in Florida, a limited amount of the savings stays only with the prior homesteader (if they buy again within 24 months), not conveyed to the new purchaser. The buyer is assessed at the new market price (I think it is of the Jan or following Jan near the sales date) and taxed on that (minus, of course, any SOH value they may have ported). And again, when that person sells, that next buyer also pays taxes on the then current market price. So how does that cause "higher house prices"? If anything, if house shopping & seeing what you'd be paying in taxes compared to your neighbor who might be paying half or five times less if they'd been there long enough, I'd think that might encourage bidding down a price, not paying ever increasing premiums.

[don]

Re: Fun Under the Water:

Are tax savings of Prop 13-type restrictions passed onto new purchasers such that they enjoy the same advantages as the seller of a particular property, because I could see how that could increase prices. But with SOH in Florida, a limited amount of the savings stays only with the prior homesteader (if they buy again within 24 months), not conveyed to the new purchaser. The buyer is assessed at the new market price (I think it is of the Jan or following Jan near the sales date) and taxed on that (minus, of course, any SOH value they may have ported). And again, when that person sells, that next buyer also pays taxes on the then current market price. So how does that cause "higher house prices"? If anything, if house shopping & seeing what you'd be paying in taxes compared to your neighbor who might be paying half or five times less if they'd been there long enough, I'd think that might encourage bidding down a price, not paying ever increasing premiums.

Prop 13 in California was sold to the voters (sheeple) as a way to rein-in open-ended assessments. The tax base would be the purchase price, with a 1.25% annual bump (or thereabouts). As long as you stayed in that house (one resident per customer) your assessment base stayed anchored to your purchase price. This was a popular proposal. What the sheeple didn't realize was that the revenue stream denied the municipalities, real and imagined, would be made up through the backdoor of fees, new taxes, bonds, etc. In California at that time the average turnover of home ownership was 3.5 years, initiating a fresh 100% assessment. (Note that prior to Prop 13 assessments were seldom 100% of market value) The increasing fees laid on local retail was passed on to their customers, in essence the sheeple. The big winner, with the lowest profile, in Prop 13 is and was the commercial real estate owners. The classic rentiers. As long as they retained ownership their assessments were also tied to their initial purchase price. What a bonanza that was. FIRE, you might say, came out on top, with something approaching double taxation on the rest. The thought of ending Prop 13 throws the sheeple into a tizzy, as they fear ballooning real estate taxes and remain unaware of the linkage between Prop 13 and all the other tax cargo they're carrying. (I'm not suggesting at this late date they're wrong. Getting further screwed is a given. Only that part of the genius of Prop 13, like the mortgage interest deduction, is the alliance between FIRE and sheeple that's created, sort of like the derivatives monster and pensions.)

[c1ue]

Re: Fun Under the Water:

I don't know where your 0.85% Florida figure comes from, but the appraiser sites I checked on homes valued at your reported median show higher tax rates all. I don't know if you or your source averaged in those of us with any remaining "save our home" value. Many here who bought even as far back as eight to 10 years ago now have none or only little of that value left. And the SOH amendment only kicked in early to mid 1990s I think. So while I pay a relatively small percentage of my purchase price into taxes, especially having owned long-term and now downsized to a property priced below prebubble value, I don't know that there are many like me who would have brought the overall taxes collected down to 0.85%, even with exemptions. Though I haven't seen the figures so I don't know.

The data source is the US Census - and is likely reliable.

The point isn't what you personally pay, or what you think others pay. The Census data is what is reported via surveys of at least every 100 households, and perhaps more.

As for why the actual tax paid vs. tax rate delta - a Proposition 13 type cap on maximum property tax increases would be more than enough to account for the delta.

Any house bought before 2005, for example, would have appreciated at least 100%. An example $200,000 house bought in 2005 which paid 1.5% in taxes ($3000), but doubled in value would today only have 5 years of 3% increases = $3478. The value now being $400,000 - the actual tax rate would be only 0.87% instead of the original 1.5%

So while you may not agree with my/Dr. Michael Hudson's thesis, the means by which such low statewide property tax rates is absolutely realistic.

For one thing, the number of retirees in Florida has been fairly consistent for decades - there are almost certainly huge numbers of people who still live in the house they moved into upon retirement.

So, again, I don't see how those past stabilizing efforts contributed to this current insanity. Could there be something else in play; could the pattern just be a coincidence. Or could you please explain to me how it works so that I understand. Thank you. Last edited by housingcrashsurvivor; Today at 09:22

The thesis is quite simple: the average person only has 'X' amount of monthly income to spend on housing. If property tax is fraction 'Y' of this amount, then that 'Y' income is unable to service mortgage debt.

Every $1 of monthly income = $100 or more of mortgage, and the banks make roughly $1 of interest for every $1 of mortgage taken out.

Given this dynamic: $1 less property tax = $100 higher mortgage = $100 interest earned by bank - do you see the perverse incentive?

Are tax savings of Prop 13-type restrictions passed onto new purchasers such that they enjoy the same advantages as the seller of a particular property, because I could see how that could increase prices. But with SOH in Florida, a limited amount of the savings stays only with the prior homesteader (if they buy again within 24 months), not conveyed to the new purchaser. The buyer is assessed at the new market price (I think it is of the Jan or following Jan near the sales date) and taxed on that (minus, of course, any SOH value they may have ported). And again, when that person sells, that next buyer also pays taxes on the then current market price. So how does that cause "higher house prices"? If anything, if house shopping & seeing what you'd be paying in taxes compared to your neighbor who might be paying half or five times less if they'd been there long enough, I'd think that might encourage bidding down a price, not paying ever increasing premiums.

Proposition 13 type laws increase asset prices because large property owners have far less risk and earn far higher income with low property taxes. More conservative individuals also have a clear financial incentive (as you have done) to not move up, so housing supply is lower. And of course Proposition 13 dangles a carrot in front of every home buyer: since prices are going up so much, "you'll be sitting pretty in 10 years even if you overpaid for this house, because your property tax will be so low like my Aunt Edna/Uncle Bob/Neighbor Tom"

The term in the past used to be 'land rich, cash poor' - today it has become 'mortgage rich, cash poor'

[housingcrashsurvivor]

Re: Fun Under the Water:

Prop 13 in California was sold to the voters (sheeple) as a way to rein-in open-ended assessments. The tax base would be the purchase price, with a 1.25% annual bump (or thereabouts). As long as you stayed in that house (one resident per customer) your assessment base stayed anchored to your purchase price. This was a popular proposal. What the sheeple didn't realize was that the revenue stream denied the municipalities, real and imagined, would be made up through the backdoor of fees, new taxes, bonds, etc. In California at that time the average turnover of home ownership was 3.5 years, initiating a fresh 100% assessment. (Note that prior to Prop 13 assessments were seldom 100% of market value) The increasing fees laid on local retail was passed on to their customers, in essence the sheeple. The big winner, with the lowest profile, in Prop 13 is and was the commercial real estate owners. The classic rentiers. As long as they retained ownership their assessments were also tied to their initial purchase price. What a bonanza that was. FIRE, you might say, came out on top, with something approaching double taxation on the rest. The thought of ending Prop 13 throws the sheeple into a tizzy, as they fear ballooning real estate taxes and remain unaware of the linkage between Prop 13 and all the other tax cargo they're carrying. (I'm not suggesting at this late date they're wrong. Getting further screwed is a given. Only that part of the genius of Prop 13, like the mortgage interest deduction, is the alliance between FIRE and sheeple that's created, sort of like the derivatives monster and pensions.)

I think I understand though there seems a big difference, as you note, in Calif commercial v residential. Maybe Florida was a little more realistic by capping at the lessor of CPI or 3% (commonly thought of as near typical CPI) for homesteaded property. Since then, however, they did also include nonhomesteaded (2nd homes, investment props) and commercial property capped now at 10% annual which does not seem terribly unreasonable? (Though wouldn't a quick round of hyperinflation make that all interesting.) While population here was expanding so rapidly (during what turned out to be a bubble) it got seriously scary to watch prices increase so dramatically that there seemed a real fear of those on fixed incomes--and the rest of us with salaries not keeping up with the then rising property values--losing homesteads to unaffordable taxation just because new neighbors paid too much for their houses.

The data source is the US Census - and is likely reliable.

The point isn't what you personally pay, or what you think others pay. The Census data is what is reported via surveys of at least every 100 households, and perhaps more.

As for why the actual tax paid vs. tax rate delta - a Proposition 13 type cap on maximum property tax increases would be more than enough to account for the delta.

Any house bought before 2005, for example, would have appreciated at least 100%. An example $200,000 house bought in 2005 which paid 1.5% in taxes ($3000), but doubled in value would today only have 5 years of 3% increases = $3478. The value now being $400,000 - the actual tax rate would be only 0.87% instead of the original 1.5%

Got it, I think. Only that house bought for $200k in 2005 would be lucky to fetch $100k today and the owner has lost every bit of their SOH value. If prices ever start to rise again, they'd be capped at 3% going forward. About these surveys, was it the homeowners who reported the value of their homes or did the Census get that from Zillow? (just kidding)

Picking myself as a random person to survey randomly, here's the stats on my neighbors based on taxes paid as a percent of county's reported values (my new neighborhood could not be more middle of the road):

2 houses due north: 1.77% (now 1.33% of their 2004 purchase price) was taxed at 2.18% of then just value in 2005 & 1.94% in 2006

my next door neighbor to the north: 1.62% (now 1.20% of 2003 price) was taxed at 1.16% of then just value 2005 & 1.36% in 2006

my neighbor to the south: 1.1% (or 1.1% of their 2001 price) was taxed at 2.3% in 2001 & at 1.2% in 2005

2 houses to the south: 2.0% (or 1.38% of their mortgage--built mcmansion on vacant lot in last year of bubble--ooops)

Not an every 100th household survey, but not, I think, misrepresentative. Nothing personal, but I'd still rather see the Census figures before I believed a report on them.

I found http://articles.moneycentral.msn.com...StateRank.aspx with your same number which quotes source Tax Foundation 2009.

http://www.taxfoundation.org/taxdata/show/24051.html shows "the figures...paid by businesses, renters and others" Info from Census. Also shows your ~.8 figure for Florida. I wonder are ag lands incorporated into these figures? Because Florida does have a lot of that and rural properties as well, but that's not where most of us live.

Here's a Palm Beach County oceanfront condo, big majority retired residents...

http://www.co.palm-beach.fl.us/papa/...x=-1&adlfilter=

here's a random pick, the first few units: 2.1%, 2.1, 1.7, 2.1, 1.0, 2.0, etc etc etc.

Yeah, I'd have to see how Census came to their figures.

So while you may not agree with my/Dr. Michael Hudson's thesis, the means by which such low statewide property tax rates is absolutely realistic.

For one thing, the number of retirees in Florida has been fairly consistent for decades - there are almost certainly huge numbers of people who still live in the house they moved into upon retirement.

Sorry but I really am very new to the study of economics and am not familiar with Hudson's work. Will google when I get a chance (just taking a break from studying for an exam right now).

The thesis is quite simple: the average person only has 'X' amount of monthly income to spend on housing. If property tax is fraction 'Y' of this amount, then that 'Y' income is unable to service mortgage debt.

Every $1 of monthly income = $100 or more of mortgage, and the banks make roughly $1 of interest for every $1 of mortgage taken out.

Given this dynamic: $1 less property tax = $100 higher mortgage = $100 interest earned by bank - do you see the perverse incentive?

I've owned free and clear for a while now and was not aware how much banks make. Stupidly, I suppose, I didn't pay much attention to it while I was paying them but the cost seemed reasonable at the time. I did pay off my loan as soon as I was able as I do not like to live with debt. But yes, I do see what you are saying about the incentive, though I do not know that someone would put that "extra" money into their house and not into their even dumber car. Though I guess what happened is that the banks put that money into the house and the homeowners withdraw that for their cars. It just gives me a headache to think people live like that.

Proposition 13 type laws increase asset prices because large property owners have far less risk and earn far higher income with low property taxes. More conservative individuals also have a clear financial incentive (as you have done) to not move up, so housing supply is lower. And of course Proposition 13 dangles a carrot in front of every home buyer: since prices are going up so much, "you'll be sitting pretty in 10 years even if you overpaid for this house, because your property tax will be so low like my Aunt Edna/Uncle Bob/Neighbor Tom"

The term in the past used to be 'land rich, cash poor' - today it has become 'mortgage rich, cash poor'

Again, in Florida, large property owners were not capped until later (only homesteaded personal residents initially enjoyed SOH) and even when included, then only at 10% so I don't see how that increased asset prices. Certainly I can see that happening at the 1whatever% quoted elsewhere.

I do not understand how not moving up effects housing supply. I lived in one house before and live in one now. Our portability amendment benefits up or downsizing to various degrees. I believe portability only applies to homesteaded properties, not commercial or 2nd homes but I'd have to check that.

The effect here initially dropped more banana peels than dangled carrots. New owners were outraged that they were paying so much more than their long-time homesteaded neighbors. That noise only subsided once housing here crashed.