From Bloomberg:
To the Barricades! Property Taxes Spur Revolts
When it comes to property taxes in the U.S., often you are blessed and cursed.
In a rising market, the local assessor will raise his estimate of your home’s worth, which usually results in a higher real-estate tax bill. Your property taxes, particularly in a high-growth area, then pay for new schools, fire and police stations and other public services.
Yet the price of growth can be burdensome when property taxes outpace the rate of consumer inflation or income growth. Anyone who lives in New Jersey, Florida, Illinois — or any area where real-estate values have jumped dramatically — can attest to this often negative reality of homeownership.
Tax revolts from North Dakota to Florida have proven one thing: If you lower the local tax bill, you still need revenue from other sources. You end up swapping one levy for another.
Nowhere has the burden incensed more taxpayers than in New Jersey. The state has the dubious honor of having the highest property-tax bills in the country, averaging $6,300 last year, a 7 percent increase over 2005.
After years of citizen activism in New Jersey, a recent proposal called for a 20 percent reduction in property taxes in exchange for higher state sales taxes, estimated to cost the average household an additional $275 a year, according to Citizens for Property Tax Reform, a state taxpayers group.
…
“This is neither relief nor reform,” says Cy Thannikary, chairman of the Allentown, New Jersey-based group, which claims to represent 500,000 homeowners and 57 community organizations. “The reduction is not constitutionally guaranteed.” The Garden State collected almost $21 billion in property taxes last year where local levies are twice the national average.Homeowners just can’t keep up with property-tax increases in many states. From 2000 to 2004, personal income grew almost 16 percent while property-tax collections increased about 28 percent, according to the Tax Foundation, a Washington-based educational organization.
That’s why tax revolts have spread across the country and are gaining momentum.
Sorry about the late blogging this morning everyone. I’m out in Scottsdale, AZ for a few days.
jb
Sorry doesn’t cut it :(
I know….I want those 5:56AM post times!
slacker
grim: do something useful…go fry an egg on your rental car hood
OT but related to most every regular here’s
perspective on disposible income…dont think posted prev…
“It’s clear from this survey that savings hurdles transcend income levels, and that savings requires more discipline than we may realize, regardless of household income,” said Kevin Martin, a senior vice president for HSBC Bank in the U.S. “The data revealed recurring bills get in the way of saving for the majority of households at both ends of the income spectrum.”
http://articles.moneycentral.msn.com/SavingandDebt/Advice/RichDontSaveEither.aspx?GT1=10022
In a rising market, the local assessor will raise his estimate of your home’s worth, which usually results in a higher real-estate tax bill
I do not understand this logic. My understanding is town first decides on budget (i.e. mainly spending), then calculates the percent of RE value that will meet the expenses. If all houses in the town are assessed higher due to RE boom, there should be no increase due to RE prices going up. For e.g. if expenses are 1 million, residents still need to pony up 1 mil. If all houses are assessed higher, they still will share same percent of the pie. In such a logic, the increase in Property Taxes should primarily reflect the increase of Town Spending.
The only place where such logic fails is if town has some property assessed at lower values and some at higher values.
From Bloomberg:
Home Construction Bust May Last Until 2011, U.S. Builders Say
New home construction in the U.S. may take until 2011 to return to last year’s level, said David Seiders, chief economist for the National Association of Home Builders in Washington.
Monthly construction starts would need to jump by 21 percent to reach Seiders’s benchmark for full recovery, which is 1.85 million. There were 1.53 million in April, the Commerce Department said. At the height of the five-year housing boom in January 2006, construction began on 2.29 million homes.
“We’ve fallen way below trend because we soared way above trend during boom times,” Seiders said in an interview. “The upswing will be relatively slow, unlike earlier cycles.”
The inventory of unsold homes is the largest since the Washington-based National Association of Realtors started counting them in 1999 and house prices have suffered the steepest drop since the Great Depression, according to the realtors’ group. Defaults and foreclosures also may rise as about $650 billion of loans to subprime borrowers, those with poor or limited credit histories, reset at higher interest rates by 2009.
“We’re still being hit pretty hard by the subprime-related mortgage market problem,” Seiders said. “One of the biggest unknowns right now is how serious the change on the mortgages side will be on home sales.”
…
Builders “have written off any hope” of 2007 being a good year, said John Burns, president of John Burns Real Estate Consulting in Irvine, California. “When you start offering consumers a good deal, you start selling homes.”
From the Press of Atlantic City:
N.J. minimum wage may be due for raise
It is hardly a matter of debate that New Jersey has a higher cost of living than many other states — a point advocates of raising the state’s minimum wage above the federal level noted several years ago.
Now, less than a year after New Jersey raised its minimum wage to $7.15 per hour — it increased to $6.15 in 2005 — it will fall short of the federal standard and again face the issue of raising its own wage to reflect the state’s economic climate.
Congress has approved an increase in the federal minimum wage from $5.15 per hour to $7.25 per hour as part an Iraq war-spending bill that President Bush signed Friday. The provision, which allows for the first increase in a decade, would raise the minimum wage to $5.85 per hour two months after Bush signed the bill, $6.55 one year later and $7.25 the following year, and includes $4.84 billion in tax breaks for small businesses.
The increase comes as the state’s Minimum Wage Advisory Commission — created after then-Gov. Richard J. Codey signed off on a wage increase in 2005 — begins reviewing comments that were submitted from the public through May 18 on the matter.
…
The New Jersey Policy Perspective, a liberal think tank, has submitted a report to the commission stating that even the state’s recent minimum wage increase has not kept pace with a cost of living that is the fourth-highest in the U.S. The group recommends that the state annually adjust the minimum wage to half the average wage, which it said would be $8.50 per hour this year.
The group also is seeking a base cash-wage requirement for tipped employees that would be set as a percentage of the full minimum wage, rather than a dollar figure. The minimum base wage for tipped employees is $2.13, the federal minimum.
did Corzine say High Property tax is a forced saving for homeowners?
#7 No surprise there. Things we used to talk about on this site months ago, that most would laugh at then are now being accepted as the new reality.
I have to admit, the NJ real estate tax is the primary reason we have not elected to purchase a home. We have the cash for 20% down, and the income to afford a decent home. However, I simply refuse to give 10-12K/yr to the state of NJ, especially when the ROI is as poor as it is in this state. Not to mention, there is no end it sight as to how far these tax hikes will go. Since NJ now prides itself on being the country’s most egregious welfare state, with an adoring electotate that sends the same lowlifes back to office at every oppotunity, one has to really question where it will all end.
will this 4-5 per gallon , effect home sales
Golf school James?
#6
“n a rising market, the local assessor will raise his estimate of your home’s worth, which usually results in a higher real-estate tax bill
I do not understand this logic. My understanding is town first decides on budget (i.e. mainly spending), then calculates the percent of RE value that will meet the expenses. If all houses in the town are assessed higher due to RE boom, there should be no increase due to RE prices going up. For e.g. if expenses are 1 million, residents still need to pony up 1 mil. If all houses are assessed higher, they still will share same percent of the pie. In such a logic, the increase in Property Taxes should primarily reflect the increase of Town Spending.
The only place where such logic fails is if town has some property assessed at lower values and some at higher values.”
Unfortunately, it doesn’t work this way. In a town that shares a school district, the higher assessments will cause the share of the school district pie to be bigger (don’t know how it works, but this was the reality when Caldwell went through a reval). Also, the county piece will be higher because the houses are now worth more. Doesn’t seem fair but that’s reality. I’m sure there must have been some houses in town who had their tax bills go down but I don’t know of any. Most people had significant increases in their tax bills – some even doubled.
Willow: Good point, but that should only apply to some towns not all, where there is school district sharing and one town does reval and second does not.
But NJ has 566 municipalities, majority have no sharing at present. I live in central NJ, where Bridgewater & Raritan share school district. But both town does reval every 2 to 3 years. My taxes went from 3.5K to 6K from 2002 to 2006. All properties I look in these towns are assessed at 2005 market prices. I fail to understand how taxes go up just because RE values went up. The expenses should have gone up just few percent every year due to inflation.
My suspecion is that they fix the tax rate, and so if RE values goes up, Towns get more money, and its easy to spend if you have the money. You can always find things to do with money.
AP
S&P Housing Index Shows Decline
Tuesday May 29, 9:09 am ET
By Vinnee Tong, AP Business Writer
S&P National Housing Index Shows First Quarterly Drop Since 1990-91
NEW YORK (AP) — U.S. home prices fell 1.4 percent in the first quarter compared to a year ago, the first time since 1991 prices have shown a quarterly decline, according to a housing index released Tuesday by Standard & Poor’s.
http://biz.yahoo.com/ap/070529/home_price_index.html?.v=4
From S&P Case shiller index site,
1 year return for NYC Metro area is -1.77%.
http://macromarkets.com/csi_housing/MSA/new_york.asp
No sign of Bottom
SG,
I think your assessment is right for NJ. Towns form a budget and then set a tax rate meant to get the needed funding.
The only issue is that not all property appreciates equally. Over the last few years, residential appreciation blew away commercial and industrial property appreciation. Within the residential sector, small “starter” homes appreciated more than bigger homes.
This means that when reassessments are done, small “starter cape” type homes will bear the brunt of tax increases. Some of this will come from outright tax increases while some of it will be a reallocation of the tax burden to these homes.
This will hit first time buyers, already struggling with a big payment, and seniors particularly hard.
# NJ is a welfare state and its getting
worse, not better. stand on any street cornor and view the population.
Many post offices now are like immigration
offices, you get what you pay for, and
NJ loves Welfare, and the home owner
is paying for it.
RentingInNJ: You are right. My town had its revaluation at the height of the market (based on October 2005 prices). The smaller the house, the bigger the tax hike. On my block, the ranches and capes all had tax hikes of $800-$1200 and more. The new McMansions all had tax CUTS.
RE post 6:
SG,
I’ll try to keep this as short as possible, but here is how property taxes work.
Periodically all property in a town is reassessed or revalued. Most towns have it done every 5 years or so, but some towns try to wait longer (particularly if they have a lot of development, I can explain why in a later post if you wish), sometimes as much as 12 years.
Whatever your assessment, that will be the basis of your tax bill until the next assessment, or you do something (build an addition) to change the value of your property.
New construction will get assessed at it’s present value, in a rising market, their tax bill will be a bit higher than if the whole town was assessed when their house was. Obviously, a home built and assessed in 2005 will carry a much higher tax bill than a similar house if it was assessed in 2001.
The municipality’s tax rate will rise or fall (it’s surprising how often this happens in an election year) depending on spending.
The way a town is run can have a huge effect on the tax bill, which is one of the things that bugs me about the state’s “across the board” rebates. The worse job the people running a town do, the bigger rebate their residents get.
Essentially, the state rewards bad behavior.
Not to mention, there is no end it sight as to how far these tax hikes will go.
That is one of my biggest fears and one of the reasons why I am hesitant to buy. Once I buy, I am shacked to a property tax obligation that I have no say over.
I see no indication of a stabilizing of property taxes either. This year’s supposed 20% rebate is nothing more than buying votes to keep the assembly Democratic in the November elections. The rebate is nether permanent or sustainable and it will cost the state heavily.
Just to be clear, your tax bill goes up or down from year to year based on a change in the tax rate, not the assessment.
Typically, the municipal share of your tax bill is about 1/3 of the total, Your school system is about half (probably a little more) and county/fire district/library/etc. will be the rest.
What complete blows the reassessment out of the water is new home construction. Towns at the Jersey Shore saw duplexes, with 8k-10k in tax revenue, being built on empty lots. Those lots five years ago were paying 800 per year in taxes. Taxes should have gone down for everyone.
It boggles my mind to think of where all of the money is going. Some streets have 10 or more new houses on them.
Jill Says:
May 29th, 2007 at 10:43 am
RentingInNJ: You are right. My town had its revaluation at the height of the market (based on October 2005 prices). The smaller the house, the bigger the tax hike. On my block, the ranches and capes all had tax hikes of $800-$1200 and more. The new McMansions all had tax CUTS.
It is interesting that you notice that too.
It does not make sense to buy a starter cape-cod in NJ.
Taxes are almost the same as split-level and bigger ranches, Price – almost the same as well – I see run down cape cods, with oil heating and wall AC units asking prices within 25-50K from decent ranches and split-levels with central AC and Gas-heating. Why would anybody buy a Starter home cape-code in this case??
Also it seems that starter homes prices are staying pretty flat, may be with small declines while bigger homes are getting discounted pretty dramatically. Which brings them even closer to starter homes.
It seems that mentality is: if you can put a words starter home in the description it makes house worth at least extra 10%-20% more.
I do not believe oin al-out 20-40% price declines, but I do believe in flat prices for 3-4 years, which gives people an opportunity to save bigger down payment and buy bigger house instead of Cr@p-Code.
Rent in rent controlled apartment – there are many in NJ, you rent will not go higher than CPI – it is in my lease contract!! – and save. If NJ economy gets better – buy a house, if it is gets worse in a few years – you will be free to move to a greener pastures.
“Since NJ now prides itself on being the country’s most egregious welfare state, with an adoring electotate that sends the same lowlifes back to office at every oppotunity”
Well said!!! Clap Clap Clap
You, yes you the voter can make a difference. Remember to vote, June 5th is primary day! Don’t be part of the “adoring electotate.”
d2b Says:
May 29th, 2007 at 11:02 am
What complete blows the reassessment out of the water is new home construction. Towns at the Jersey Shore saw duplexes, with 8k-10k in tax revenue, being built on empty lots. Those lots five years ago were paying 800 per year in taxes. Taxes should have gone down for everyone.
It boggles my mind to think of where all of the money is going. Some streets have 10 or more new houses on them.
It boggles my mind to think of where all of the money is going.
Easy:
Pensions, Medicare, Increased goverment spending, employment and goverment salaries.
Double-dipping state goverment officials with 150K+ pensions, olympic size swimming pool in every school, outdated roads which are in need of constant repaires, wellfare, increased amount of people lacking health insurance, increased amount of illegal workers who are not paying taxes, but using municipal services.
State Debt interest payments!!!!!!
Shoud I continue??
OK, I hadn’t looked at the ratios of in the tax bills in a few years, and they seem to be all over the map.
non-urban municipalities seem to be closer to 20% of a typical tax bill and schools are closer to 2/3 of the take. No rhyme or reason for the breakdowns that is easy to explain, except that more urban municipalities tend to have a lot more cops and are more likely to have paid fire departments.
#25 Al There will be decliens first in my opinion, declines of around 20% or more, and than flat prices for at least 3 to 5 years if not more, probably more.
Spring market is a bust, little to nothing selling, at least in my area of Bergen county.
Af ther this Spring market, people who truly wnat to or have to sell, will finally start making signeificant decreases in their asking prices.
It is a matter of simple affordability.
We all need to get real about the property tax situation. Here is the issue flat out the issue, property taxes are very high here but the same issue faces many places around the country. NJ is particularly bad because of the state deficit issue, lack of shared services, highly paid public workers(not salary necessarily but pension, benefits etc.)/politicians with school administration jobs etc. It has little to do with welfare, immigration etc. Although the system could use reform. It has to do with the fact that to give a dollar in welfare money to someone it costs 3. The government needs to change how it’s employees are compensated, it needs to reduce the number of employees by using automation increasing efficiency. Corruption is a huge problem *cough* SCC *cough*. Don’t get me started on the SCC living in Jersey City I can tell you they spent a fortune building schools in hudson county that in terms of facilities best most public schools in suburban Bergen and Essex counties. Children need good teachers and a desire to learn maybe some books, couple this with corrupt contractors it is no surprise the SCC went bankrupt. Seriously why were schools built Downtown in Jersey City where land is expensive and most students do not live near by. By its very nature running a state and local government in an area as dense and expensive as NJ is going to be costly but if the electorate cared about it’s citizens they would try to keep it as reasonable as possible.
I think since new Jersey wants to be known as the peoples republic we should adapt more of china’s laws The death penalty is the ultimate deterrent for crooked officials In China …http://www.ipsnews.net/news.asp?idnews=33503
Al and Jill
“the (new) McMansions all got cuts”
Actually, that is pretty much the way it is supposed to work.
As I explained in post 21, new construction gets assessed at current value while existing homes carry an assessment from an earlier year.
If property values rose over time, a fair reassessment of houses in 2005 would bring the relative assessments of a home assessed in 2000 and a home assessed in 2003 closer together because the new price of the home assessed in 2000 would incorporate the appreciation that took place in the three years before the other home was built.
Of course the fact that the assessment took place at the height of a real estate bubble means both homes are overvalued today and could probably succeed if they pursue a tax appeal.
post (30)
Be patient let the pressure is build, a NJ TAX REVOLUTION is brewing!
NJ republicans are also part of the problem. In my Legislative District 40 assemblyman Kevin O’Toole feels that he is heir apparent to Senator McNamara’s seat. Great just keep recycling old ideas. I will give him some credit for pension reform but we need NEW blood.
Here we go again, Wayne Mayor Scott Rumana(R) is running for the vacant O’toole assembly slot. Nothing like keeping the pension double dip alive and well! Yes, I am a registered Republican and I can’t stomach this garbage. NJ is not for sale, vote out the trash on June 5th we need new blood.
Is it true that the greeters at Wal Mart,
and Valley Fair greet you in Spanish? What
taxes are they paying, or ye witholding,
and SSI, right. as they apply for the
S8 Housing, granted by the double dippers.
They are kiling this State. I just read at acpress.com, Atlantic City’s paper, that NJ is considering raising minimum wage to $8.50 per hour. Why would anyone want to own a business in NJ.
Ha, Ha, post a job at under $8:50 an hour and no one would apply!!! Trader Joes is $13 an hour and nannys are $10 an hour. Heck summer interns are $15 an hour. The only people who get under $8:50 are illegals and the rules don’t apply to them anyhow.
May 29th, 2007 at 3:06 pm
They are kiling this State. I just read at acpress.com, Atlantic City’s paper, that NJ is considering raising minimum wage to $8.50 per hour. Why would anyone want to own a business in NJ.
FYI Actually my house was assessed lower this year because the market is falling but my tax rate went up so I am paying the same as last year anyhow. The towns already have their 2008 budget in place so if property values fall they will just raise rates to match the amount of taxes they want.
John #36:
Maybe you or I wouldn’t work for $8.50 an hour. But minimum wage is supposed to be a starting point for entry-level, unskilled labor. Driving minimum wage higher ripples through a good part of the labor market. Your nannys will need to be paid more, etc.
In 2006, our company hired 17 high school students. This year we are hiring 15. Same pie, different slices.
Very nice site!
http://c.1asphost.com/topfarm7/895.html