County revenue: Slow down now or slow down later

In this world nothing can be said to be certain, except death and taxes.

         — Benjamin Frankline, in a letter to Jean-Baptiste Le Roy, 1789

The art of taxation is to pluck the goose so as to obtain the most feathers with the least amount of hissing.

        --Jean Baptiste Colbert, comptroller general of finance to Louis XIV of France.

 

The SF Chronicle did a wrap-up of the effects of rising interest rates, the resulting slowing home sales and selective home price declines on County property tax collections.  July 1 was the assessors' reporting dates.   I will pluck out the San Mateo County bits:

As mortgage rates shot up last year from around 3.2% in January to as high as 7% in November, fewer people could buy homes. The rise in rates “increased mortgage payments by 30, 40, 50%,” said Oscar Wei, deputy chief economist with the California Association of Realtors.  Buyers who could afford a home found slim pickings, because people with mortgages in the 3% to 4% range were reluctant to sell.

Regionwide, the assessed value of all property subject to property tax grew at a lower rate last year than it did in 2022, mainly because of the sharp slowdown in home sales.  That means property taxes — which primarily fund public schools, community colleges and city and county governments — will also see less growth in fiscal 2023-24.

San Mateo County reduced assessments on 6,403 homes for 2023-24. That was way up from 294 last year, but far below the 34,700 properties that suffered a decline in 2011-12, the assessor’s office said in a news release.

In San Mateo County, the value of business and other personal property rose by 15.7%. It contributed $1.7 billion to the county’s roll, which increased by nearly $19 billion, or 6.9%, to $307.8 billion. Last year’s increase was 8.3%.

Since the Fed is very likely to do at least one or two more rate increases, the turnover on homes is likely to stay muted.  Inflation is finally trending downward, so the double whammy of business assets higher valuations (separate from the real estate) is likely to level off as well.  There are a lot of shovels in the ground on commercial and industrial property, but it has to be nerve wracking from these developers as tech lay-offs continue.  Our County supervisors will have to be careful with all the hand-outs, pay raises, property purchases for subsidized housing, transit giveaways and the like.  Even without a recession later this year, further plucking the goose is going to involve a lot of hissing.

Comments

[Joe]

From local realtor Raziel Ungar's e-newsletter....like I said....

The San Francisco Chronicle also noted that homes for sale in the Bay Area are at their lowest level in 20 years. In fact, on a 12-month-rolling basis, the number of new listings AND the number of sales are both at their lowest points in well over 20 years! Perhaps the biggest wild card has been severely depressed new-listing activity as potential sellers have held back – ascribed to the “mortgage lock-in effect” – which not only artificially constrained the number of sales, but put upward pressure on prices as buyers, once again, competed for an inadequate supply of homes for sale.

[Paloma Ave]

Based on this news, what are the chances that our democrat politicians will slow down spending increases?

Not a chance! Time to increases taxes and fees!

[Spurinna]

Also old folks are waiting to die so their kids can inherit the home.

If they sell the home to their kids then the kids have to pay taxes on the current value of the home.

[Joe]

Whoops:

SAN JOSE — Three downtown San Jose housing tower projects have encountered delays due to a murky economy, sky-high interest rates and the withdrawal of a key tech partner from the highrises.

The housing towers are located in downtown San Jose’s South First Area, or more familiarly, the SoFA district, and together would produce a combined 474 residential units, once they are all constructed.

One unique feature of the three towers was the involvement of Nabr, a tech startup that uses software to automate and customize how people choose and design their homes and craft financing packages for potential ownership.

Nabr collected deposits from people who wished to rent the apartments in a program that would enable people to eventually own their apartments. At one point, Nabr reported the waiting list was in the thousands.

Now, however, Nabr has pulled out of the project of three towers and has returned all of the deposits. The tech startup, which in August 2022 had raised $48 million in a venture financing round, has decided to shift out of the San Jose market.