Property Taxes Remain High Amid Housing Slump

[Mar 12, 2009.]

 

According to a survey by the U.S. League of Cities, municipal finance officers budgeted for a 3.6 percent drop in revenue from residential taxes this fiscal year. At the same time, the National Association of Realtors has reported that the national median existing single-family price in just the 4th quarter of 2008 dropped 12.4% from the previous year.

Local governments are facing huge budget deficits and are struggling to find ways to solve their financial problems. To offset the drop in housing values, city governments are raising tax rates.

Bloomberg.com reported that In Michigan, where prices in Saginaw declined 41 percent in the fourth quarter, some taxes will rise as much as 4.4 percent this year because the tax cap provides for an increase linked to a state-calculated consumer-price index.

“Assessments are going out now, but most people don’t pay attention until the bills come,” said Ken Parrish, treasurer of Kent County, which includes Grand Rapids. “That won’t happen until July, and then we’ll have some unhappy taxpayers.”

This can spell disaster for some homeowners. Those that are looking to refinance their mortgage must include these higher tax payments, if already assessed, in their current debt-to-income ratios. For some that are pushing the high-end of what underwriting guidelines allow, this could result in their inability to refinance.

Homeowners that are facing rising mortgage payments due to an adjustable rate mortgage must now also contend with their local governments increasing their real estate taxes. At a time when the federal government is looking at ways to help people avoid foreclosure and make their homes affordable, local governments are forced to ask these same people for more money.

Residents do have the right to appeal the value assessed by their city government if they feel the value is higher than it should be based on the assessed value of comparable homes in the area. In fact, counties across New Jersey got 32,976 appeals last year, 40 percent more than in 2007, according to the State Treasurer’s office.

 

About Author:

Chris Rocks is the Regional Director of the National Credit Federation (NCF), a consumer advocacy group that assists small business owners and consumers overcome debt and credit challenges.