I am including this article here because it discusses falling real estate prices, including Florida, and is from the Conference of Mayors.
Falling Real Estate prices = lower property taxes which means less income for local governments, which is another reason to practice sound management in government.
This article is similar to research appearing in Business Week. Next year will be worse than 2007. I lived through three of these real estate downturns in California, and this one will be worse because of all the flimsy sub-prime loans that are resetting thru mid-2008 to higher payments, plus all the speculative buyers that were in the market that can't carry the extra inventory.
vj
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Nov. 27, 2007 - from
http://www.bloomberg.com/apps/news?pid=20601087&sid=atgFG_y3hGqY&refer=home
U.S. Mortgage Crisis Slams Property Values, State Tax Receipts
By Michael B. Marois
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Nov. 27 (Bloomberg) -- The worst U.S. housing recession in 16 years will drive down property values by $1.2 trillion next year and slash tax revenue by more than $6.6 billion, according to a report by the U.S. Conference of Mayors.
California, the hardest-hit state, will suffer a $630.6 billion decrease in property values that will cut property tax revenue to local governments by almost $3 billion, the study found. The New York City region will see the greatest slowdown in the output of goods and services because of the mortgage crisis, according to the report.
The U.S. residential real estate market is faltering as rising foreclosures among subprime borrowers have pushed down prices and led to a record supply of unsold homes. Foreclosures among homeowners with subprime adjustable-rate mortgages have reached a five-year high.
``The real estate crisis of 2007 and 2008 will go down in the record books,'' according to the report, released as the Conference of Mayors gathers in Detroit today for a special meeting to discuss the housing slump. ``The wave of foreclosures that has rippled across the U.S. has already battered some of our largest financial institutions, created ghost towns of once vibrant neighborhoods -- and it's not over yet.''
Subprime loans are made to borrowers with low credit scores or heavy debts, and have the highest default rate. Those risks increase with mortgages that offer low ``teaser'' rates in the early years and then reset to higher rates that some borrowers can't afford.
Slowing Growth
The 361 largest U.S. cities will experience a combined loss of $166 billion in economic growth, led by $10.4 billion in the New York-Northern New Jersey area, according to the study. Los Angeles is projected to slow by $8.3 billion, followed by $4 billion each in Dallas and Washington and $3.9 billion in Chicago.
Property values in Florida are projected to decline by $79.7 billion next year, lowering property-tax receipts by $589 million and sales taxes by another $148 million. New York's property-tax revenue may decline by $686 million.
The National Association of Realtors said Nov. 21 that home prices fell in one third of U.S. cities last quarter as stricter lending standards caused a 14 percent decline in sales nationwide. The association said prices dropped in 54 of 150 metropolitan areas and the median sales price tumbled 2 percent nationwide.
Homebuilding permits in the U.S. slumped in October to their lowest since 1993, the Commerce Department said Nov. 20, and construction of single-family homes tumbled 7.3 percent to the lowest since October 1991.
Spending Declines
As construction wanes, so do related purchases such as new furniture and fixtures. Consumers also are cutting back on spending financed by home-equity lines of credit. Both have crimped state and local sales tax revenue, the U.S. Conference of Mayors' report said.
The collapse of the market for bonds backed by mortgages has spurred U.S. banks to take more than $45 billion in writedowns and tighten their lending standards. Falling prices also have made it harder to refinance or sell.
To contact the reporters on this story: Michael B. Marois in Sacramento at [email protected] .
Last Updated: November 27, 2007 05:00 EST
