Up, up and away: Superman? no, your taxes

February 07 F1203003 $1,334,200 $0 0%
April 18 F1203003 $1,100,000 $-234,200 -18%
August 13 F1203003 removed
August 17 F1220933 $950,000 $-384,200 -29%

 

This property in White Rock, BC has dropped in asking price from 1,334,200.00 to 950,000. Why should that concern  you? You don’t live in White Rock and you don’t own a house you thought was worth over a million dollars. The assessment is 1,050,000.00. The price may keep falling.

The reason that it concerns you, me and everybody else is that taxes are based on assessments. If assessments go down, taxes have to go up to pay for all those things that municipalities have to pay for. Ya know.

Yesterday, there was a report that a house that was being offered at over 5,000,000.00 went into receivership. That kicks those rich people where it hurts. Except, the people who are likely to be hurt are the tradespeople who did the work, the companies who supplied the materials. You see, the house isn’t finished yet. Imagine if you own a company that does drywall and now you aren’t going to get paid. Or does paving, or roofs, or provides plumbing materials, or…. So, there are even fewer people to pay those taxes for roads, schools, garbage pickup, recycling, etc.

Our property taxes are going up, up, up. Either that or our services are going down, down, down. Those community centres may be going dark. Those community golf courses may be locking the gate. Unless, of course, we pay more property taxes.

There’s a recession. If you’ve got a steady, secure job, you won’t have felt it but people who own businesses, particularly people with small businesses have been and are struggling to stay afloat. There’s lots of unemployment and, a lot of the employment that exists, is part-time, poorly paid. How do you know retired people are hurting financially? Take a look at the greeters in places like WalMart or Home Hardware or some of the people cleaning tables in Tim Horton’s. On my trip back to BC, I stopped at a Tim Horton’s and the lady cleaning the tables was older than me. I’m 73.

There are a lot of things in life that are like icebergs. You just see the tip but underneath, there are sharp edges ready to tear your life apart. Mortgages are like that. You can get a mortgage at 3.5% so you go for the granite counter tops, the Jacuzzi and the sauna, the extra bedroom, the double garage, the I want to have this so when my friends come to visit, they’ll envy me. Except the mortgage is based on both of you working, is based on interest rates staying at 3.5%, is based on the house going up in price or, at least, not going down. Ahah! One of you loses a job, interest rates start to go up, both bad but then a neighbour has to take 100,000 or 200,000 less than they paid three years ago and you realize that you’ve got an upside down mortgage.

An upside down mortgage? What’s that? Never heard of it. Really? In the good old USA, upside down mortgages are everywhere. That is, a mortgage is 300,000 and the current value of the house is 150,000. Come renewal time, the holder of this “investment” needs to come up with 150,000 dollars because no banker in his right mind is going to lend 300,000 on a house worth half that. Any chance you’ve got 150,000 floating around somewhere, anywhere? No? You just joined the homeless. Welcome to the WalMart parking lot.

Oh, did I mention that if you put 20% down, it’s gone.

House prices are sticky. People who don’t have to sell put their homes up for sale. They don’t get the price they want so the owners take them off the market. That makes prices sticky.

At the moment, there isn’t any panic, except among some real estate agents who have been buying assignments on pre-built condos. You know, getting an option on a condo early, then as the building nears completion, flipping it for quick bucks. Real estate agents are nothing if not greedy and some, in spite of past lessons, have a whole bunch of these assignments. They need to get out. The prices for these units are not sticky. The sweat from desperate real estate agents makes them slippery.

The other not sticky, that will drive prices down, are divorces (court ordered sale), deaths, job moves you can’t refuse, job losses, builders who can’t borrow any more money to finish projects. These are situations where a house has to be sold. They’ll lead the way.

If prices fall by 40%, then so will revenues based on property taxes.

If you are thinking of buying, don’t. If you have found someone who just is desperate to buy your place, sell. If you know someone who is desperate to buy my place, let me know. No, that’s not my property at the beginning of this article. I’m not in that league. Thank goodness -40% of less is less. I’m thankful for small mercies.