Sunday, July 30, 2006

Trouble on the Real Estate Horizon?

Nothing like a tax bill to wake you up. Weber County in Utah seems to have decided to do away with separately taxable land and building evaluations and the correspondingly variable taxation rates, resulting in a tripling of the tax for speculators and non-speculators alike. This is presumably so the County can share in the profits realized as property values have almost doubled in the last few years.

I can think of a situation where rental property owners might find that this puts a crimp on their income, or where an elderly couple finds they can't afford to pay the tax, to the point where neither homeowner can retain his property. This results in their putting it on the already overloaded market. We all know what this does to property values.

On another front, a friend is unable to sell his home in California, and he will soon find himself between the variable-rate rock and the overpriced-home hard place. Hopefully, he will not have to submit to foreclosure.

Wall Street pundits think stagflation seems to be around the bend, judging by the recently released statistics on the GDP and inflation. Anxiety is rising for the next Fed rate announcement. Will they accommodate or tighten? At this point, Las Vegas-type betters are saying the odds are favoring a rise by a small margin. Borrowers must be on pins and needles.

[Thanks to for the image.]

Anecdotal, all of this; but aren't these interesting times we live in. I blame excessive credit creation for these inequities. I believe that property values have ballooned because the Fed has "printed" too much money. The rest all flows from this original sin. Inflation tends to first benefit the real estate contractors, then other speculators; then, as it works its way through the system, its effects begin to inflict pain on unsuspecting homeowners, e.g. lower income elderly living on a fixed or almost fixed income, who find their property tax has tripled and prices are going up, through no fault of their own.

But the Fed people are much too far away from a tiny town in Utah to care.


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