Higher Property Taxes Could Accelerate Downturn - Housing Tracker

Quotes of the Day

"Everything seems to go up except for your paycheck.” – Steven White, a nutritionist in a northern suburb of New York City, who went to a public hearing recently to protest the higher property taxes he has to pay this year. (Wall St. Journal, Apr. 25th)

"It's all the way down the line.” - Dave Strefling, Detroit regional manager of Michigan Foundation Co., a ready mix concrete firm. His 32 trucks have all been in use at the same time only once this spring, something that's never happened before this time of year. (Detroit News, Apr. 28th)

Macro Effects of the Housing Slump

Great Expectations. “New York State Department of Labor [forecasts] that the Street will cut its payrolls by some 36,000 over the next couple of years, a sizable bite out of the rolls of the 182,000 folks who now earn their daily bread in the canyon of capitalism.” (Barron’s, Apr. 28th)

Recession Diet Just One Way to Tighten Belt. “At Home Depot (HD), sinks and faucets are selling briskly. Managers at the chain suspect that consumers, loath to spend money on a splashy kitchen renovation or new roof, are settling for a cheaper bathroom “refresh.” Another top seller at home improvement stores: programmable thermostats and insulation, which can cut fuel bills… Furniture companies like Bombay and Domain… have filed for bankruptcy protection… “People are not not spending, but they are changing how they spend,” said Marshal Cohen, chief analyst at the NPD Group.” (NY Times, Apr. 27th)

Housing Slump Hits Builders. “Housing Consultants Inc.: In 2007, a paltry 5,556 permits to build new homes were filed in the nine counties [of] southeastern Michigan. That was nearly half the number of permits filed in 2006 and 20,994 less than in 2004… Mark Kwolek, co-owner of Planned Home Improvement in Westland: "You're finding skeleton crews everywhere. You go to a supplier and the business is closed with no warning. You try to call a contractor and you find he's moved out of state." Michigan’s Department of Labor & Economic Growth: About 69,000 jobs directly related to the home building industry have vanished since 2000.” (Detroit News, Apr. 28th)

M.D.C. Holdings, Inc. Q1 2008 Earnings Call Transcript. “Analyst Timothy Jones – Wasserman & Associates: “I know your SG&A is pretty high, can you give me what your headcount is today versus last year in the peak? The full employees. There’s huge differences among builders...” MDC CFO Paris G. Reece, III: Our peak [employee headcount] was about 4,300… two years ago. And we’re down as of the end of the year, I believe our 10-K disclosed 2,000 and of course we continue to right size as we go. You could assume that there have been further reductions from there. 4,300 to 2,000 is kind of where we are.” (Seeking Alpha, Apr. 27th)

Barclays North: The Decline Of A Real Estate Powerhouse. “Just two years ago, Barclays North was one of the largest private employers in the city, owned millions of dollars' worth of raw land in Snohomish County [and] once employed more than 100 people. Barclays has [since] laid off three-quarters of them. It owes millions to lenders, and at least five of them have sued to recover loans worth $4 million. Banner Bank and First Sound Bank recently won judgments for more than $800,000. Dozens of other lenders are showing more patience with McCourt and giving him more time as he considers all options for the company's future.” (Washington Herald Net, Apr. 27th)

Many States Appear To Be In Recession As Deficits Grow. “National Conference of State Legislatures 50-state survey: The finances of many states have deteriorated so badly that they appear to be in a recession… Delaware [has] a $69 million gap this year… California [has] a projected $16 billion budget shortfall over the next two years… By mid-April, 16 states and Puerto Rico were reporting shortfalls in their current budgets... That's double the number of states reporting a deficit six months ago… For the upcoming fiscal year, 23 states and Puerto Rico [are] already reporting budget shortfalls totaling $26B... Last week, the Center on Budget and Policy Priorities said 27 states are reporting projected budget shortfalls next year totaling at least $39B." (Yahoo! Finance, Apr. 25th)

Rising Property Taxes Fill Gaps, Pinch Homeowners. “Faced with revenue shortfalls, local governments across the U.S. are raising property-tax rates, angering homeowners already hit by the housing slump and economic slowdown. Memphis Mayor Willie Herenton has proposed a 17% increase in the property-tax rate to close a budget gap… Portland, Maine, has a proposal to raise the property-tax rate 3.7%, and lay off city workers… Arizona Gov. Janet Napolitano recently vetoed a bill that would have repealed the state property tax… Both raising taxes and slashing costs can accelerate the economic cycle's downward turn. Municipal spending accounts for one-eighth of the nation's gross domestic product and the U.S.'s eight million municipal workers account for 6% of the nation's employment ranks.” (Wall St. Journal, Apr. 25th)

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