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Friday, Oct 31, 2014
Editorials

Be careful with increasing revenues

Published:

Relief is widespread now that local property values are steadily increasing and bringing in more tax revenue for cities and counties.

Today's housing recovery is steady and cash-fed, nothing like the earlier easy-money bubble that led to a crash in property values and buried many buyers in a financial hole. And while the price appreciation can be expected to continue, local governments would be wise to keep belts tight and expectations realistic.

Hillsborough County Property Appraiser Bob Henriquez says the value of property in his county is up about 5.4 percent. The resulting increase in tax revenues, because of various tax caps and deductions, will be somewhat less.

The higher revenue does justify a small raise for county employees; it does not signal a return to the irresponsible years when no one noticed a few million here and there for pet projects and when pay for many government jobs became more generous than for similar jobs in the private sector.

The board and Hillsborough County Administrator Mike Merrill are right to focus on top priorities, especially the attempt to broaden the county's economic base.

The brightening economic picture continues to hold many shadows. Houses are indeed selling faster and for higher prices - Zillow.com reports a price increase of 11.6 percent in the county over the past 12 months.

But it also reports that more than a third of the homes sold in Hillsborough in April were sold at a loss. That's a huge improvement from the 50 percent loss rate in early 2011, but the fact remains that many sellers are losing money and will have little or no equity to reinvest.

Foreclosures too remain a concern. The Florida Realtors reports that of 20,662 single-family homes sold statewide in April, 3,344 of the sales were foreclosures. That number is up slightly from a year ago.

The encouraging news is that foreclosures, along with short sales, are becoming a shrinking share of total sales. And prices have moved up. Florida's median sales price of $165,000 in April is about 14 percent higher than a year earlier. That's a gain of $20,500.

The higher prices are being driven by savvy investors who are snapping up houses that they will either offer for rent or resell. Half the single-family homes sold statewide in March, and nearly half in April, were cash deals. The Tampa Tribune recently reported that the Blackstone Group now owns more Hillsborough properties than anyone else.

Advocates of big, easy mortgages for high-risk applicants should note the outcome of that short-sighted policy. The working poor have been hit hardest by the crash. Many low-income buyers lost both their homes and their savings.

It is a sign of a growing economy that, as Zillow reports, rents are up 7 percent in the past 12 months in Hillsborough County. It is less optimistic news if you're a renter whose income is flat and whose credit rating has been squashed.

Another side effect of the hoped-for arrival of cash investors is felt by ordinary folks trying to get a new mortgage on an ordinary home. Investors in some neighborhoods are paying more than lenders will allow, based on the recent history of depressed values. That can make it harder to qualify for a loan, despite attractively low rates and fair prices.

The pain of the largest downturn since the Great Depression won't soon pass. Home prices are going up, but at this point are only back where they were at the end of 2009. Local leaders should keep that in mind and make upcoming budget decisions with conservative restraint.

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