Tuesday, August 08, 2006

Property Taxes Growing Faster Than Incomes

From the Asbury Park Press:

Property taxes go up faster than incomes

Property tax increases greatly outpaced personal income growth in the region's suburbs between 2000 and 2004, a turnaround from the 1990s, according to a report published Monday.

Property tax collections throughout New York, New Jersey and Connecticut rose twice as fast as income during the four-year stretch, and the gap in suburbs was even larger, according to a review of state and federal data by The New York Times.

"People's wealth may be growing if they own a house, but the census data show that their income isn't keeping up with their tax bills," said Gerald Prante, an economist with the Tax Foundation, a Washington-based group that favors lower taxes.

The widest gap in the region was evident in New Jersey's Somerset County, where property taxes jumped 41 percent while income grew only 5 percent.

In Nassau County, Long Island, tax collections rose 29 percent while personal income went up 11 percent. In New York's Westchester County and New Jersey's Bergen County, the property taxes also grew at about three times the rate of income.
...
Bob Vena, a plumbing contractor in Hazlet, said he does not know how long he will be able to afford the soaring taxes on his home and bungalow, which now total $13,500 yearly.

"Eventually I hope to sell everything and just get out of New Jersey," Vena, 63, said.

45 Comments:

Blogger NJGal said...

""Eventually I hope to sell everything and just get out of New Jersey," Vena, 63, said."

Ah, but to WHO? I suppose it's all the rich 20-somethings and their $300 jeans.

8/08/2006 04:41:00 PM  
Blogger Math, like gravity, is law. said...

"Eventually I hope to sell everything and just get out of New Jersey," Vena, 63, said.


Multiple Mr. Vena by x 100's of thousands over the next 3 years.

8/08/2006 04:42:00 PM  
Anonymous UnRealtor said...

I watch all these HGTV shows with people upgrading this, adding granite to that, and when you factor in property tax increases because you've improved the home, these upgrades are financial losers.

Upgrading a kitchen and upgrading bathrooms, for example, will increase your NJ property taxes forever.

Why do people still have kitchens and bathrooms from 1942? The Tax Man.

Taxes in Essex county in particular are obscene, you're looking at $10,000 minimum, with $15,000 quite common as well. And if you actually have a back yard, forget it.

8/08/2006 04:54:00 PM  
Anonymous Anonymous said...

Why don't you just move to central jersey then? property tax is still not that bad in central Jersey.

8/08/2006 05:20:00 PM  
Anonymous Anonymous said...

Then how do people afford to shop the way that they do.

In the suburbs of Long Island & NNJ, people judge you by what you wear & what you drive.

The whole culture is geared toward toward two activities spending money, shopping, and eating at bad but over trendy restaurants.

Now people will be pulling home equity & maxing out credit cards for the holiday season & back to school.

8/08/2006 05:20:00 PM  
Anonymous Anonymous said...

{{Ah, but to WHO? I suppose it's all the rich 20-somethings and their $300 jeans. }}

But they don't pay rent or mortgage, the parents do like paying another 4 four years of college tuition & living expenses

8/08/2006 05:21:00 PM  
Anonymous Anonymous said...

just pay taxes on your credit cards
along with jeans and everything else
"Eventually I hope to sell everything and just get out of New Jersey," Vena, 63, said."
better sell soon or you'll never get out.

8/08/2006 05:27:00 PM  
Anonymous Anonymous said...

i had a reltor tell me this weekend that this is temporary slowdown. prices will not go down only yes you guessed it level off. there is an article going around his office from the nar or njar about demand over the next ten years will cause prices to continue to rise. i asked where the demand is going to come from? the reply was population increase. so there you have it hurry and buy while prices have temporarily leveled off

anyone see this letter?

8/08/2006 05:30:00 PM  
Anonymous Anonymous said...

People are just going back to spending the old fashioned way - on credit cards.

For everything from Gas - Taxes - mall shopping sprees. Most DO NOT pay in full, but just transfer from one card to another.

But we live in the most consumer oriented part of the country. People spend $2,000 - $5,000 a month just on clothes which is more than property taxes..

8/08/2006 05:31:00 PM  
Blogger RichInNorthNJ said...

...on his home and bungalow,...

I can't help but wonder if it's a REAL bungalow?

8/08/2006 06:15:00 PM  
Blogger RichInNorthNJ said...

Upgrading a kitchen and upgrading bathrooms, for example, will increase your NJ property taxes forever.

No effect on property tax. An increase in square footage will. Adding a deck will. But not improvements.

8/08/2006 06:30:00 PM  
Anonymous Anonymous said...

"No effect on property tax. An increase in square footage will. Adding a deck will. But not improvements."
what about hardwood floors?

8/08/2006 06:34:00 PM  
Anonymous Anonymous said...

Escalating cost squeezing the bubbleheads!
Between the property taxes slaes taxes utilities and maintenance HOME PRICES WILL GRIND LOWER.

BOOOOOOOOYAAAAAAAAAAA

Bob

8/08/2006 06:39:00 PM  
Anonymous Anonymous said...

{{{For everything from Gas - Taxes - mall shopping sprees. Most DO NOT pay in full, but just transfer from one card to another.}}}

How do they get/keep credit! I can't get a card. They won't accept the libray as my address.

8/08/2006 06:45:00 PM  
Anonymous UnRealtor said...

"Why don't you just move to central jersey then? property tax is still not that bad in central Jersey."


Time is also money, and I'd rather pay high taxes than suffer a long commute.

If I made a move, it would be to another state, where you can have both a reasonable commute, and reasonable taxes.

8/08/2006 06:50:00 PM  
Blogger RichInNorthNJ said...

what about hardwood floors?

Nope.

8/08/2006 06:54:00 PM  
Blogger RichInNorthNJ said...

...squeezing the bubbleheads!

Uh, I thought "we" were the bubbleheads since "we" believe in a housing bubble and "they" don't.

Hmmm, guess I was wrong...

8/08/2006 06:57:00 PM  
Anonymous UnRealtor said...

"No effect on property tax. An increase in square footage will. Adding a deck will. But not improvements."


Not in my town -- I asked town hall this week.

Also, from what I gather after many online searches, most towns in NJ will increase property taxes if:

* You perform "substantial" renovations to bathrooms and kitchens.

* You install central air conditioning.

* You install new siding.

Here's an example:

"The following items may effect your assessed value: conversion of attic, basement or garage into living areas; installation of a bathroom or powder room, central air conditioning, fireplace, porch, patio, deck, additions, new siding, inground swimming pool, or other structures."

http://lindenwold.net/tax_assessor.htm


Several other NJ municipal sites referred to "significant" remodeling of a kitchen or bath as cause for a tax increase.

8/08/2006 06:59:00 PM  
Anonymous UnRealtor said...

Rich, the message from the tax assessor was basically this: "Any improvement that increases the value of your house, will increase your taxes."

They also wouldn't proivide any guidelines ("every house is different"), so I'd know how to stay within some boundary.

8/08/2006 07:05:00 PM  
Anonymous Anonymous said...

It's offical. They have killed
NJ.Not only is it a welfare state
but also the nj taxpayer pays for
it.

How can people continue with this
state of affairs?

NJ , has turned into a third world
state.

8/08/2006 07:07:00 PM  
Anonymous Anonymous said...

And it getting worst. The state
can't bail all these town out
from their pension and salary
increases.

8/08/2006 07:12:00 PM  
Anonymous Anonymous said...

So here is the solution - MOVE.

There are so many other places around the country where the cost of living is not confiscatory like in NYC/NJ.

Notice the politicians like Bloomberg & Corzine aren't even talking about a middle class tax cut but assume that everyone makes $200,000 per household.

Either make more money or move. This region sucks anyway. Everything & everything is ridiculously overpriced, the beaches are crowded congested & dirty, commuting costs are ridulous, and rents are astronomical.
You can't even find an apartment in a ghetto neighborhood for less than $2,000 a month.

8/08/2006 07:58:00 PM  
Blogger grim said...

Piece on Ben Jones (thehousingbubbleblog.com) from Newsweek:

Bubble Blog

A popular blogger explains how he predicted the cooling of the real estate market and what the mainstream business press can learn from sites like his.

8/08/2006 08:09:00 PM  
Blogger jayb said...

Anonymous said...
i had a reltor tell me this weekend that this is temporary slowdown. prices will not go down only yes you guessed it level off. there is an article going around his office from the nar or njar about demand over the next ten years will cause prices to continue to rise. i asked where the demand is going to come from? the reply was population increase. so there you have it hurry and buy while prices have temporarily leveled off

anyone see this letter?

8/08/2006 06:30:20 PM


This might be the article from NAR. I'm not sure.

Home Sales To Hold Fairly Steady For Balance of Year

WASHINGTON (August 8, 2006) – The housing market is in a process of stabilizing with little change in overall sales volume expected over the balance of the year, according to the National Association of Realtors®.

David Lereah, NAR’s chief economist, said the indicators already are leveling-off. “We’ve seen a minor easing in closed transactions of existing-home sales, and a slight increase in the leading indicator of pending sales based on contracts,” he said. “New-home sales and housing starts have been fluctuating, so the overall market is stabilizing.”

“On one hand is the rise in mortgage interest rates that has slowed sales in many higher-cost markets, and on the other is 3.8 million new jobs over the last two years,” Lereah said. “This means many potential home buyers could enter the market in the foreseeable future, especially in moderately priced areas where affordability conditions remain favorable. In fact, this is already occurring.”

Although sales will be fairly steady over the balance of the year, declines since last fall mean annual totals will be lower. Existing-home sales are forecast to fall 6.5 percent to 6.61 million this year, the third highest on record after 2005 and 2004. New-home sales are projected to drop 12.8 percent in 2006 to 1.12 million, also the third best on record. Housing starts should be down 9.1 percent to 1.88 million this year.

The 30-year fixed-rate mortgage is running nearly a percentage point higher than a year ago but is likely to rise very slowly in the months ahead, reaching 6.9 percent in the fourth quarter.

NAR President Thomas M. Stevens from Vienna, Va., said current market conditions are favorable for buyers. “The rise in housing supply is the biggest change in the market over the last year,” said Stevens, senior vice president of NRT Inc. “Clearly, this has taken pressure off of home prices and has significantly widened choices for buyers. At the same time, sellers are getting excellent returns – but in this competitive environment they need real estate professionals more than any time since the 1990s to market their homes and maximize value.”

The national median existing-home price for all housing types is forecast to grow 4.3 percent this year to $229,000, while the median new-home price is expected to rise only 0.5 percent to $242,100 as builders offer incentives to clear unsold inventory.

The unemployment rate should average 4.7 percent for the balance of the year. Inflation, as measured by the Consumer Price Index, is likely to be 3.5 percent for 2006, while growth in the U.S. gross domestic product is projected at 3.5 percent. Inflation-adjusted disposable personal income is expected to grow 3.0 percent this year.

8/08/2006 08:27:00 PM  
Blogger grim said...

Newsweek/MSN was nice enough to include a link to our little bit of the bubble as well.

Thank You Kathy Jones!

8/08/2006 09:15:00 PM  
Blogger chicagofinance said...

Question:

Richie - is he:

1)Robin to your Batman?
2)Yin to your Yang?
3)Goliath to your David?
4)Warren to your Jim?
5)other?

Please let us know.....

8/08/2006 09:30:00 PM  
Blogger Richie said...

Richie who? Richie me?

-Richie

8/08/2006 09:49:00 PM  
Blogger chicagofinance said...

lookie......

Credit-Default Swap Market Whipsawed by Verizon (Update1)

Aug. 8 (Bloomberg) -- Companies in the process of restructuring are whipsawing the $346 billion credit-default swap market, where money managers bet on the ability of corporations to pay their debts.

Unexpected price changes for credit-default swaps, financial instruments typically based on corporate bonds and loans, are setting off alarms on the trading floors of the biggest banks and securities firms.

[edit]

Similarly, hedge funds were roiled after credit-default swaps of London-based Rentokil Initial Plc plunged 80 percent in value when the pest exterminator decided to issue debt through a new holding company.

The wild swings in credit-default swaps, which were created 12 years ago by investment bankers in London and New York, have become ``an unpredictable problem,'' says Stephen Rodger, who helps manage $3.8 billion of bonds at Baillie Gifford & Co. in Edinburgh, and has no intention of participating in the market any time soon.

Hedge Fund Nightmare

[edit]

For hedge funds, unregistered pools of capital where managers participate substantially in the profits of the money invested, the volatility of credit-default swaps is a ``nightmare,'' said Simon Ballard, head of research in London at ARC Securities Ltd., a fixed-income broker. ``Credit derivatives have underpinned the evolution of the hedge fund community for the last few years.''

New York Fed

Even the International Swaps and Derivatives Association, the trade group that has championed credit-default swaps as tools to reduce risks in the debt market, is concerned that increased volatility shows the hazard that the contracts no longer reflect the value of assets they're mimicking.

[edit]

Prices of credit-default swaps, which enable traders to bet on increases and decreases in corporate indebtedness, fluctuate the most when companies surprise speculators by announcing mergers and acquisitions, spinoffs, leveraged buyouts and other corporate restructurings. The volatility of credit-default swaps is increasing on a record $2 trillion of takeovers this year, up from $1.5 trillion in the same period of 2005, according to data compiled by Bloomberg.

Rentokil's Swaps

The increase in M&A has helped make credit-default swaps the fastest, growing part of the market for derivatives, financial instruments derived from stocks, bonds, loans, currencies and commodities, or linked to specific events like changes in the weather or interest rates.

[edit]

Market Rocked

``Bondholders typically get taken care of because companies want to maintain good relationships with investors so that they can access capital markets in the future,'' said Matthew Mish, credit strategist at Barclays Capital in New York. ``The fate of the same company's credit-default swaps is determined by the ISDA definitions, and the rules are the rules.''

[edit]

8/08/2006 09:53:00 PM  
Anonymous Anonymous said...

Currently, there are 31,430 properties advertised for sale in NJ on our site.

8/09/2006 01:30:00 AM  
Blogger thatbigwindow said...

Stop saying "WORST"

The correct word to use is

WORSE

Thanks!

8/09/2006 07:07:00 AM  
Blogger RichinNorthnj said...

Unrealtor,

I agree with you in that anything that increase the value of your home will increase your taxes as sales are what most taxes are based upon.
Going by personal experience, when I made improvements to an existing bath and kitchen I did not receive an increase in my taxes. But when I increased the square footage of my home, than my taxes increased.

But now you have me wondering if that was a year when homes were reassessed in my town? So I tried to do a little research on Bergen County property taxes and there is no direct information as to what is taxed and what isn’t. It seemed to do more with previous sales in the neighborhood and comparing homes.
I remember that a patio or deck would be (but not at the rate of a room) but basements weren’t (but than there was the “heated space” rule, so I always wondered) blah, blah, blah. Now I’m wondering how different the rules are county by county.

If this damn job didn’t get in the way of my life I’d do more research online and send out a few emails requesting info!
Maybe later…

8/09/2006 08:04:00 AM  
Blogger RentinginNJ said...

Upgrading a kitchen and upgrading bathrooms, for example, will increase your NJ property taxes forever.

Yup. I have a friend who bought a tiny house in Clifton in September 2005 (ouch). It’s too small for him, but he thought he would jump on the property ladder and trade it in for something bigger later. Now he is stuck. He can’t sell it for what he bought it for and he can’t afford to add on because of the property taxes.

8/09/2006 08:14:00 AM  
Blogger grim said...

cf,

Is it just me or does there seem to be a "DIY-Hedge Fund" craze developing?

Seems alarmingly similar to the "Become a day trader" craze.

grim

8/09/2006 08:15:00 AM  
Anonymous Anonymous said...

If you're careful where you buy, and with the smaller amount of congestion, commuting from most Central NJ communities take less or about the same time as many of those from Bergen, Essex or Union counties

8/09/2006 08:25:00 AM  
Blogger RichinNorthnj said...

RentingInNJ,

Note that there's a difference between improving or upgrading existing space and increasing square footage.

8/09/2006 08:28:00 AM  
Blogger delford said...

njgal: i amhearing that all the tiem now, I am out of here, we are out of here.

People just never stop to think that if you are having trouble with the taxes, dont you think your potential buyer may balk too?

it is truly incredible how stupid peopl are.

8/09/2006 08:31:00 AM  
Blogger delford said...

thatbigwindow: Hey I saw your post on the castle condos in River Edge, I think it was under the understanding the soft landing peice. Any how if you get a chance take a look.

8/09/2006 08:36:00 AM  
Blogger thatbigwindow said...

Hi Delford

Yes, River Edge is a bizzare town indeed. Just one look at the property taxes says it all. They are still thinking thier school system is the greatest thing on the east coast.

8/09/2006 08:55:00 AM  
Blogger delford said...

thabigwindow: And people are howling now over their new tax bills, but I bet they are some of the same people who voted yes for the referendum for the elementary.

15 new calss rooms plus a host of toher up grades, and this after just completing an addition in 2002. This is in effect adding a t3rd elementary school to town. this at a cost of over 21 million, but the town is suppossedly getting 4 million from the School Const Corp, but that is just a promise, and not a gurantee.


Now that it is sinking in, people are finally statring to realize that once it is built, you have to staff it with teachers at around 40K each assuming you hire recent grads, teachers aides, custodial staff, lights heating etc etc. Believe it or not people paid no attention to that before voting yes for the referendum.

Now its sinking in, and people are upset, and the tax increases are just starting. This new school construcation tax increase will not start kicking in until next summerss new tax bill, and then it is up up and away.

The town has very few other rateables except for homes, and no way to pay for this. The talk is once I am doen with schooling my kids I am out of here.

Also the apartments in town are filling up with kids which was not the case up until a few years ago.

The apartments are the 800 pound gorilla in town, but nobody can talk abou that.

River Egde is taxing itself out of existence, and its too bad, it used to ge a great little town.

8/09/2006 09:34:00 AM  
Anonymous UnRealtor said...

I've found my perfect house, and cannot fathom making an offer (either a lowball now, or in 2007/8) given the property taxes.

My budget spreadsheet melts after entering the property tax info, and the house has a kitchen and bathrooms from the 1940s. Once those are updated, the property taxes would be more obscene.

Frustrating...

I think moving to another state is the best solution for my family.

8/09/2006 09:46:00 AM  
Blogger thatbigwindow said...

Delford - That is a huge problem with River Edge. If the average house is listed for 500k and needs work, what person just starting out can afford to carry that mortgage plus 10k a yr taxes?? It seems the "poorer" side of town got hit with the higher taxes. The ranches off of 5th ave, and the houses along and off of Valley Road are paying around 10k+ a year on taxes.

It is a shame. I know I will never want to live in the town I grew up in based on taxes alone. And unfortunately, my sister and myself will inherit a tax nightmare of a house.

8/09/2006 09:57:00 AM  
Blogger delford said...

thatbigwindow: I have a friend on Valeey, she just got her new tax bill, and is now just under 11k, her last child has two years left, then they are gone (they hope to be gone)

Actually the east side of KKR has the cheaper taxes, Center Ave, Park, Richard Ct. that whole sidef town, this apparently due to some anomaly back in the 1930's.

As you probably know, inventiry is not moving in River Edge, and even the houses in the low 400's are not selling.

I am sad and disappointed the uninformed clueless residents voted for this school referendum, it will kill the town, and the ironic part is, the schools were much better 10 years ago, even 5 years ago.

Now that people are waking up to this it is too late, as construction has already started.

All I am hearing now is x amount more years and we are out of here, something you never used to hear before in RIver Edge, a place where two and three generations of families lived. My sister is off to Penn, after my neice graduates next year, she knows what is going on, and will price the house to sell, as they have been conservative over the years and not used up their equity.

If the average property tax in RE is around 10K a year, with an avergae increase of around 8% over the last couple of years, and with projections of it being even worse % wide next year and beyond, we will have the average 50 yr old cape or colonial at 15k a year in property taxes or more in less than 5 years.


Just who is going to buy these things, because everybody that is talking about leaving, is making that decesion absed on the idea that they will still get big bucks for their houses, and that as the market is starting to show now, look highly unlikely.

I think River Edge is in for some very ugly times ahead, and it is very sad.

8/09/2006 10:34:00 AM  
Anonymous Anonymous said...

if you think river edge is bad
try Closter, same problem.

And who would want to live in Clifton, (my word)

8/09/2006 12:22:00 PM  
Blogger delford said...

Clifton: It Used to be a wonderful town/City,and its high school football the stuff of legends.

Alas it too has seen better days, and is declining like so much of Passaic county has over the years.

8/09/2006 04:31:00 PM  
Blogger chicagofinance said...

Yes.

Clifton is massive garbage.

It should be merged with Paterson, but I'm sure Paterson would refuse.

I think Clifton means "untreated raw sewage with terribel bike paths" in the Ramapo Indian language.

8/09/2006 04:48:00 PM  

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