Dec 01

In addition to possibly increasing the middle income tax burden, some of the proposed changes may cause real estate values to fall up to 15%.

The effect will most likely hit neighborhoods with the highest rates of owner occupancy the hardest.

This is similar to how Milwaukee short changed owner occupants when they shifted various costs from property taxes to the water bill. By that move a few hundred dollars that were deductible as property taxes simply became a nondeductible out of pocket expense.

Read the LA Times’ view on removing tax deductions for homeowners.

 

 

 

Sep 19

For the past two weeks I was in Brooklyn NY helping my wife with a big seminar she was putting on for her business, the Event Decorating Academy.   My involvement on tour dates is mostly lifting heavy things,  running to the Home Depot and various vendors for materials and keeping the computers running.

Carmen leaving FLL for NYC

Carmen as she leaves Ft Lauderdale airport for NYC. The Skycap asked if she was moving

So when she is on tour I drive around a lot.  This trip I got to see a large part of Brooklyn, queens and a bit of Manhattan as we have a number of suppliers for the Event Decor Mart located in NYC.  I was was in some nice areas and some not so nice areas.  We rented a condo for the two weeks in Mill Basin Brooklyn using AirBnB.com  Very nice area.  It was far nicer to have a two story townhouse with three baths than a couple of hotel rooms.  I will use AirBnB.com again.

I was absolutely shocked at the lack of for sale signs and appearance of vacant, abandoned homes and residential properties.  The foreclosure crisis does not appear to have had nearly the impact in NYC as it did to us in Milwaukee.

I was talking this over with a buddy.  He felt  the health of housing is reflective of the local job market.  I have to agree.

Jun 05

I walk the neighborhoods where are properties are located as often as I can. My walks are in the two to five mile range. It is a good way to combine some light exercise with managerial work.     We also do exterior surveys every spring to set the agenda for our summer efforts.  I try to combine the surveys and walks as much as possible.

You can learn things about a neighborhood on foot that you would never see driving through at 25 MPH. This gives me a more insightful way of checking up on maintenance crews, properties and deciding on properties to purchase. Yes, we are buying again, but that is another story for another day.

I noticed two major things this spring while doing my neighborhood walks/exterior surveys of our properties.

Vacant and abandoned housing

The first is there is a large number of vacant/abandoned/foreclosed properties throughout the Southside (53204 & 53215) that are not listed for sale on MLS and do not have for sale signs.

I began writing down the some of the addresses. When I get back to the office I look to see if they are listed for sale on MLS.  If not I will run ownership on a few of them.

For those not listed on MLS, almost inevitably ownership records show that they are owner occupied.  More times than not they are not registered as vacant buildings with the Department of Neighborhood Services.  Ironically a few had Christmas decorations in their windows.  Many had orange electric company shut off tags on their front doors.

Being a curious lad I look up a few of the listed owners on the court system.  A lot of them show no foreclosure actions naming the listed owners.  Perhaps the owners received notices from their lender and just assumed they were going to be put out on the street?  Who knows.

While my little bit of info gathering during my walks is by no means a statistically correct study, it certainly appears to me that the foreclosure mess is larger that reported and  we are not anywhere near the bottom of the crisis.

Condition of owner occupied housing compared to rentals

The other thing I noticed is if a house is in truly deplorable condition or needs major repairs such as failed roofs or porches,  it is almost always owner occupied or an abandoned formerly owner occupied property .

Inspectors doing fire inspections etc on our rentals will see a couple of blown off shingle tabs or a downspout that isn’t sealed to the sewer and write an order. Yet the owner occupied properties will have failed porches, missing siding, roofs that needed to be replaced five years ago, yet no city orders.

I am not the only one who witnessed this phenomena.  Click here to listen to Mary Hennen, Senior City Assessor’s take on the difference of conditions between owner occupied and rental housing.

We need to assure all properties are held to the same standards by code enforcement, not just rentals.

 

 

 

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Dec 23

“Going Green” is usually a positive phrase. Business that go “Green” are looked at as innovators and use this for a market advantage. It is hard to say anything bad about this type of greeness

However the way the city of Milwaukee is going grheck scares the heck out of me. .

As I drove the Southside neighborhoods finishing up our annual fall exterior surveys of our properties, I was shocked at the number of green boarded and abandoned homes and duplexes in that area. Even more than there were in spring

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Apr 25

I was having a conversation with a buddy today about the accuracy of the most recent City of Milwaukee assessments and where values are truly headed. I thought it was relevant enough that I turned my email to him with links supporting my views into this post.

The Milwaukee Journal quotes Alderman Mike Murphy who believes our housing market has hit bottom:

“I do think we’ve hit the bottom,” said Ald. Michael Murphy, chairman of the Common Council’s Finance & Personnel Committee. Murphy, Mayor Tom Barrett and Assessment Commissioner Mary Reavey all said they were hopeful that property values would start to slowly rise again over the next few years.

It would be wonderful if that in fact was correct, however there are many indicators that the bottom may still be a ways off.  The Feds are considering forced reductions of mortgages to appraised value.  This will allow owners to sell for less than today and remain financially  unscathed.  Previously if you owed $150k on your home you would fight like heck to get at least $150k, otherwise you would have to pay out of your pocket to sell.  If this becomes policy it will allow owners to sell for much less than they owe today, creating a general downward pressure on all home prices.

Then there is the phenomena of  people who can pay their mortgages, but are simply walking away.  It used to be dishonorable not to pay your debts.  Now it has the cute name of “Strategic Defaults.”  This along with short sales undermine our entire economic system as well as real estate values.  There just isn’t the social pressure to pay what you agreed to anymore.

Finally there is a large shadow market of homes and other real estate that are foreclosed but not on the resale market.  As these enter the market it will further drive down prices. If you want to see the shadow market in action write down the addresses of the obviously foreclosed buildings and homes that do not have broker signs in front of them, look up the ownership on the city site, then look for the property on MLS.  Many will be lender owned, but not actively marketed.

The Milwaukee Journal article reports the Assessor claims the decline in values over last year to be a meager 2.4%  One reader of the Journal article makes a very valid comment:

“Ask any realtor, appraiser, banker, buyer or seller of a home over the past 24 months how much values have dropped, 2.4% is a joke they need to remove the decimal point the acutal number is closer to 24%.”

I concur with this person that the real values of properties, at least in the neighborhoods we own in are dramatically less than the assessed values.  Milwaukee has typically overvalued the lower value neighborhoods in what I believe is a regressive tax scheme to lower the taxes of the more affluent white neighborhoods at the expense of these who can least afford higher housing costs.  The city assessor justifies this by excluding many comps as invalid, while being quite happy to use those homes purchased by first time buyers using down payment grants etc. that hid the true value of the purchase.  Today many of those homes are in foreclosure.

So while Milwaukee officials are hopeful that the end of the decline is nigh, and I too wish this was true as I happen to have a large financial interest in this subject, it probably isn’t so.  Many well studied economist and others believe that the Milwaukee area home prices will return to 2007 values in the fourth quarter of 2017 These same experts found that we are currently 15% off the mark today, not the 2.4% the Assessor has given.  They also predict the slide won’t stop until fourth quarter 2011.

But the city has strong motivation to artificially keep assessed values inflated:  That of course is to maintain artificially high property taxes while at the same time being able to claim that have only raised the mil (amount per thousand dollars of assessed value) by a small percentage.

So while many, including the city officials and  me, “hope” for a housing price recovery soon, hope is not a workable strategy. Please post your comments and challenge my views.  We all have a lot riding on making he best guess here.


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