Guess what? Did you know that, but for a few unique pockets within the state of Michigan, home values have gone down? Not only in Detroit, where average values have dropped by 40% or more, but also throughout the rest of the state. In light of the recent panic and revelations about Fannie Mae, Freddie Mac, Lehman, etc., we should all be painfully aware this will not likely end soon.
Government Mandates caused the recent crisis, and attempts to reign in the corruption which had been seeded into these institutions by Bush in 2003, and again McCain in 2005 were met by fierce resistance by Dodd, Frank, and further helped along by “Mr. Wonderful” O-Who himself, Barack Obama. Ok, this argument can be made elsewhere right? What does it have to do with Michigan?
Michigan, like many other states generates a large amount of revenue by taxing the value of property. School funding is affected when local property tax revenues, which still account for roughly $4 billion, about 25% of their operating costs, decrease. Add to this the decrease in the overall state property values. Affecting the rest of the $16 Billion school dollar bite. When Values go down, taxes on those properties will go down as well.
One thing however.. For a time anyhow, it may not hurt as bad (for the state) because of the limitations placed on how fast taxation could be increased. The reason for that, is that taxable value can only increase the lesser of 5% or inflation where SEV is similar to the market value. In other words, you may have a property which peaked in its value before the assessments caught up, and because of proposal A, your taxable value might still be lower than the current value of the property. In other words Thank you John Engler era for ushering in that part of the tax code which might temper the damage to the state budget.
In the end however, as more folks successfully argue the diminished value of their homes and property in the present, the Michigan budgeting districts which rely on a consistently increasing revenue stream are in for bigger shocks. And as the crisis in Wall street / Washington looms ever larger, loans on larger properties will decrease in the absence of absolutely perfect credit ratings. This will further bring prices down and ultimately the threshold will be crossed where real values which drop meet the rising assessments.
Then the real trouble begins.