WEST PALM BEACH, Fla. — Bad weather report number one: the median price of a home here in Palm Beach County has dropped 6.8% from a year ago. Number two: the Florida Association of Realtors reported last week that home sales slumped 19%. Number three: a state constitutional amendment will be on the ballot January 29 (when Florida holds its presidential primary) that would phase out a 3% per-year Save Our Homes tax cap that voters approved in 1992.
Welcome to the Sunshine State! The unintended consequences of Save Our Homes, according to critics, is that existing homeowners are trapped in their houses because if they do manage to sell to either upsize or downsize, they face much higher taxes on a new home, even if that house is across the street.
If the amendment passes, the Save Our Homes 3% cap protection would be phased out in a few years (it may be kept until homes are sold), but if the homeowner stays in Florida and buys a new home, they lose the tax cap. There is a "super exemption" option, but that too has some negative points. If voters say NO to the amendment, they may get a Save My Homes Portability option put forth by Lee County Property Appraiser Ken Wilkinson. Wilkinson's "Save Our Homes, Part 2," would allow homeowners to carry over the same percentage of savings that the Save Our Homes 3% cap now provides.
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Aletta Shutes, executive vice president of the Florida Credit Union League, said of the SOH Portability effort, "We can easily say we support any effort to foster home ownership among Florida's citizens because it is one of the major foundations of our economy. We are coordinating with the groups who are actively seeking to pass the proposed constitutional amendment and will publicly weigh in should the need arise. We believe the amendment is a good first step, but will require legislative action to implement its provisions."
Throughout the state, the crush of rising property taxes, declining home values, a sluggish market and climbing windstorm (read hurricane) insurance is putting a super hurt on the mortgage operations of credit unions and other lenders. Defaults in Palm Beach County topped 1,000 in June from 259 a year ago.
"We saw the market peak in August 2005," said Sharon Self, Mortgage Dept. manager for Community Educators Credit Union in Rockledge, "it's gone down slowly and steadily since then and prices have gone down with it." (CECU has $291 million-in-assets and 33,000-plus members.)
CECU does things old style, Self said, only offering fixed rate loans and escrowing for its borrowers. That's proving to be helpful now because "so many people have been set up to fail," she said. "The whole insurance situation and tax reform is holding things up. So many who got in at the peak are now upside down as values have dropped. We're doing what we can to help members; maybe offer them a second. The CU also does a lot of first time buyer education classes and services its own portfolio.
"The Board of Realtors is working the legislature, but you can't force an insurance company to write policies; money talks and it's the money that makes the rules," Self said. In the Brevard County area CECU serves, permits pulled for new construction dropped to 374 this past June from 990 in June 2005.
"The median sales price for a home in our area has dropped $34,800 since June 2006 and is currently $198,000," Self added. "It is my opinion that the uncertainty with homeowners insurance and real estate taxes is causing some people to wait before purchasing a home. In addition Brevard has a surplus of homes available for purchase. We have to work harder to get the loans and we are marketing heavily in the paper as well as our participation at the Board of Realtors. We even cold call real estate offices. It might take some time, but I believe we will recover from this slump. In the meantime CECU will continue to deliver the high quality of service our members have come to expect from us."
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