It's a great time to buy, but what happens next?

It's a great time to buy, but what happens next?

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Wow, it is a great time to buy real estate in our area? Based on price alone, there are certainly bargains €” but price is not everything. The after-purchase cost of owning a home along with a “hospitality factor€ are also important.
Our budget crisis caused by the property tax system, high insurance costs and tropical weather is in the headlines every day. These factors have resulted in a record number of properties listed for sale in Charlotte County. We can’t do much about the weather, but high insurance costs and our property tax system will continue to impact sales. Insurance costs, although high, appear to be leveling, but the property tax issue will not go away soon.
Three important factors influence our real estate market and have a major impact on property taxes. They will challenge us to convince buyers that Florida and Charlotte County is a desirable and friendly location.
First, most area sales involve people looking for a winter home, a retirement home, or an investment opportunity. A small percentage of sales involve local families moving from one type of dwelling to another. After all, the median age of our residents is over 50.
Second, most property in our area is not homesteaded. According to the Charlotte Property appraiser’s site there are approximately 116,120 residential lots, 63,220 single family homes and 13,230 condominiums. All of the lots and many of the homes and condos cannot be homesteaded because the owners are out of state, out of the country or are local owners with two or more properties.
Prior to 2000, before the drastic rise in property prices, the difference in assessed values between homestead and non-homestead property was not a big issue. In 1999, one homesteaded waterfront property with a 1996 SOH base year was valued at $73,397 and owners paid $1,140 in taxes. A similar non-homestead property was valued at $83,000 and owners paid $1,600 in taxes €” a $460 or 40 percent difference
In 2006, the homesteaded home was valued at $339,000 with $1,370 in taxes. The nonhomesteaded home was valued at $358,000 with $5,074 in taxes€”a $3474 or 270 percent difference. The homestead property taxes went up $230 while the non-homesteaded went up $3474.
Third, vacant lot sales €” predominantly investor/speculator driven €” have slowed to practically nil. In Rotonda West, there were 562 vacant lot sales in 2005, 96 in 2006 and 43 so far this year. Lot sales have a frequently overlooked, but major impact on our local property tax revenues.
Lot values, both waterfront and dry, have gone down. In Rotonda lakes, 2500-plus lots have gone down in valuation by at least 10 percent and some by as much as half. According to the Charlotte County appraiser’s site the county’s vacant residential lots have decreased in just value from $12,049,492,983 to $5,387,365,303 €” more than half. Since lots cannot be homesteaded, they will be taxed at the new values. And, unless current market trends reverse by the end of this year, values will go down significantly again, as will tax revenues.
A major cause of Charlotte County ‘s current budget mess was the large increase in tax revenues from nonhomesteaded property and new homes both homesteaded and non. The Save Our Homes cap kept existing homestead tax revenues in reasonable check. If it wasn’t for the insurance scare and tropical storms, the boom may have continued and delayed the crises.
The next two years will probably see all property valuations drop, but thanks to the impact of the SOH cap on homestead property, non homestead taxes will decrease while homestead taxes increase. It may take a long time before the homestead property values come close to par with the non homestead. If valuations really go down, par will come rapidly because there is no cap on valuation declines. If that occurs, millage rates may skyrocket for budgetary reasons and have an effect on all property owners. The uncertainty of these tax revenues makes managing local government very difficult.
Here is the “hospitality factor.€ Our system is grossly unfair to non-resident owners and recent buyers who homestead property. There can be three homes on the same street valued the same paying vastly different taxes. The resident owner of homesteaded property who purchased it prior to 2000 pays the least amount and uses services full time. The resident owner who purchased since 2002 pays higher taxes and uses services full time. Finally the non-resident owner, no matter when it was purchased uses most services the least and pays the most in taxes. Some would say “they can afford it€ or “better them than me.€ Is that how we want to say “Welcome to Charlotte County?€

Andy Leonard (941) 662-0033

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