Tax reform is good news for real estate market
By Louise Bolger
sun staff writer
OK Florida you did it, or about 64 percent of you did it. You passed the amendment on property tax reform but what happens next and how will it affect our future?
Well to recap, starting with the 2009 tax roll the Save Our Homes exemption for homesteaded Florida residents will double to $50,000, the one time $500,000 property tax exemption will provide portability for long time homeowners who want to move, and a 10 percent cap will be established for non-homesteaded property owners. There are also some benefits for business owners.
Almost everyone, including those of us who voted for the amendment, agree that it doesn’t go far enough. Even most of the state’s leaders feel it is a step in the right direction and claim they will be looking at the property tax package again with the intention of further reform. State Sen. Mike Bennett and Florida House Speaker Marco Rubio are in favor of capping all taxes at 1.35 percent of property values. This would include non-homesteaded properties and businesses. It would, however, not have an affect on or amend Save Our Homes, the Homestead Exemption, or any other exemption. The proposed plan, which is also endorsed by the Coalition Against Runaway Taxation, is similar to California’s Proposition 13, which in 1978 capped property taxes at 1 percent of taxable value.
All of this chatter about property tax reform can only be a good thing for our unsettled real estate market. Real estate professionals are caustically optimistic that Manatee County may have turned the corner, and real estate agents on Anna Maria Island have been particularly busy since the beginning of the year. December’s sales numbers for the Bradenton-Sarasota area, although down 10 percent from December 2006, are still better than all but three of Florida’s 20 major housing markets.
This, combined with the Federal Reserve cutting the prime rate 3/4 percentage point on Jan. 22 and another 1/2 percentage point Jan. 30, is giving the housing market a much needed transfusion. In addition, the Federal Reserve has left the door open to further rate cuts in March or April, probably another one-quarter percent.
This is all very good news for homeowners with adjustable rate mortgages, which adjust to market rates every 6 to 12 months. These ARM rates are influenced by short-term rates, which track the Federal Reserve’s key interest rate. It could be enough of a stimulus to keep some borderline homeowners out of foreclosure, but will reduce money market and CD rates depended upon by seniors living on fixed incomes. The other good news is fixed-rate home mortgages. On Jan. 30, the day the Federal Reserve cut rates, fixed rate 30 year mortgages were averaging 5.45 percent and fixed rate 15 year mortgages were averaging 4.94 percent.
With tax reform being passed on Tuesday and The Federal Reserve cutting interest rates on Wednesday, last week was a real winner for real estate. Potential home buyers’ excuses for not buying are quickly eroding. Prices are low, interest rates are low, and if we all don’t sit on our laurels, property taxes will be lower still. Power to the people. It really works.