My mom and dad paid off their house last year. The insurance and tax bill they have to pay now are more then their total mortgage payment was at the start of the loan. This has to be affecting the economy.
The thing that keeps us afloat (no pun intended) in Florida is that as long as you live in your home and don't move, you're taxes are protected from huge increases by Save Our Homes. They can only raise taxes about 3 percent per year. If we were to sell and move into a home of comparable value, our taxes would at least quadruple.