Government also shares the blame; it has encouraged over-valuation as a way to boost tax revenues. The people made happiest by the housing valuation boom were not homeowners, very few of whom have seen any real, in-hand dollars from the run-up, but rather property tax assessors. Who here thinks property tax assessments will match the reduction of asset prices as quickly as they matched asset price inflation?
...very few of whom have seen any real, in-hand dollars from the run-up, but rather property tax assessors.
Part of the problem, people were borrowing “in hand dollars” against the increased value of their homes. Folks who signed adjustable rate mortgages were told not to worry, since the price of the home would always go up and they could refinance.
Last I heard, nobody knows how much equity was drawn from those inflated prices, but I’d be interested to know.
Never mind reducing assessments to match the ice cold market, even keeping assessments artificially inflated they are already talking about raising rates here.
You'd like to think that several years of record property revenues would be the best possible buffer before a downturn. Oppurtunity to buy back bonds, invest in long term infrastructure and equipment, build up an emergency savings fund.
Of course the reality is the exact opposite. When confronted with a one time windfall, they did what they always do: they made that amount their new general spending baseline, projected a similar (or even larger) increase in coming years, and promised every dime of it to the usual bottomless pits.
Now we come to the rainy day and nothing is paid off early, there's no savings fund, the only thing they did with all that money was buy new obligations.
If you ran your finances like that you'd be living in a cardboard box.
Local gubmint leaders in my county are already whining about "lost revenue" and how they're going to have to cut personnel, yada yada yada. They're talking of raising sales taxes to compensate.