Saturday, April 25, 2009

Newtonian fact: "What goes up................"

A lot of us all around this country of ours are feeling a smack on the head by that man who discovered gravity. I know we are here in Tallahassee and around the state of Florida. I believe that the old failings of mankind are at play. A lot of folks want to be Aesop's grasshopper and play the fiddle and smoke a little hoppergrass and ignore the hard working ants who are putting it away for a rainy day.

I got into real estate in 2002. That was my first year. Man, to apply robust to describe the market would be like describing water as wet. It was up, up and away for all players: buyers, sellers, lenders, realtors and government. Here in the state of Florida our property taxes flew off the chart increasing 100% in 5 years. Property values just floated that tax to injurious levels. Some smart folks put together the Save Our Homes regulations, capping taxes for permanent residents at no more than 3% per year. However, if you sold your home and moved up your taxes could knock you unconscious. I had a very successful client who sold his $400k home and moved to a $1,200k home. His property taxes went from around $3700 per year to almost $10,000 per year. As I said he was successful and able to take that hit but he did not like it. Others of us, less successful, applied the Save Our Homes acronym of SOH to Stay in Our Homes .

Now where did all that money go? It went into the vaults of various cities and municipalities across our state. The coffers were running over. Week after week county commissions and town councils would convene and plan how to spend all that lucre. Where was it written that, that had to be the case? Who said you had to spend all that loot?

Snap forward a few years and you see a Governor get elected in Florida who made a campaign promise based on property tax reform. He has made good his promise. This reform coincided with the bursting of the real estate bubble. Both effects have been synergistic. The one potentiates the other.

Now here we are. Cities and municipalities decry the depletion of funds. The state of Florida's 2009 budget is sure to be the leanest in many years. You see and hear every day about school Districts that can't make their budgets work. Cities say they may have to lay off workers. What ???? The sun is suddenly coming up in the west ! Used to be if you could land a job with the state government, you were set for life. We had a former Governor who referred to such people as lard bricks. ( His term, not mine ). They just went to an office and sat their and put in their time and one day retired and collected their pension. What a country !!

Once again, Sir Isaac Newton's law of physics reminds us that " What goes up, must come down." We also glean the genius of Aesop who taught us that it is best to put away during the plentiful years for the, sure to follow, lean years.

Our current circumstances will improve one day. That grasshopper will play his fiddle again and the circle of economic life will continue on. Sure is not fun to watch it, nor experience it.

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