Orlando and Miami: Risky Housing Markets
Forbes.com has just ranked the Miami housing market and Orlando as the two riskiest markets in the country.
However, common wisdom says not to worry. The real-estate Ponzi scheme that got us into this fix will be replaced by the next get-rich-quick gimmick.
Florida’s boom-bust cycle will go on, fed by warm winters, beaches and cheap living. They attract the growth that eventually absolves all our sins.
Future home buyers are driving down I-95 and I-75 as you read this, ready to keep Florida mortgage demand up and prices high. They are led by the empty nesters with their fat 401(k) accounts.
At least we hope so.
There are disturbing reports of school enrollment declines and of moving companies moving more people out than in.
A recent Yahoo Finance story on best places for empty nesters noted it was time to rethink the age-old strategy of migrating to places such as like the Florida housing market. A growing number of states are tinkering with their tax codes to attract them.
At some point, global warming may even make Ohio tolerable.
The article points out that Florida isn’t the cheap escape it once was because of a property tax structure that shields longtime homeowners by slamming new buyers.
In reality, our tax burden remains relatively low compared with most other states. It just feels high because we derive most of our revenues from a narrowly assessed sales tax and the property tax. That magnifies the burden on property owners.
House Speaker Marco Rubio once proposed a radical solution” to eliminate homestead property taxes altogether and replace them with a 2.5-cent increase in the sales tax.
He gave up on it. But the real estate market is vulnerable enough to revisit that idea, particularly with the escalating property insurance crisis.
The flaw in Rubio’s plan was that it did nothing to expand the tax base. It worsened the problem of government revenues being too dependent on too small a slice of the economy. And given our move to socialized property insurance, we may well need that increase at a later date to pay for hurricane damage.
The solution is to throw a wider tax net without going to an income tax. That means eliminating a number of sales-tax exemptions, taxing all Internet sales and expanding the sales tax to cover professional services such as legal and accounting fees.
This would take the pressure off Florida mortgage loan holders by spreading the burden over a broader swath of the economy. A tax on services targets wealthier residents, who would benefit most from the elimination of homestead property taxes.
This would be no cure-all for the inflated real estate market. But it would cushion a fall that promises to drag down Florida for years to come. We are in a unique situation with the cost of property insurance often exceeding the cost of property taxes. And insurance premiums are only going up. It is time for a unique solution.
Talk of leaving Florida has become a pastime, with the quality of life as big a complaint as the cost of life.
The long-term solution requires more than whacking taxes and budgets. Done to excess, that only makes the quality problem worse. It can cripple our ability to upgrade infrastructure, improve schools and universities, and build the kinds of amenities that attract the high-income home buyers we desperately need to bail us out of this mess.
SOURCE: Orlando Sentinel
