Florida foreclosures and how they affect property taxes down in the Sunshine State need to be studied by anybody in charge of handling tax revenues down there, no matter how reduced those revenues end up being. With an increasing number of foreclosures — and more on the horizon — Florida is coming to grips with the problem other states have had for a while and which it’s been able to duck for so long.
Think of it like this; a person who turns in his keys and walks away from his home has no obligation for any future taxes, though quite a few cities and towns are going after these people for taxes they owed. The loss of these revenues, which often aren’t made up by the banks who now own the properties, can hit a city or town hard. And the likelihood of any fast sales have evaporated lately.
The problems in real estate in general, and not just in Florida, is that there was a quite-lengthy boom. It helped to insulate Florida from the issue of a general decline in property values(and taxes on those properties) for longer than what was the the case in most states, fortunately for the Sunshine State.
However, when the bottom falls out of a market, or when the inevitable bust finally follows the boom (as it has, not only in Florida but in most other states as well), such speculative investment can hurt more than might normally be the case. For example, consider the ocean of people who’d bought into homes they couldn’t afford with the expectation that they’d “trade up” after selling their old home for a handsome profit.
Many of these owners looked at the properties they were buying into and gambled that they’d be able to get out of them with a nice profit before the low interest rate loans or adjustable-rate mortgages they took out to get the property began to adjust upwards. But the bottom of the market fell out from under everybody quickly, meaning these homes are now unable to be sold for at least what they were purchased for.
Nowadays, many of these homes are being held by people who realistically can’t make their agreed-upon monthly payments once those adjustable-rate mortgages began to move upwards. They may have suffered job loss in the recession as well. It can be a vicious cycle and there is really no facet of economic activity that is immune from the cycle, including tax collection and sales.
It seems certain that the rate of FL foreclosures will continue to be a cause for concern at least until local and state government can work out ways to help people stay in their homes and avoid foreclosure, usually by taking advantage of certain federal programs. Until that occurs, though, the property tax revenues that funded many schools, police and fire services will be lower. Whether relying on property taxes was smart is a different question, though.
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