Home Prices Hit Calif. County's Tax Base
MICHELE NORRIS, host:
From NPR News, this is All Things Considered. I'm Michele Norris.
ROBERT SIEGEL, host:
And I'm Robert Siegel. Now, a soldier on the frontlines of the housing crisis. It's not good out there. Yesterday, the Standard and Poor's/Case-Shiller 20-city housing index showed a drop of an annual rate of 18.2 percent through November.
This is more than just personal for Gus Kramer. He is the county assessor in Contra Costa County, California which is in the East bay area just outside San Francisco. On the basis of his assessments, the county takes about one percent in real estate taxes.
In California, the basis can't go up by more than two percent a year until the house is sold, but at the moment, the problem Mr. Kramer, as I understand it, is not assessments that are going up but rather assessments that are going down.
Mr. GUS KRAMER (Assessor, Contra Costa County, California): That's absolutely correct. The values in Contra Costa County and the larger East bay are falling precipitously. There are something like 80 percent of the houses for sale in some depressed areas are bank-owned, if you can imagine that.
SIEGEL: Because they were in foreclosure, you're saying...
Mr. KRAMER: These homes were in foreclosure. They were taken back by the bank, and now the bank has listed them with a local real estate agent for sale. And the banks' attitude is their first loss is their best loss, so they're deep discounting these properties and driving the values down in entire neighborhoods.
SIEGEL: So as the assessor, what kind of changes are you seeing in the values of properties that are now being bought, from what to what?
Mr. KRAMER: We're seeing properties from two-and-a-half, three years ago, some properties are down as much as 70 to 80 percent in value.
SIEGEL: You mean, say like a $200,000 house might be going for $40,000 you say?
Mr. KRAMER: There are single family homes selling in Antioch and Pittsburgh for under a $100,000. In fact, the joke in town is you can almost put it on your credit card.
SIEGEL: That means, though, that the county's revenues - every time a house changes hands, the county's property tax revenues can be expected to go down by, if it's 70 percent of the house, it would be 70 percent of the real estate tax.
Mr. KRAMER: That's right. We estimate about five percent of the homes in the county change hands in a given year. The estimate for this year is our property tax revenues will be down approximately eight percent.
SIEGEL: So today, for example, you saw some properties today?
Mr. KRAMER: We saw some properties today, properties that were listed - that sold in 2005 for about $800,000. Today, they are selling in a very nice neighborhood on the golf course, all tricked-out with granite countertops, beautiful swimming pool, and they are selling for around $300,000.
SIEGEL: Three hundred thousand dollars.
Mr. KRAMER: Yes.
SIEGEL: Well, how is the county coping with the loss of revenue that it is...?
Mr. KRAMER: The county is coping by having to cut back on discretionary services, and unfortunately, the people that are suffering the most are the elderly and the poor. The only place the county has discretionary income, really, is in the health services, basically the county hospital and services to the elderly and or social services which mostly affect the poor.
SIEGEL: In your experience, in terms of what you're seeing in real estate, has it been getting steadily worse with every month or do you see any uptick or silver lining at all?
Mr. KRAMER: I have not seen any uptick, to be honest with you. It's still falling - I didn't think it would fall this far. We had the same experience during the mid 1990s, but the properties fell precipitously, but nobody sold their properties. We didn't have foreclosures then. The market came back, we restored the values, and the public agencies basically got most of their money back.
This time we're actually having change of ownerships, and with change of ownerships, that locks in that lower value for that person for tax purposes as long as they own the house under Prop 13. So the public agencies are really going to have to do more with a lot, lot less. It's actually a financial crisis to be quite frank with you.
SIEGEL: Well, Mr. Kramer, thank you very much for talking with us.
Mr. KRAMER: You're very welcome. Thanks for having me on the show.
SIEGEL: That's Gus Kramer who is the county assessor in Contra Costa County, California.
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