City and state government workers were huge beneficiaries of the boom years, since not only did their houses appreciate by double digit rates, so did their salaries. Since taxes are based on home values, the bubble meant that government got just as bloated as the real estate market. Now that homes are worth less, it is in bureaucrats’ best interest not to admit it.
This story comes out of Nevada, but it could be anywhere.
Don came to the lectern and leaned into the microphone, a resolute, if rumpled, man with thick white hair, a Col. Sanders mustache and glasses.
“Before we came down here,” he told board members, whose faces were mostly hidden behind computers, “we drove around. There are 10 foreclosures within a mile of my house!”
Don mentioned the home that sold for $132,000. Board member Tio DiFederico, a commercial appraiser, had some questions: Was that a bank sale?
“OK, it probably wasn’t in very good shape.”
“Actually, I was in that house. It was in fairly decent shape.”
DiFederico wasn’t swayed. “We’ve discussed this before — these bank sales sell for about 25% less than owner-occupied homes. They need to get rid of them faster.” He suggested the Knights’ home was worth $140,000.
In the audience, Janet grimaced. Still too high.
“The problem with short sales and foreclosures is they always go submarket,” said board Chairman James Howard, in a somewhat conciliatory way. “And if you try to set your values based on those short sales and foreclosures, you’ll always be a little bit low.”
The Knights lost on a 4-to-1 vote. The house’s value was set at $140,000.
“I’m sorry we weren’t able to help you today, sir,” Howard said.
The story says the home in question could have fetched well over $300,000 at the peak.