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Palm Beach County's property values may drop 12 percent

Budget cuts likely, tax increases possible

By Andy Reid |South Florida Sun-Sentinel

April 28, 2009

New economic estimates show Palm Beach County's property values dropping 12 percent, likely triggering budget shortfalls for local governments and potential tax increases for residents in the coming year.

Property Appraiser Gary Nikolits Monday released updated estimates for just how much the struggling economy will affect the bottom line on Palm Beach County's taxable property values. While 12 percent was actually an improvement over the estimated 15 to 17 percent decrease Nikolits warned of in March, it could still leave the county facing its biggest drop since the Great Depression-era declines, he said.

Earlier this year, local governments were counting on just a 5 percent decline in property values.

Even during past recessions, the county usually held strong or saw slight declines, Nikolits said. "It's pretty bad," Nikolits said. "Palm Beach County has always been a growth county."

Nikolits estimates the county's 2009 taxable property value will be about $135 billion, about 12 percent less than the previous year. That doesn't include new construction, which gets added in this summer.

Estimated values for cities within the county showed declines ranging from 2 percent to 21 percent, according to the property appraiser's office.

Boca Raton's taxable property values would go down about 9 percent, to $17 billion. Delray Beach would drop about 13 percent to just below $7 billion and projections show Boynton Beach values declining 16 percent, to about $4 billion.

County commissioners are considering their first property tax rate increase in 10 years to cover a budget shortfall that could reach $130 million.

One budget scenario being considered is an almost 8 percent property tax rate increase, where the current rate of $3.78 per $1,000 of taxable value would go up to $4.07 per $1,000 of taxable value. If approved, that would mean a $246,000 home, eligible for a $50,000 homestead exemption, would pay about $798 a year, up from $741, for the taxes levied by county commissioners. That doesn't include taxes for schools, cities and other government agencies.

The county is considering laying off 100 to 200 employees to help cut costs, County Administrator Bob Weisman said. This will be the third year in a row that the county has seen its revenues drop, Weisman said.

The county has a $4 billion budget and about 6,000 employees. Updated property value estimates are due from Nikolits in June and July. Commissioners must approve a budget by the end of September.

State budget cuts take even more money from local governments at a time when some services are needed the most, Commissioner Jeff Koons said.

"The state tax structure is pitiful and they are not going to fix it," Koons said. "This is going to be the hardest budget we have faced in Palm Beach County in 25 years."

The coming budget squeeze wouldn't be so bad if local governments had done a better job of limiting spending during the building boom years, when tax revenues kept going up, Nikolits said.

"In those good years ... they created new programs. They bought property," Nikolits said. "That's a continuing expense."

Just give the home back to the bank? Is this fair?

What do you think?

Please comment below

Is the Bear Waking Up? South Florida Real Estate Market may be on the rise?

Is change on the way?

There seems to have been a resurgence in the market these past few weeks. Not only is buyer activity on the rise, but it has become apparent that seller "reality" is starting to set in. I have noticed some remarkable price reductions in current inventory in the past 14 days. Sellers are becoming more realistic with their goals and are pricing accordingly.

What does this mean for the market?

I hope it means change..... It's been a while since I have just lost out on a home because it recently went under contract. It's been even longer since I was in a bidding war on a particular property. These occurrences however are rapidly becoming the norm on properties which are priced right. If sellers continue this trend of fair market pricing, and I hope they do, we can expect to see a reawakening of activity in the upcoming months. With the right homes priced right, we just may be able to reduce inventory levels and get the Real Estate market back on track.

What can I do to prosper from this?

The best advice I can give to investors at this time is to begin cherry picking properties. Sellers are more motivated then ever to sell at fair market value, they are tired and beat down by this market and finally just want to get out. It's been a buyers market for quite some time, but only the buyers knew it! Know the sellers do as well and are acting accordingly. Spend some time locating that perfect opportunity and don't be afraid to use short sale comps to obtain the home at a fair price. We need to remember that all of these "standard" sellers are competing with short sale pricing, and unlike 6 months ago these short sales are actually closing!! Use their reduced sales figures to obtain cherry properties at cherry pit prices!!!