As the economy contracted and families tightened their budgets, smaller homes have become more popular.
The National Association of Homebuilders report that the size of homes is decreasing. The national average is now around 2300 square feet, down 100 square feet or so from recent years. Builders are constructing smaller more energy efficient homes with efficient space planning.
I like this idea of better space planning and energy efficiency. Less home means less to clean, heat, cool, and maintain. But how small is too small? Could you live in 100 square feet of space? Take a look at these "Tiny Houses" .
Given that they are detached homes, water, sewer, and electrical lines have to be run to them. Would that be called "tiny sprawl"? I think a more environmentally sensitive solution is infill development and redevelopment in our cities where utility services already exist rather than starting new neighborhoods of tiny homes.
On the other hand, these tiny houses are cute as a button - like oversized doll houses. My husband thinks the tiny houses look like sheds or outhouses. Indeed, some of them are delivered on trailers. I love my husband and cat but would need at least one room to get away once in a while. One of the larger "small house" plans might work for us.
I do like the philosophy behind tiny houses, which is to simplify your life. Get rid of the stuff you don't need and don't accumulate more stuff or become a slave to your stuff. With a smaller house, you save money and time that you can then put toward living -- spending time with friends and family, going on vacation, or volunteering. When we moved overseas, we purged a lot of our stuff and rented a smaller house, and I have to say I'm enjoying it. When we return to the states, both boys will be in college and we'll likely downsize further. I just don't think we're quite ready to go tiny!!
Saturday, February 20, 2010
Unintended Consequences -- Turtles, Alligators & Taxes
I "rescued" the turtle from my front yard and carried him back to a pond across the street last summer. I was concerned a car would run over him as our house was near a busy intersection. I had a choice of three ponds in which to deposit him and chose the one that historically had the most turtles resting on a concrete drain pipe on sunny days. Fewer turtles had been there in recent weeks, so I reasoned he should go back to that pond. I carried him at arms length. Turtles, as a defense mechanism, will urinate or defecate profusely, and I was trying to avoid that issue. I set him down on the bank and he scuttled into the pond.
Two days later, a neighbor alerted us that an alligator had taken up residence in the pond over a month prior. At this point, I knew I probably had not helped this turtle. Perhaps he was aware of the alligator and making his way to one of the other neighborhood ponds. I was trying to help him, but Mother Nature had her own plans and designs. My intervention may have saved him from being run over but probably didn't save him from becoming the alligator's lunch.
Similarly, a few years ago, South Carolina passed legislation changing our property tax system. Sales tax rates increased to provide funding for schools. Property taxes shifted to a Point of Sale program where homes were reassessed for their sales value when they sold. Existing homeowners saw their property tax bills decline as the school funding portion of their bills evaporated with the new legislation. People purchasing homes saw taxes increase after they bought their new home. Real estate agents and homeowners were cautious about disclosing the taxes on properties on the market, knowing that the new owner's taxes would be higher, concerned that higher taxes might dissuade a prospective buyer from purchasing the home.
A few years down the road several unintended consequences have arisen from the Point of Sale tax system:
1) Some next door neighbors paid very different amounts of property taxes depending on when they purchased their homes.
2) Investors were disinclined to purchase properties as higher property taxes made cash flow impossible on rental properties in some areas.
3) Businesses considering locations in South Carolina also became aware of property tax disparities and some chose to locate elsewhere.
4) Sales tax revenues declined as people spent less due to the economy, resulting in less money for the schools. School funding shortages resulted in teacher layoffs and other issues affecting the quality of education and facilities provided to our children.
Now, with the significant decline in real estate sales prices and the overall economy, home buyers are purchasing homes closer to 2006 values. In some cases, with the decline in property value, the taxes could potentially be less than the previous owner was paying. Significant disparity remains for those who purchased homes in the intervening years before prices fell.
State government, local government, South Carolina Association of Realtors and others are working on tax reform measures but no consensus has been reached. Some propose changes to encourage businesses to locate in the state. Others feel business/commercial, investor, and owner-occupied property taxes should be addressed.
With counties, cities, and schools seeing budget shortfalls, it is clear that more tax money is needed to provide continued services for the public good. Hopefully any resolution will be analyzed from every angle for future unintended consequences, and the tax burden will be fairly and equitably distributed among all sectors.
It's hard to predict how natural systems or the economic/financial systems will react to changes. Sometimes, even with the best of intentions, we make things worse!!
Two days later, a neighbor alerted us that an alligator had taken up residence in the pond over a month prior. At this point, I knew I probably had not helped this turtle. Perhaps he was aware of the alligator and making his way to one of the other neighborhood ponds. I was trying to help him, but Mother Nature had her own plans and designs. My intervention may have saved him from being run over but probably didn't save him from becoming the alligator's lunch.
Similarly, a few years ago, South Carolina passed legislation changing our property tax system. Sales tax rates increased to provide funding for schools. Property taxes shifted to a Point of Sale program where homes were reassessed for their sales value when they sold. Existing homeowners saw their property tax bills decline as the school funding portion of their bills evaporated with the new legislation. People purchasing homes saw taxes increase after they bought their new home. Real estate agents and homeowners were cautious about disclosing the taxes on properties on the market, knowing that the new owner's taxes would be higher, concerned that higher taxes might dissuade a prospective buyer from purchasing the home.
A few years down the road several unintended consequences have arisen from the Point of Sale tax system:
1) Some next door neighbors paid very different amounts of property taxes depending on when they purchased their homes.
2) Investors were disinclined to purchase properties as higher property taxes made cash flow impossible on rental properties in some areas.
3) Businesses considering locations in South Carolina also became aware of property tax disparities and some chose to locate elsewhere.
4) Sales tax revenues declined as people spent less due to the economy, resulting in less money for the schools. School funding shortages resulted in teacher layoffs and other issues affecting the quality of education and facilities provided to our children.
Now, with the significant decline in real estate sales prices and the overall economy, home buyers are purchasing homes closer to 2006 values. In some cases, with the decline in property value, the taxes could potentially be less than the previous owner was paying. Significant disparity remains for those who purchased homes in the intervening years before prices fell.
State government, local government, South Carolina Association of Realtors and others are working on tax reform measures but no consensus has been reached. Some propose changes to encourage businesses to locate in the state. Others feel business/commercial, investor, and owner-occupied property taxes should be addressed.
With counties, cities, and schools seeing budget shortfalls, it is clear that more tax money is needed to provide continued services for the public good. Hopefully any resolution will be analyzed from every angle for future unintended consequences, and the tax burden will be fairly and equitably distributed among all sectors.
It's hard to predict how natural systems or the economic/financial systems will react to changes. Sometimes, even with the best of intentions, we make things worse!!
Thursday, February 11, 2010
Good News in Charleston Real Estate -- Inventory of Homes Decreasing
One real estate market indicator we watch is the inventory of homes for sale.
The inventory of single family homes for sale in Mount Pleasant was 916 as of February 1st, 2010 and has remained below 1000 homes for the past three months. The number of homes on the market in Mt Pleasant had not been under 1000 since June 2006.
Month Number on Market
November 2009 997 homes
December 2009 957 homes
January 2010 916 homes
Peak inventories have also decreased since the July 2007 peak of 1330 homes.
Month/Year Peak Inventory
October 2006 1147 homes
July 2007 1330 homes
July 2008 1224 homes
May 2009 1174 homes
Similarly in the Charleston Tri-County Area (Berkeley, Charleston, and Dorchester Counties), the inventory of available homes for sale has fallen to 6227 single family homes from a peak of 7430 homes in August 2008. The last time the inventory of single family homes was under 6300 was in March 2007.
As home buyers take advantage of historically low interest rates and home buyer tax credits, we expect inventories to decline further, continuing this positive shift in our market.
Sunday, February 7, 2010
Charleston Area Median Prices - Goose Creek & Johns Island Increase in 2009
Here's a nice map showing the change in median price for various areas of Charleston (courtesy Charleston Trident Association of Realtors). Changes varied across the market.
Goose Creek and Johns Island saw year over year increases in their median prices. West Ashley was not far off the target with a lower decrease than many other areas.
Areas with a lot of second homes generally saw larger declines as activity in this market segment dropped off. Fewer people are interested in second homes during a down economy. Home sellers in these areas have significantly lowered their prices, so there are some tremendous values on the barrier islands. See the average price per square foot numbers in the charts for Kiawah Island and Seabrook Island, Sullivans Island and Isle of Palms, below. The number of sales in these areas have improved as buyers are scooping up great values. Click on the figures below to see them in full size.
Goose Creek and Johns Island saw year over year increases in their median prices. West Ashley was not far off the target with a lower decrease than many other areas.
Areas with a lot of second homes generally saw larger declines as activity in this market segment dropped off. Fewer people are interested in second homes during a down economy. Home sellers in these areas have significantly lowered their prices, so there are some tremendous values on the barrier islands. See the average price per square foot numbers in the charts for Kiawah Island and Seabrook Island, Sullivans Island and Isle of Palms, below. The number of sales in these areas have improved as buyers are scooping up great values. Click on the figures below to see them in full size.
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