But, that is the way things are going in the general area, including Wenatchee and Chelan, as well as most of the state.

Property Taxes

While it may seem to the people in the Lake Chelan area that taxes never go down, the property tax statements in much of Chelan County actually show some decreases.  My own properties that are out of the Chelan area showed a few percent decrease this year.  But, folks in the Chelan Valley did not!

Last year the Leavenworth area carried a big share of the tax increase for everybody.  One thing that has become clear is that the method of revaluing one fourth of the county each year, and each area every four years, creates some real burdens as the tax burden swings across the county.

I posted about the property tax amounts by taxing district with links to table showing the tax amounts for each taxing district across the entire county!  Have a look, it could happen to you and there is some good information to consider before marking that ballot!

I don’t know what the expectations of the developers, banks and auction company were for Saturday’s auction.  I am sure they hoped to have a hundred or more bidders, but realistically I bet they did not expect that to occur.  But, in a market that is virtually stalled, they now have contracts on 9 or more homes of the 14 they have for sale.  They generated trememdous exposure to the project and are likely to get contracts on even more of the homes.

If their expectation was to get some sales happening, they have likely achieved success.  In this market, that is a great accomplishment.  They have identified the pricing that the current market will pay for that property.  If they had realistic goals, they had a successful event.  You can get the Wenatchee World’s perspective on the auction here! 

The gist of the study is that it isn’t developers or even construction costs that have driven up the cost of housing, but it is the cost of “serviced” land.  That would be land with infrastructure to support development.

The rage in politics these days is “development must pay for development.”  From a local government standpoint, with the funding options available, that mantra may be more of a practical approach than something that is philosophically derived.  I doubt local governments have much choice today.

While I’m too young, barely, to remember back to the post-war 1950s, it is clear that somehow our priorities have shifted since that time frame, or even the 1960s.  From what I can glean from the study, it sounds like cities, counties and the public did not mind “investing” in their area and their future.  That investment sounds like it included building some infrastructure so their area could benefit from an influx of productive, hard working, home owning families and individuals that they may have realized would contribute far greater value to their community.  I suppose much of what has happened since is a rebellion against the suburban dwellings that sprung up so easily in the post-war era.

Since then, I suppose the world has become more crowded.  Maybe people really are more self focused.  Have we somehow come around to thinking the state and federal government should take our taxes and provide the solutions to these problems which may have been handled much more economically and efficiently in the past?  Tracy Warner’s column got me thinking, which is what it is all about.  Maybe high property costs and taxes just create a fog of nostalgia for the problems with those typically bland developments.  If those types of things have you wondering, his column is well worth a read and please feel free to comment here. 

What do you think?  Click here to see it and please comment!

However, I’m starting to hear from investors who are actually looking for properties again.  Yes, finance is a mess, but when the news is this negative, maybe we are at the bottom.  Barrons online had this article on the 14th about how this real estate rout may be short lived:

In hindsight, the housing bust hasn’t been nearly as calamitous as depicted in the media, or as Wall Street’s woes might suggest. Yes, people have lost their homes, but more than a few were mendacious mortgage applicants and mere speculators, who eagerly sought out 100% margin loans, only to fold just as quickly when prices turned against them.

It is important to remember, as well, that even after a steep drop in the S&P/Case-Shiller Indices, long-term buyers in the top 20 U.S. metro markets have seen their properties appreciate by 70% since 2000. Home prices often take five to 10 years to recover fully from severe declines such as this. But at least the available data suggest the scary dive in home prices soon will be over.  – Barrons

So, there is quite a bit of good research that indeed, the real estate market may already be starting to recover.  Those panicky sellers who rushed to sell at a big discount this year may look back next year and wonder why they didn’t hold through the correction.  Those buyers a year from now, or two, may wish they had bought during that summer of 2008!

My summary report is here.  The number of sales in May of 2008 were still a bit lower than last year, 15 sales compared to 19 last year.  There were some expensive homes that sold in 2008, two 4 to 5 bedroom homes sold at an average price of $1.49 million and one 6 to 7 bedroom home sold for $2.8 million.  Those types of sales drive average prices up and include some waterfront homes.  The most expensive homes that sold in May 2007 were 4 to 5 bedroom homes that averaged $524 thousand for the three in that range in 2007.  The average Days On Market for the homes that sold is up to 162 days from 134 days in 2007 for May.

I’m sure there are folks in many parts of the county who would be very happy to have their markets this strong compared to last year.  If you think our stable or increasing housing prices are a problem, and in some ways they are, at least we’re not in a market where prices are dropping 20 to 35%!

I was actually pretty favorably impressed with the consultant, David Rosen, of DPR Associates.  They took census data from 2000 and Office of Financial Management data from as recently as 2006 and 2007 and did a thorough statistical analysis of the housing situation in Wenatchee.  They are also very knowledgeable of housing trusts, housing authorities and the taxes and regulation that can be used to support such ventures.  They are experts and have facilitated $7 billion of affordable housing.

However, the consultant was chosen by a group made of representatives from the Planning Department, Housing Authority and the NW Justice group.  These groups stand to gain from findings that money needs to be sent to them for “affordable” housing.  It would be as if I were the dealer in town for a given brand of truck and was asked to choose the consultant for the city to hire to specify the trucks they should buy for public works.  It is likely I would choose a consultant that would recommend my brand of truck.  That is similar to how this consultant was chosen.  Nobody from the local home builders’ association, the Master Builders’ Association of the Building Industry Association of Washington was included.  Nobody from private industry at all was invited.

I have asked for copies of the presentation and will post links to the consultant’s report when it is available online.  But, I did take some notes and can share some things now.  The statistical analysis looked at median home prices versus median income.  There is an $82k price difference between what a median income earner ($57k for a family of four) can afford and the median home price ($248k).  They also took today’s ratios of folks at various lower income levels, from the homeless to twenty and fifty percent of the median income and projected them forward to the growth levels expected over the next 25 years.  The conclusion was that about 1750 affordable homes need to be built and many more refurbished at citizen expense. 

That assumes that in the next 25 years, the distribution doesn’t shift on its own.  Do you think Wenatchee will continue to rely as heavily on farm workers in 25 years?  The city’s “High Performance Strategy” would suggest we will have a different mix of workers in the future.  We are also in the midst of a huge demographic shift with baby boomers moving into retirement.  They are a large part of the current real estate market and tend to be able to afford homes that are above the median. Delving a bit further into the statistics and background behind them could be very worthwhile.

Other things could purposely shift the pricing side of the distribution. For example, looking at changes in planning code and urban growth boundary strategy that might actually be able to reduce the price of the median home, or at least the appreciation rates of the median home over the next 25 years.  Impact fees, land availability, zoning, planning requirements and other policies impact the viability of market production of affordable homes.  We’re in the midst of a major market adjustment that is making housing prices move back to being more in line with incomes.  Nobody knows yet how much that will change the situation.  Shouldn’t all of those issues be looked before deciding to tax the public to buy homes for folks who might be able to make some different choices and afford a market rate home?  Could that money be more wisely spent on programs to help low income residents become higher income residents?  Is subsidizing homes for low income residents the most effective way to spend your money?

What type of incentive is created for folks when, because they keep their income low enough, they might be given a home or a reduced price on a home or rental?  If they earn too much, they may not qualify anymore.   Is that the type of incentive to create?

None of that was looked at.  It isn’t the consultant’s fault.  The consultant was selected by parties with an agenda.  They got exactly what they wanted, a report on several ways to get YOU to pay for low income homes.  Those include:

• Inclusionary housing programs – where developers have to create a % of low income homes in any development
• General Obligation Bonds or Property Taxes Levies – Bonds or property taxes paid by the residents and businesses of Wenatchee
• Local Infrastructure Financing Tool – From the link: The LIFT Competitive Program allows selected local governments to take advantage of tax revenue generated by private investment in a Revenue Development Area (RDA) to make payments on bonds used to finance public infrastructure improvements.  Incremental revenue increases in the RDA and revenue from other local public sources are used to match state money and must also be used to repay the same bonds.  The state revenue earned is distributed through a local sales and use tax that is credited against the state’s sales and use tax.
• State Housing Trust Funds Awards – State tax money and grants that give your state government a reason to raise your taxes.
• Subsidized rehab options to preserve existing, salvageble affordable housing.
• Hotel/Motel taxes
• Taxes, Fees & Assessments

Look for more on the blog in the next week regarding the specifics of the proposal and links to both the report and the presentation.  To me, the presentation looked more like a big government Seattle solution than a market focused Wenatchee style solution.  Question the assumptions when seeing a presentation like this because once the tax streams and affordable housing industry get even more established, it will be difficult to reign back in.  There are benefits to having clean, safe housing available for a variety of income levels in Wenatchee.  There are also a variety of methods to achieve that goal.  Wenatchee residents need to be prepared to ask themselves how many affordable homes they each want to pay for!  Let your local officials know…

Property owners who own their entire waterfront would not be affected.