Even if you don’t have a “toxic” mortgage or any plans to sell to your home, rising interest rates and the slowdown in housing prices could still pinch your pocketbook. Out this week is a report from BusinessWeek’s sister company Standard & Poors that says states are beginning to see reduced tax revenues because of the housing slump. Less money coming in to state coffers means potentially higher taxes down the road. (Or less money for state services.)
So far Florida has had the sharpest revenue reduction, according to the report. The state cut its forecasted tax revenues by $1.1 billion for 2008. The housing market has continued to deteriorate there, taking business and consumer spending with it. Florida legislators are calling a special session in September to deal with the potential shortfall.
Other states seeing a downturn in tax receipts include Arizona, Virginia, Ohio and Minnesota. In California, sales and use tax revenues in June were down $315 million or 6.9% from what had been forecasted. The overall finances of the 50 states remain fairly strong. Standard & Poors has actually raised its credit ratings on nine states this year and lowered only one, Michigan, due to Motor’s City’s weakening job situation. The report notes that 2008 could be more challenging, however.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.