For the past several years we have been living on a borrowed dream. When we wanted something we would just “put it on the card.” Then if at the end of the month if we did not have the money we just paid as much as we could and let the balance accumulate at 20% interest. This living on a borrowed dream included the purchase of houses, second homes, boats, clothes, appliances and in some cases even food using credit in the form of mortgages or credit card debt.

Where did the money to make these loans at 20% interest come from? Some of the money was from banks, pension funds and money market funds but I suspect a large amount of the funds were from foreign lenders such as China and the Middle East. We were borrowing from them to purchase the goods that they created. However, the money we borrowed to enjoy the good life has to be repaid and that is the problem. We all have heard of the problem of home owners owing more on their mortgages than their property is worth. Well, some homebuyers took a gamble that if the property value went up they would win and if the value went down then the bank would lose. Guess what, that is exactly what is happening now. But the loser may be you, me, foreign lenders and the Federal government.

Over 50% of our economy is based on consumer spending and probable 80% of consumer spending involves credit cards. If merchants are concerning about the lack of desire in purchasing consumer goods for the holidays just imagine what will happen when Mr. Smith decides to make a purchase and the credit card company says….Mr. Smith you have exceed your credit limit and your credit card is no longer valid. When this happens our system of living the borrowed dream will come to an end. Our system of rewarding borrowers and penalizing savers will come to an end. The outcome of this will mean less consumption and spending but I’m not sure this is such a terrible outcome. I believe it was Benjamin Franklin who said. “Happiness is spending less than you earn”

Tom Dixon

If you live in Florida and own property, you will receive a TRIM (Truth in Millage) notice in the next 4 to 6 weeks. This notice will give you an estimate of the real estate taxes that the property must pay, based on the assessment and millage rate. The assessment is established each year by the County Property Appraiser using mass appraisal techniques. The millage rate is based on funds the city and county government need to operate.

The real estate taxes for a property is then calculated by multiplying the assessment – say $100,000 times the millage rate of say 19 mills, which is really 1.9% or .019. This equals a tax of $1,900. I sometimes think that the use of the term millage rate is to confuse the taxpayer. It would be much clearer if it was expressed as a percentage of value.

As a taxpayer, you are only obligated to pay your fair share and the only part of the real estate tax equation which can be appealed is the assessment. For non-homestead property, the tax year of 2008 is very important because the Florida Constitution was changed to limit the increase in the assessment from year to year. The following is an extract of the new assessment procedure for non-homestead property.

Assessments of non-homestead property shall be changed annually on the date of assessment provided by law; but those changes in assessments shall not exceed ten percent (10%) of the assessment for the prior year. …. such property shall be assessed at just value as of the next assessment date after a qualifying improvement …such property shall be assessed at just value as of the next assessment date after a change of ownership or control and …changes, additions, reductions, or improvements to such property shall be assessed as provided for by general law….

There are serious unintended consequences of this amendment. For example, over time – as the difference between the assessed value and the just value increases – fewer and fewer property owners will be motivated to sell and fewer buyers will be interested in buying because of the impact of the increase in assessment and taxes after a sale. The next problem will be the lack of motive to upgrade, change or improve property because again, this will cause a re-assessment of the property. However, this is the Florida Constitution and unless it changes, you should take advantage of these benefits.

With the general decline in real estate values from land, condos, single family homes to income properties, the year 2008 is the best opportunity to lock in the low valuations so that in future years as the real estate market improves, your assessment and real estate taxes will be at a minimum.

After you receive the TRIM notice, there is usually a period of 25 days to file an appeal petition if you wish to protest the assessment. Then, sometime in the next 12 months there will be a hearing before a Special Magistrate to protest the assessment. As a property owner, you can file the appeal and present your arguments before the Special Magistrate. However, many property owners have found that using a professional is much more effective.

With our 30 plus years of combined knowledge of South Florida real estate valuations as estate brokers, professional appraiser, teacher and economic analysts, we are well equipped to represent property owners in the successful appeal of real estate tax assessments.

CALL US — WE CAN MAKE SURE THAT YOU ARE ONLY PAYING YOUR FAIR SHARE OF REAL ESTATE TAXES.

by Tom Dixon

While this will contain a lot of rhetoric about politics, I will conclude on how this affects our real estate activities.

No question, a current hot button and one destined to worsen, is our energy pickle and the high cost of gas. Unfortunately, it seems only a sharp increase at the pumps jars us into demands of “what is the cause” and “who is to blame.” The con game cranks up with our politicos showcasing public hearings of the oil industry execs. Rep. Maxine Waters from Texas suggested they be nationalized. (I have asked her to send me her proforma cash flow for the first year under government control). Do we ever hear how our elected officials have punted on our being overly dependent on foreign oil ? We now import over 60 % of our demand and rely on such dependable sources as Nigeria and Venezuela!

The con job is the political grandstanding while neglecting to inform of the facts:

# Recent studies indicate that current demand may exceed available oil supplies.

# Our political leaders in the U.S. have discouraged any new oil drilling in the U.S as well as building nuclear plants, which is considered one of the cleanest ways to add new energy capability. (France’s energy is 80% nuclear plants). This makes us scramble to create other sources which is primarily coal– more pollutant than oil.

# We see much political knee jerk to take it out on the oil companies, such as don’t look at their yield on investments but their increasing profits, legislate that they should invest their profits in alternate sources of energy so they cannot do what they do best…..search for new oil sources. Better yet, take all their profits. Trouble is that is no more than five cents per gallon.

# No question but that we should be pulling out all stops in search for alternate sources – wind, etc. What is needed is a Manhattan type project, investing a lot more money to attract the private sector to pull out all stops to come up with quicker solutions.

# Congress just passed one of the worst farm bills. Buried in the bill was how we are protecting to 2010 corn ethanol, now recognized as a scam.(1) Not only has our underwriting of corn ethanol been one of the largest contributors to increased food costs in the world, but, it is raising havoc with many combustible engines, particularly marine, and, it prevents the importation of sugar cane based ethanol from Brazil, which would love to supply the US with as much as it wants. The big problem: – to protect our corn farmers, the farm bill places an import tariff of 54 cents per gallon.

We have allowed ourselves to be conned by our political leadership. By refusing to take prudent action we now face a near term future with no logic with little hope things will get better. We are going to be buffeted with an unpredictable market for crude oil and some real tough political decisions, which hopefully will be based on prudent logic instead of political scape-goating.

What does this mean to our livelihood in real estate? As it is likely that we will see increased gas prices, the market will react and be very sensitive to drive times. Existing housing and any new projects in the urban west area will suffer. Many will want to move to reduce their drive times. Nearness to metro rail stations as well downtown areas with easy walking to amenities will be in demand. And, we can’t wait for reliable, battery autos! So, buckle your seats, the con job will get worse, as, heaven forbid, our political leaders refuse to admit they have been asleep at the switch.

By: Gary Sisler

Couple of good source reading: Gusher of Lies: The Dangerous Delusions of Energy Independence. Lou Frey Report (1) Gusher of Lies

When I was in high school my favorite movies were horror flicks.  At FSU, I participated in a lot of film projects for both the Communication School (News) and the more artsy Film School.  I came to realize that as a goal, what I really wanted to do was edit a horror flick because no other genre elicits the primal reaction from the audience.  Sure – comedies are fun, but the laughs aren’t created by the medium, they’re written.  Romance: same thing – those stories can be told equally well on stage or in books.  But there is something more powerful and unique in scaring people with the juxtaposing of frightening moving images.

Why am I writing about this now?  Simply to point out that we have become a nation that loves to be scared.  I’ll try not to let this become political, but doesn’t anyone see a slight problem with the fact that our fears led us into the War on Terror?  (Can a war on an emotion ever be won?)  And who helped feed these fears more than our U.S. News Media?

Granted, the news isn’t always doom and gloom.  In fact, I remember about two years ago reading about a tattoo artist with a high school education who made an easy 200k in one year just flipping houses.  And while this is wonderful for the tattoo guy, when the media starts getting overzealous about such stories, as they tend to do, it begins to amplify what was a semi-isolated event into an unrealistic expectation too irresistible for a lot of dreamers out there to handle.  Soon, stories about that friend of a friend of a friend who just sold his house for double what he paid three years ago starts to resonate with what you’re hearing about out in, say,  the Las Vegas suburbs and before you know it, fantasy seems to merge with reality.

Some of us understood the real estate boom was bound to come to an end, but as long as the news was good, who cared?!   Rapid appreciation soon came to a halt when someone finally asked, “Wait a minute!  What is this actually worth?”  vs. what they could maybe sell it for.  And suddenly poof! no more incredible stories on the news about real estate entrepreneurs.  The media goes back to showing war images, because those got high ratings and were relatively easy to cover.

Fast forward to last august.  From that point to the present, all we’ve been hearing about in the news is a constant slew of gloomy news about our economy, and/or maybe the Democratic Primaries (isn’t there anything out there worth actually investigating anymore?)  Now those same people who told us how easy it was to make money are telling us its worth less and less every day, without much explanation as to why.  As if they themselves had nothing to do with the rampant real estate speculation and subsequent decline.  It’s a bad situation when we find that our economy is dictated by consumer confidence while at the same time, we’re basing of confidence on information gathered from a source that prospers by scaring people into staying at home watching the latest news reports.  I’m not saying things aren’t scary in the financial world.  In fact, I think they may get worse.  But that’s in part because we have multiple TV news channels broadcasting around the world 24/7, featuring wannabe actors and models speculating non-stop these days about whether or not we are in a recession.  And when those are 90% of the stories we hear – those become 90% of the stories we tell, and soon enough our fears become self-fulfilling prophecies.

A little bit of fear, caution and skepticism isn’t being unrealistic, (in fact a little more of those the last couple years  might have helped)  The key is to not let your imagination run wild with those fears, and try to understand that what you see is grounded in a larger context that cannot be contained with the camera’s frame.   And please, when the talking heads with their ticker symbols and random shocking headlines are flashing across your screen, take them with a grain of salt and remember that they get paid to keep you glued to the screen, and not go out and find out for yourself why these things are happening, lest they too get the boot.

As some old dead guy once said, “The only thing we have to fear is fear itself.”   That seems like pretty relevant advice right about now, doesn’t it?

by Andrew Dixon