Harford tax bills going down?

More supply, less demand

July 06, 2011

A point worth noting in all of this is that key parts of the real estate boom were driven by government policy, and the modest recovery in the market that was seen late last year and early in 2011 dried up when a government incentive program for homebuyers expired. While government policy certainly isn't the answer to every problem, in this case, we have learned there are right and wrong ways for the government to promote home ownership and we're not doing ourselves any favors by shutting down the whole operation because parts of it were foolish and unsuccessful.

Every decade or so, we're faced with the reality that prices don't always go up. Heck, even gas prices have been coming down lately, sorta, but albeit not as quickly or by amounts as large as when they went up.

Regardless of what other factors are at play, one basic rule holds sway in economics, that being the one we refer to as the Law of Supply and Demand.

When demand is great and supply is small, prices are high. When demand is small and supply is great (the situation we have these days when it comes to the housing market) prices are low.

When the variables of supply and demand are more in balance, the result is a more balanced situation with regard to housing prices, that is to say incremental increases in value.

Nationally, and locally, we've been in the unfortunate situation to have lived through a span where one extreme ruled the market for a few years (high demand driven by too-easy credit and relatively short supply), followed by our current situation of low demand (driven by a chastened credit industry) and a glut of houses built when demand was high.

The result: housing assessments in Harford County continue to drop. In the latest round, the Route 40 area is expected to see assessments go down, which follows last year's assessments taking a dip elsewhere in the county.

From a personal finance perspective, this is good news for people who plan to stay in their homes because their tax bills will be going down. Otherwise, it's a mixed bag. Some houses will hold value better than others making resale financially realistic. In other cases, more is owed on mortgages than the house in question, which is an unenviable situation.

And governments that depend on real estate taxes end up taking a hit because tax revenue goes down with assessments. It's difficult to sympathize with the governments, though, because they had no trouble spending the windfall when assessments went up when they probably should have been sending out real estate tax refunds.

Though the situation isn't a good one when supply and demand are as out of whack as they are these days, there's reason to be hopeful that some sort of balance will be struck in the next year or two locally. Maryland, after all, isn't in the unfortunate situation of places where pure speculation drove real estate booms.

A point worth noting in all this is that key parts of the real estate boom were driven by government policy, and the modest recovery in the market that was seen late last year and early in 2011 dried up when a government incentive program for homebuyers expired. While government policy certainly isn't the answer to every problem, in this case, we have learned there are right and wrong ways for the government to promote home ownership and we're not doing ourselves any favors by shutting down the whole operation because parts of it were foolish and unsuccessful.

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