By George Tsai
Every citizen has to pay his or her fair share of all the taxes. That's the beauty of the American system. So taxes are on the minds of a lot of people these days.Let's talk about the property valuations. Their sharp increases from July 1, 2006 to June 30, 2007 have sparked both exaltations and concerns among the homeowners. A couple of weeks ago, my College Point neighbors and I each received a report from the City Department of Finance that our property values will jump a whopping 27 percent for the fiscal year starting July. Wow, incredible! So will the assessed values. Frankly, I am kind of ambivalent about this.This year's valuations seem to have exceeded the actual worth of the properties on my block. Yet the report says the city estimates our market values in one of three ways Ð “based on recent comparable sales; the income that our properties generate; or the cost of constructing our properties.'' It seems the city based its current estimates on last year's overheated market prices and assumed the trend would linger, if not go forward. The city apparently failed to take into consideration the possibility that the housing market would soon cool down across the nation. Flushing is perhaps an exception, thanks to its swelling number of immigrants.According to the Commerce Department, sales of new homes toward the end of 2005 fell shy of expectations, median prices dropped 5.7 percent, but the number of new homes for sale shot up to a record 493,000. Mortgage applications seem to be tapering off. As I see it, the culprit is the rising mortgage interest rates. On Feb. 7, the 30-year fixed mortgage rates rose to 6.25 percent. Since 2004, we have seen 14 consecutive quarter-point interest-rate increases by the Federal Reserve Board. The move has lifted the target for the federal funds rate – what banks charge each other for overnight loans – to 4.5 percent – the highest level in nearly five years. And I venture to predict the Fed may add one or two more rate increases this year in the name of fighting inflation.Also, a government report showed in late January that economic growth slowed sharply in the fourth quarter to the weakest pace in three years as consumers spent less robustly and growth in homebuilding eased.Last fiscal year, the city boosted the valuations of the same properties in this area by 15.5 percent or higher. In other words, in less than two years the city has elevated the values of houses on my block by 32.5 percent. I don't think the current market warrants a 27 percent increase in housing value amid reports of looming bubble bursting in the real estate industry.Comparisons are not enough. Timing plays a big role in sale price. Also, keep in mind that no two houses are the same. Comparisons sometimes can be misleading. What's more, none on my block was sold, though one has been in the market for almost a year. Blame the cooling market or the asking price? Both.Mine is one of a cluster of townhouses built on a block more than half a century ago. With lackluster appearance, these vintage townhouses are in an unfashionable area, so I doubt they are worth the city's maximum estimate. The market trend prediction sometimes could go wrong.For the sake of fairness, the city should base its valuations on the actual sale prices of houses of the same size and shape on the same block. Similar houses 50 feet or 100 feet away could be worth more or less.Besides, the valuation increases could offset the $400 the city gave homeowners last year as tax relief. Mayor Michael Bloomberg reportedly will do it again this year. Still, I prefer an accurate property valuation to the gift check since the mayor cannot afford to repeat this every year. A number of new duplexes in College Point have remained unoccupied for quite some time. The for-sale and for-rent signs being displayed in this semi-rural town have lately generated little interest among prospective buyers. They balk at making deals because of the rising interest rates. Most take a wait-and-see attitude, wishing the mortgage rates would nosedive again in the near future. It's unlikely.The four golden years are apparently history for realtors and the lending institutions. A frustrated agent grumbled the other day that he could hardly get one phone call a week from house hunters. That situation, he said, may force him to quit the industry for good. No joke. It's a serious message that well reflects the latest housing market doldrums.Common sense tells us that when mortgage rates go up, the housing prices will come down. Of course, I wish the city estimates were correct. But the current market doesn't justify such a soaring estimate.Local homeowners may have received phone calls from telemarketers persuading people to borrow money to refinance their home mortgages. Some offer 1.5 percent adjustable rates, comparing them to the going rates of about 6 percent or higher. I am skeptical. Unquestionably, there are hidden costs. Beware, folks!Regardless, we pay much less than our counterparts in Nassau County on Long Island and Westchester County, 25 miles north of the Whitestone Bridge. People living in these two counties, however, have two things in common Ð more wealth and bigger houses.
