MuniLand

The latest S&P/Case-Shiller Home Price Index, released yesterday, wasn’t pretty. Housing values continued to fall, their 5th consecutive year-on-year decline. (You can download the data here). The Federal Reserve Bank of Cleveland had this to say about the release:

According to today’s [Case-Shiller] report, the fourth quarter started with broad-based declines in home prices… On an annual basis, the 10-city composite is down 3 percent and the 20-city composite is down 3.4 percent, and eighteen of the 20 MSAs are also in negative territory.

Basically, there’s blood on the streets everywhere.

The Federal Reserve Board reports in its Flow of Funds data (line 4) that the value of household real-estate assets has declined from $22.7 trillion in 2006 to $16.1 trillion in the third quarter of 2011. That’s a loss of 30 percents. Have revenues from property taxes, which are supposed to reflect the property valuations, mirrored the same decline?

Thankfully not (yet). As we can see in the U.S. Census data graphed below, property taxes have mostly marched steadily northward. We see a slight flattening in 2009, but nothing to match the 30 percent decline in property values. Local governments should see this as a gift from increasingly stretched taxpayers. There may be room to raise tax rates in some places but there will also have to be local belt-tightening as declines in property values feed into declines in tax collections.