REAL ESTATE
Farming “Out”
As discussed in Chapter 7 of our publication When to Buy and When to Sell: Combining Easy Indicators, Charts, and Financial Astrology, and our previous Real Estate blogs, the purchase of a home may be one of the biggest decisions to make in one’s lifetime. It has never been more difficult for first time buyers, which are usually in their late 20’s to early 30’s, to purchase a home, and the process can be very harrowing and nerve-wracking. Investment properties have now become very challenging as well, with potential “rent freezes” and new system regulations, and increases in insurance and property taxes.
As also stated in our August blog (Real Estate – Affordability, dated 8-16-24) the “affordability” of purchasing a home has become historically challenging in the last couple of years, as inflationary conditions have resulted in the “doubling” of homes prices in many areas, record credit card debt among consumers (which negatively effects credit scores and debt-to-value ratios), rising rents, insurance, property taxes, as well as home and car maintenance costs. Adding everyday needs (including food, energy, and other necessities) into the equation multiplies the difficulty.
Inflation, deception, and fraudulent and/or incompetent activities are the base to the current real estate costs/issues. As we discussed in last month’s edition, there are some locations throughout the U.S., where the Central Appraisal Districts (CADs) are under heavy scrutiny for over-valuing properties, as they depend on property taxes for revenue, and many are “broke” due to mismanagement and other immoral issues. Many states also have built in “property taxes” for businesses (disguised as fees), which have come under protest. Recent court rulings have significantly reduced some of these highly over-valued charges, however it is very expensive to fight the authority. Property tax valuations have skyrocketed, which is inflation itself, as is a possible “unrealized gains” tax that has been proposed by those in charge. Taxes garnered on property owners, at the behest of CAD’s, is simply a form of “unrealized gains” tax, when the home has not been sold. So, essentially, when combining the two, the homeowner will owe more taxes on a property whose “perceived” value is rising, then potentially more taxes based on that value before the gains are enjoyed. By the way, there is no rumor that “unrealized” losses, based on any decline in value, will be implemented.
The “American Dream,” of owning a home is becoming very suspect, as it is no longer a nice tax write-off, or something to call your own, as the cost has become astronomical, and inconsistent. As also noted last month, there are also rumors of some “rent controls” and other programs to assist young/first time buyers, however there is a risk of further inflation with other issues that this may cause. If these programs increase home prices further, re-appraisals and higher property taxes are likely to follow. The deception of “helping” inexperienced home buyers is being exposed by the unfair raising of these taxes, which essentially pays back those programs. Remember not be pressured by any pushy agents, or “false” reports about a new “buyers-market” by certain real estate companies.
This brings us to the ever-growing issues relating to farms across the world. New strict agricultural regulations have put an immense amount of pressure on farmers, as well as the previously mentioned tax increases. It has become basically unaffordable for many of these entities to continue their generationally owned farms throughout the world. Between these regulations on production, cattle, rising property and equipment tax, increasing energy costs, and economic conditions, all at once, many farms are struggling to stay in business. This is causing revenue shortfalls (somewhere in the neighborhood of $10m), and mass layoffs in the industry (as there are in many others), which only exacerbates the problem. Government assistance is also waning, in the face of more governmental restrictions. Furthermore, farmers repairing their own equipment, such as tractors and plows, are being disallowed, as restrictive software has been implemented so only the manufacturer is allowed the fix these machines. Currently, there are lawsuits filed by farmers (known as the “right to repair” act) to try to remedy this situation. Certain agricultural companies are also suggesting, or planning, to move out of the country, which will cause suffering to even more American workers. For anyone planning on starting a farming business, be extremely diligent in your research to understand all aspects, and potential future issues.
Please visit the website www.augustassociatesllc.com for home values, listings, and professional assistance.
