[mcdude]

Real Estate Woes Hitting Tax Base (Citizen Article)

As the national economy worsens, area economists and statisticians are keeping an eye on residential sales as an indicator of the overall health on New Hampshire's and Belknap County's economy.

Countywide, recently released third quarter statistics show residential real estate sales in Belknap County dropped 21 percent from the same period last year.

According to information provided by the New Hampshire Association of Realtors indicated the number of sales dropped from 225 in the third quarter of 2007 to 177 in the third quarter for this year. On a positive note, the values of those third quarter Belknap County sales rose 7 percent, from a 2007 median value of $232,000 to a median value of $249,000 in 2008.

"There is some seasonality or certain sales that are associated with lakefront property in September," said New Hampshire Housing Finance Authority Housing Research Director Dan Smith who said the summer buying season generally ends in September, and he was not surprised that the overall values for Belknap County were higher than the rest of the state.

As to the number of sales, local economist Russ Thibeault of Applied Economic Research said he thinks many people are giving second thoughts to second-home purchases and he is not surprised to see the number of sales lower than last year even though value appears to be holding it own.

What concerns both Smith and Thibeault is the rising number of foreclosures.

Smith said the number foreclosures in the state could reach 3,500 — a 70 percent increase over last year. In Belknap County, there were 26 properties foreclosed on 2005, 50 in 2006, 114 in 2007, and 150 in 2008 through September.

"Remember," said Smith. "There is a negative effect of foreclosure on property taxes."

He said when a property goes into foreclosure, somebody still owns it, so property taxes will be paid and are often recoverable from the next purchaser, but revenue streams can slow.

As to declining values, an overall declining value means a higher tax rate to maintain constant spending — as in the 9 cent jump in Laconia's rate over projections.

Smith said he does not expect New Hampshire to experience the declines seen in other portions of the country like Nevada, Florida and parts of Michigan. But he said in general, a marked increase in foreclosures can strain a community's ability to raise taxes.

The state, he said, has a much larger issue.

"When sales are off by 20 percent, as they have been the past three years, it represents a significant hit to the state for its revenue," said Smith.

WMUR recently reported the state's projected revenue for fiscal year 2009 could be as much as $250 million short. Gov. John Lynch has already trimmed $90 million from the state budget, but legislators may be forced to eliminate an additional $160 million in spending before June 2009.