Good News for Homeowners and Real-Estate Market
By H. James Litten
Posted: March 30, 2008
Thousands of Indiana homeowners should be breathing a sigh of relief, thanks to the bipartisan efforts of the Indiana General Assembly to ease the tax burden of great concern to Hoosiers since last summer. After months of discussions, legislators agreed to approve a sweeping tax reform package, signed by Gov. Mitch Daniels on March 19, that caps property tax bills for homeowners at 1 percent of assessed value. Rental properties will be capped at 2 percent.This tax package not only brings great news to homeowners, but I believe it will bring a much-needed lift to Indiana's real estate market, particularly in Central Indiana.
Indiana is fortunate to have one of the highest homeownership rates in the nation, but last summer's tax bills had the potential to dramatically reduce the number of Hoosiers who could afford their own homes. Property tax bills were scheduled to go up an average of 24 percent statewide, but some areas of the state were seeing tax increases of two times or more. When coupled with Indiana's rising foreclosures and continued lending to those with questionable credit, the property tax increases slowed an already-weakened housing market. Many homebuyers and home sellers simply put a stop to any decisions about moving.
To be fair, Central Indiana's real estate market still experienced almost 28,000 residential real estate transactions in 2007, the fifth-best record in our area's history. But the fear of larger property tax bills caused many Hoosiers to temper their home buying and selling while waiting for the tax issue to be resolved.
The action taken by Indiana's legislators resolves the property tax issue, hopefully once and for all. Now homeowners and prospective homeowners can accurately predict their semi-annual property tax. This certainty, combined with the pent-up demand we are seeing in the local housing sector, is a recipe for increased sales in 2008 in Indiana. In Central Indiana we are already experiencing some market stabilization with local home sales up 0.9 percent in February compared to the same month last year. It's the first time residential real estate sales have been up, compared to last year, since April 2007. The tax package also stabilizes Indiana's housing market by helping senior homeowners on fixed incomes. Property taxes cannot be raised more than 2 percent per year for those older than 65 with incomes less than $30,000 (joint incomes less than $40,000). That means more Hoosier seniors will be able live out their lives in their own homes.