The Observation Deck

I’m sure some of you saw this on Cleveland.com yesterday or this morning….

Cuyahoga County Property Tax Increase (click here)

This is a continuing disaster for Lakewood homeowners. The average Lakewood house now comes with an annual property tax obligation of around $8,000. Which mostly isn’t even tax deductible anymore.

Just as bad is this: “In prior years, the county held community meetings where owners could file an informal complaint, and avoid some of the procedural steps required during the formal Board of Revision process. But the county will not provide such an opportunity this year due to time constraints brought on by the pandemic.” So now the only way to appeal your revised valuation is straightaway with the Board of Revisions. Which requires some cost and a lot of formal preparation. Very daunting for most people.

The bottom line is that, given how low the Fed sets interest rates these days, the local entities that levy property taxes (mostly LCSD) are confiscating the entire value of your home at the rate of $8,000 dollars a year (on average), year in and year out. The only reason homes have any value here is because you can’t live under a bridge. If property taxes were suddenly applied to stock portfolios instead of to homes, those portfolios would lose at least 50% of their value overnight. Bond portfolios and savings accounts would be 100% wiped out. Gone.

(And the fact is, Lakewood homes have increased in “value” only against the US dollar, and against an hour of your time. Measured against the S&P 500 or against most other assets, Lakewood homes have tanked over the last decade, losing 50% or more of their “value.”)

There is going to come a time when Lakewood’s extraordinarily high property taxes catch up with its home values. Math always wins, sooner or later. When will Lakewood’s wickedly high property taxes cause homebuyers to look in other NEO communities and maybe in other states? Who knows. Innumeracy is endemic and as John Maynard Keynes once said (more or less), “people can remain irrational longer than you or I can remain solvent.”

Good luck with your appeal. Wish me luck with mine.

Also note that Lakewood had one of the HIGHEST percentage increase in values in the county -only Maple Heights was higher at 29% then Lakewood at 27%!

Rocky River only 19%, Bay 16%, and Westlake 12%? That’s bullshit.

Yes rates are going up nationwide, but according to this article, our increase is about SEVEN TIMES the national average increase, much higher than major metro areas that we know also saw steep home sales price increases.

https://www.google.com/amp/s/finance.ya ... 00196.html

I think the county owes Lakewood a detailed explanation with the data that justifies this outrageous increase.

Bridget Conant wrote:
I think the county owes Lakewood a detailed explanation with the data that justifies this outrageous increase.

You can blame the people moving in who are fine paying increased prices for our single family homes. The article states:

"The triennial appraisal, including this year’s, relies on nearby sale prices over the last three years."

The last three years have seen an insane jump in sales prices here. Homes that were going for $100k a few years ago are selling for over $300k. There is a new home going up on Woodward that is listing at $600k. And I'm sure they will get it, if they haven't already.

Property taxes should be capped to some sort of rolling average. Or maybe a larger tax when you sell your house based on higher values. Just because our house goes up in value doesn't mean that is cash we have on hand.

Lakewood homes are selling for 50% to 60% more than they were 5-6 years ago.

Lakewood Home Values per Redfin (click here)

I took a class in taxation decades ago and what Matthew is referring to is the so-called "wherewithal to pay" principle. Real estate taxes are a heinous exception to it, especially given a 27% increase and particularly when coupled with Lakewood's extraordinarlily high tax rate -- double the Ohio average and 3.5 times the nationwide median. I think we're headed where Shaker Heights is now. Shaker homes lost 11% of their value compared to the rest of the county.

Remember too that we're comparing home value to "dollars." Compared to the S&P 500 and to most commodities Lakewood home values have tanked.

These ballooning tax bills are going to price a lot of longtime homeowners out of town.
To be candid, it's hard to argue that we're getting value for the money.

Tim Liston wrote:Lakewood homes are selling for 50% to 60% more than they were 5-6 years ago.

Lakewood Home Values per Redfin (click here)

I took a class in taxation decades ago and what Matthew is referring to is the so-called "wherewithal to pay" principle. Real estate taxes are a heinous exception to it, especially given a 27% increase and particularly when coupled with Lakewood's extraordinarlily high tax rate -- double the Ohio average and 3.5 times the nationwide median. I think we're headed where Shaker Heights is now. Shaker homes lost 11% of their value compared to the rest of the county.

Remember too that we're comparing home value to "dollars." Compared to the S&P 500 and to most commodities Lakewood home values have tanked.

Tom, you are one of my favorite Deck authors!

The commodities markets are too sophisticated for me to invest in, however, in my profession I have structured an electric power purchase hedge for a major factory. So I am not ignorant.

My point is that I have never ever considered my home to be an "investment" in the sense that you indicate as a basket of equities or commodities trading on the U.S. exchanges.

It is where I sit in my armchair and read books. An equity position in, let's say GM, does not afford me that or even a backyard where I can plant trees.

Filmmakers have addressed this observation humorously in "The Money Pit" and "Mr. Blandings Builds His Dream House."

Regardless of taxation, I cannot keep my head dry without spending oodles of "dollar" to maintain my home annually. They are all money pits from day one!

Mark, one point I’m trying to make, and it’s arcane and perhaps I’m expressing it poorly, is that Lakewood homes (and their taxes) have increased 27% only when compared to a US dollar. But most tangible assets have also increased substantially in value relative to the dollar, not just homes. Stock, farmland, metals, you name it. Oil is on a tear. Heck even used cars have appreciated in price as fast as Lakewood homes. Tried to buy one lately?

But here’s the rub. Most people’s wages are paid in US dollars, not in bushels of soybeans or kilos of copper or acres of farmland. And wages have not kept pace. Which makes the 27% increase that much more tragic. I understand it but perhaps should not dwell on it, because my main point is this….

Lakewood homeowners should not be expected to cough up $8000 each and every year in taxes for the right to live in a $250,000 Lakewood home. That’s insane. Most people simply don’t have that kind of money to spare. And those who do still can look elsewhere for a place to live and send their kids to school. Mike is right. We’re hitting a point at which our property taxes are simply going to drive people away.

The “laptop class” can live anywhere. A $250K house in Lakewood ($8000 a year taxes). Or a $500K house in Asheville, NC (only $3800 a year). Or a $500K house in Ft. Collins, CO (only $2500 a year). The last I heard, Boise, ID is the fastest growing big city in the country. You can buy a $500K house there and pay only $3500 a year in property taxes.

If Lakewood was a state it would have by far the highest property taxes in the country. See Property Tax Rates by State (click here)

(((PS to Mark. Investing in commodities doesn't have to be difficult. Check out ticker symbol COMT. It’s an ETF so it’s easy to buy/sell/own. COMT holds a broad variety of commodity futures and tracks the GSCI commodity index. I’ve owned a bit of it for some time. About six months ago started adding to it relatively. Glad I did, so far at least.)))

Tom, I heartily agree with your fundamental premise!

The burden of real estate taxes on Lakewood homes is an incentive to relocate to lower tax environments and a disincentive to remaining in Lakewood.

Both can be motivators. Retirees may find both appealing. As will others.

Thank you for taking the time for your additional explanation.

According to this article (click here) every home on my street increased in value by just a shade over 19%. All 25 of them, 19% on the nose. And the houses on the streets on either side of me. 19% exactly. It’s possible to search an entire street all at once just by leaving the street number blank. One exception only at 0%, no idea why. I wonder who they know….

(((BTW some cleveland.com articles including this one are now behind paywalls. No surprise there. But if you use the Brave browser (http://www.brave.com) instead of Chrome/Firefox/Safari it will defeat the paywalls and let you read the articles anyways. I use Brave pretty much exclusively these days, mostly because Brave is better at ensuring my privacy.)))

Tim, this is not a property tax question.

How do you think we should pay for news reporting?

michael gill wrote:Tim, this is not a property tax question.

How do you think we should pay for news reporting?

To push the train further off the track, most - or most of the paywalls I encounter - insist on a subscription when all I want to do is read an article.

michael gill wrote:Tim, this is not a property tax question.

How do you think we should pay for news reporting?

I understand that reporters and journalists need to be compensated, no argument there.

The old model, which relied on advertising revenue, somehow isn’t working? Which I don’t understand considering how internet “clicks” are monetized. Where’s that advertising money going?

My biggest concern in all of this is access to information is being restricted. NYT, WaPo, Atlantic, and so many other sources keep important articles and critical information behind paywalls, limiting access.

Our democracy is dependent on a “free press” and I mean free in every sense of the word. Right now, especially, we need many sources, many “legitimate” sources to counter all the crap out there.

If Fox and OAN and such are all you have, no wonder people believe all this crazy shit out there.

Bridget Conant wrote:

michael gill wrote:Tim, this is not a property tax question.

How do you think we should pay for news reporting?

I understand that reporters and journalists need to be compensated, no argument there.

The old model, which relied on advertising revenue, somehow isn’t working? Which I don’t understand considering how internet “clicks” are monetized. Where’s that advertising money going?

My biggest concern in all of this is access to information is being restricted. NYT, WaPo, Atlantic, and so many other sources keep important articles and critical information behind paywalls, limiting access.

Our democracy is dependent on a “free press” and I mean free in every sense of the word. Right now, especially, we need many sources, many “legitimate” sources to counter all the crap out there.

If Fox and OAN and such are all you have, no wonder people believe all this crazy shit out there.

It is a complicated subject, BUT much of the downfall of NEWS MEDIA was brought on by themselves.

Followed by Wall Street and Non-profits slowly administering the death blows.

I will give four simple examples, that you will see everywhere, and begin to understand mostly self inflicted.

Let's start with the easiest Wall Street. In the old days media and news media was owned by families or large corporations. This allowed them to work at about a 3-5% profit margin. No one was getting rich, but many saw it as a good way to live and give back. Wall street came in and demanded 15% then 20% then 40% and the only way to do it was cut high priced reporting and reporters.

Example 2 - Self inflicted, as this was getting to be tough times, this thing called the internet popped up and took off. Media companies believing this was a way to make their bottom line better embraced it. After all this was going to cut one of their major expenses, PRODUCTION (paper, studios, desks, insurance, benefits, etc.) Of course they were giving up there biggest advantage, PRODUCTION VALUE, editors, legal departments, professionals, etc. But in the race to the bottom they did not care. Soon media became reporting on internet posts, and even worse saying to people, "Go to our internet page at," just going to commercial break. Again companies thought they would control the net, and the ad revenues. Why would you advertise with a company that directs people away from your ads?

Example 3 - Internet BS - In the early days media companies sold internet ads with outright lies and promises of riches. Again they thought they would control the medium. Of course by giving up high end production, they just became another stop on the endless internet. As the mosh pit of content got larger, the deepness got shallower. Watch a 30 minute local news broadcast, almost no local news that can't be covered from a desk or from home. Why pay to be there?

Example 4 - Non-profit media, sounds harmless enough, but it should be read as "Church Owned Media" and certainly not news. Non-profits especially those like the Cleveland Foundation for one are more into social engineering than actually caring about your life what alone real news. But the one thing they have learned is bad coverage slows down their donations, good coverage increases them. So in starting into the media business they can control, the flow of knowledge in a community, and even how people feel. No better example of this than CLE, errrr no "The Land" errrr no The Plum, errrrrr Cleveland is tough... Meanwhile the county shrinks as13 people a day, but you read, "Downtown Cleveland is the fastest growing part of the county." You read, Sherwin Williams new transparent building, not that the County Land Bank took over 60 more properties. All you get is fluffy news. Right now non-profit media is shoving everything down you throat from food to gentrification, err positive development for the wealthy. Who in turn can give to the non-profits.

The way to save media, realistic expectations, dedication and an earnest need to understand the things around us.

This rush to the fluffy bottom serves no one but the check writers who are desperate to control.

But what would I know?

.

I wanted a Snickers bar.

It was behind a paywall.

I wanted some potatoes. They were behind a paywall.

I wanted a house.

It was behind a paywall.

michael gill wrote:I wanted a Snickers bar.

It was behind a paywall.

I wanted some potatoes. They were behind a paywall.

I wanted a house.

It was behind a paywall.

Sorry, those material items do not equate at all to information, the knowledge we need conduct ourselves through a pandemic and maintain a viable democratic government.

Knowledge is power.