Financial Guest Post
by D. Sherman Okst
As I walked out of the post office with my unopened assessment letter in hand, I thought to myself, “Oh, good, I have been meaning to call them. Prices have been dropping so our assessment needed to be adjusted down.”
One less call to make.
Then I opened the letter.
My house value, according to the appraiser, had gone up 27% in the two years since we had built it.
My first thought was, "Wow, the DOW is down 46%; it is nice to see that something has actually appreciated in value." My second thought was, “If only this were true.”
I mean, seriously, if any asset I owned had increased 27% in value over the past year, I’d be so happy I’d gladly pay taxes on that gain -- especially if that asset wasn’t sinking as fast as every other asset.
But, in reality, prices have fallen and are falling and will continue to fall. I don’t think anyone could tell me that this is ethical, or wise. At the time the decision was made, it may have appeared to be a good idea. It may have been made before people knew that they were in the biggest real estate bubble of all time. I mean, come on, it took National Bureau of Economic Research (NBER) a year to officially call this a recession; by that time we had a few economists calling it a mini-depression so how can you blame someone for not knowing we were in a real estate bubble.
I contribute to a financial website. My blog gets 1.5 million reads per annum. A good bit of what I follow is real estate related. When I saw 27%, I knew something was wrong. Augusta County may be, right now anyway, a little behind the devastation curve that is occurring out there, but the real estate bubble is severe and it is a global event.
Dubai, a very rich nation, is experiencing the burst of its real estate bubble, as is Spain, the UK and every other country I can think of. Overseas workers have driven their Mercedes, some 3,000 of them to the Dubai Airport, parked them and skipped the country leaving their fancy new Mercedes and their condo mortgages behind. Over there they toss you in debtors' prison when you lose your job and can’t pay the mortgage.
My point is this: Augusta County isn’t as rich as Dubai, and even Dubai isn’t insulated from the real estate carnage.
The real estate bubble is a global phenomenon. One of my friends told me Augusta County was insulated. I asked him if he had started taking drugs. Nothing is insulated from this. A year or two behind the lag, maybe. Insulated, no. As severe as California or Florida, no. But Virginia is the 8th worst state foreclosure-wise.
D. Sherman Okst is an Augusta County resident who with his wife runs a small technology business. He reads extensively and studies the economy blogging as "Davos" at the Daily Digest, a column for Chris Martenson, which gets 1.5+ million reads a year. Sherman writes code, was a high school computer science teacher, and ex-airline captain with 15,000 hours and 18 years of service. He was a builder, managed a lumber yard and as a kid was a mate on a fishing boat. Sherman has also had work published in a few magazines.