Area Real Estate Prices Continue Plunge

Will it affect Elk Grove's 2013 budget; Nero playing the fiddle?

The bad news for local real estate continues according to information compiled by Core Logic.

According to data complied by the Santa Ana-based real estate analytics and business services, the home price index continues its steep decline in the Sacramento area. For the period ending May, 2011 prices in the Sacramento-Roseville-Arden Arcade survey area, prices dropped 13.4 percent when compared to May 2010. 

If that weren't bad enough, Core Logic also reported earlier this month that in the same Sacramento reporting area that a full 41.70 percent, or 203,818, of all residential properties were underwater for the first quarter of 2011. On top of that, an additional 5.20 percent, or 25,272 homes were on the verge of going underwater.

While Elk Grove has been able so far to dodge the budget woes of other municipalities, will the continuing real estate turn into a bigger problem for Elk Grove in fiscal year 2012? 

Consider plunging real estate prices. As real estate prices continue to devalue and assessments continue to drop, property tax revenues will continue their years long decline.

More significantly will be the continued weakness of sales taxes. With the continued uncertainty in employment growth and with several rosy assumptions built in the 2012 California state budget, local consumer confidence will continue to lag.

As consumer confidence remains wobbly, big ticket purchases, not to mention the purchase of all that excess real estate inventory in the city, will likely continue to show no or very anemic growth at best. For Elk Grove this is perilous path as the majority of our city's tax revenue is generated by sales taxes. (Makes you wonder if someone in city hall was thinking about allowing the 24 hour Wal Mart to slip through the cracks so they could ensure that five percent "merit" pay increase.)

During her testimony at last month's unveiling the 2012 budget Elk Grove City Manger Laura Gill danced around the subject throwing a few sentences in her presentation about the uncertain prospects of the city's 2013 budget. But as weakness in real estate shows no sign of abatement, as real estate prospects goes, so do the city's finances.

So as Elk Grove celebrates it's eleventh anniversary as a city today, we certainly hope our elected officers and city officials heed the call for continued financial vigilance and don't play the fiddle while things [could] deteriorate.