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Housing | Inland Empire Housing Market

5. Property Tax Income as Determined at the Time of Purchase

The Inland Empire once more has been at least as hard hit by property tax decreases as Southern California, if not more. In some areas, average property taxes of newly sold homes have more than halved on average from the peak to the third quarter of 2008, the last quarter under consideration in this study (See maps: M7Property Taxes 2006 and M8Property Taxes 2008). As long as house prices fall, this trend will continue with all the implications outlined in the previous section. In short, Inland Empire cities and counties will have to tighten their belts even more than the rest of Southern California, unless other funding sources are made available.

6. Default Risk

The maps from the previous section (map: Coefficient of Variation) and (map: Skewness of negative equity) offer some unpleasant prospects for the Inland Empire. Note that in Section 3 we considered down payments at the time of purchase, while the two maps in this section are based on cumulative equity: the down-payment plus any additions or subtractions to the value due to house value increases or losses since the purchase, but not including any additional borrowing against home equity increases. Recall that for the coefficient of variation map (see map: Coefficient of Variation) light green areas are the safest, while red and especially orange neighborhoods are at risk. In the skewness of negative equity map (see map: Skewness of negative equity), dark green areas are the relatively safest, while red areas are the most likely to see defaults in the future. According to those measures, the Inland Empire still constitutes the highest risk area for future foreclosures, thus home price drops with all its negative consequences are likely to haunt the Inland Empire even more than other locations in Southern California

Summary:

By all measures analyzed in this section, it seems that the Inland Empire will likely underperform any California-wide economic development. This will be the case as long as the link between the housing market and the real economy is substantial enough to pull down the local economy.

Contributors: Johannes Moenius is Associate Professor of Business at the University of Redlands.

Cumulative housing turnover - 2008 3rd quarter
Highest & lowest risers at peak - 2006 3rd quarter
% decline - 2008 3rd quarter
Equity share 2006
Largest Decliners by Income
Largest Decliners and Best Preservers by Income
Tax revenue 2006
Tax revenue 2008
Inland Empire Business Atlas, ©University of Redlands, 2009. Funded in part through a cooperative agreement with the U.S. Small Business Administration. All opinions, conclusions, or recommendations expressed are those of the author(s) and do not necessarily reflect the views of the SBA or the University of Redlands. Site created and maintained by the Redlands Institute.