November tax collections slip, housing softens
(Calif.) Tax collections in November fell slightly below expectations but for the year to date, California coffers are still running $1 billion ahead of estimates.
State Controller John Chiang released his monthly cash report Tuesday that showed income taxes turned out to be the biggest disappointment, failing to meet projections by more than 7 percent or $259 million.
Sales taxes were also down in November by 3.7 percent or $103 million when compared to estimates made in the budget last June.
The one bright spot was corporate taxes, which were a stunning 205 percent above projections or $164 million – a carryover from the October reading when corporate collections outstripped estimates by more than 1,000 percent.
Chiang said in a statement that the report shouldn’t be considered as a harbinger of an economic slowdown.
“California is experiencing a solid post-Recession upswing, which has brightened the State’s revenue picture,” Chiang said. “However, while the timing is unpredictable, history reminds us that booming economic times are always followed by painful lows. It is therefore critical for the State to take advantage of this window to smartly manage long-term fiscal risks such as deferred spending on critical infrastructure and unfunded retiree health care.”
In related economic news provided by the controller, analysis of the state’s housing market suggests 2014 will close with sales of single family homes falling at least 8 percent below last year.
Leslie Appleton-Young, vice president and chief economist for the California Association of Realtors, reports that between 2009 and 2012 about 55 percent of households could qualify to buy a median-priced home. That number has since fallen to about 30 percent during the third quarter of 2014.
Today, homebuyers need to earn at least $95,000 a year to qualify for the purchase of the state’s median-priced home, now set at $467,700, she points out. Under such a scenario, a buyer would need that much income to cover a monthly mortgage payment of $2,370 including taxes and insurance, assuming a down payment of at least 20 percent and an interest rate of 4.23 percent.
To evaluate the market conditions, the realtors’ association uses an affordability index based on income, 20 percent down payment and interest payment on a home loan.
The association reports that the affordability index hit its highest level during the depth of the recession – the third quarter of 2007 – when only 11 percent of households could afford a median-priced home set at the time at $600,000 – a figured that quickly diminished in a flood of foreclosures and fire sales.
During the past two years, prices have rebounded before slowing earlier this summer – a pause that can at least in part be attributed to rising interest rates.
Appleton-Young noted that when the Federal Reserve announced last summer its intention to begin easing its bond buying program – used to stimulate the economy since 2007 – interest rates climbed dramatically and while the rates have settled back some, the cost of borrowing money remains a barrier especially to first-time buyers.