One aspect of analytics that is getting pushed more is prescriptive analytics. This is where an analyst goes beyond analyzing the past and predicting the future to the place where alternative futures are laid out and the best alternative is prescribed. I’m not there yet when it comes to items I am following, but I think I can make some predictions.
Let’s start with my very local market of housing. I met with a builder on Saturday who mentioned prices on homes in our area are being seen 29% above the most recent tax assessment. This sounds awfully high to me and adds evidence another bubble in housing prices is underway. There is a judgment there that I want to examine:
- when my wife and I bought in 2010, I expected prices to fall a bit but the availability of this particular house was a driver in the timing of our purchase decision
- the tax assessment of the house fell in 2011 and 2012
- the tax assessment spiked upward in 2013 back to the level at which we purchased in 2010
That decrease in assessment in 2011 and 2012 wiped out the 20% equity position we had when we purchased. Then in 2013, it returns with the increase in assessment. In the interim, the tax rate didn’t stay flat. In an effort to maintain their collections, our state and local governments increased the tax rate and we paid more in property taxes in 2013 than we did in 2010. In fact ,we paid 12% more.
Now along comes a report that homes are selling at a pace of 29% above the tax assessment. It is logical to expect the 2014 assessed value will be above the 2013 value and it might be up more than 10%. The conclusion has to be the expectation for property taxes in 2015 will rise by the amount of the increase in assessed value less depreciation. Given the area we live in, the depreciation we have experienced is very small.
My conclusion is to be quite concerned about the rise in property taxes for this year and next. My income is not keeping up with the increased tax burden and the consequence will be reduced savings and reduced spending.