Housing Market Slump May Lead to Budget Cuts

The sharp dip in property values that forced Prince William County, Va., into its first spending decrease in 15 years this spring is now lasting longer than officials anticipated - and is looming over preparations for next year’s budget.

Home sales have fallen off 40 percent from June 2006 to June 2007, and appraisal values could fall as much as 8 percent, officials said.

Some feel the bubble has already burst in this Virginia county.

“We’ve really seen the bursting of the bubble,” Prince William County Chairman Corey Stewart said.

“That’s going to affect our budgets for at least two years.”

Because the county heavily relies on property taxes, the current state could force more spending cuts.

“We had hoped that come this spring, things would begin to improve… They have not,” said Chris Martino, Prince William County director of finance. “We’re basically where we were all last fall and continuing to trend down.”

While 732 property sales accounted for $316 million in June 2006, the 456 sales in June 2007 registered just $186 million.

With more than a year’s supply of vacant homes for sale, the average house sits on the market for 106 days, he said.

Martino anticipated a 2 percent drop in property values this year, but new estimates based on soft figures show the decline could quadruple.

“We do not know where it will land,” he said.

It is too early to speculate exactly how the Virginia housing market’s down cycle will influence decisions the board will face in 2008, Stewart said, but it will surely place challenges on fiscal changes.

It will also hold bearing on the many Virginia mortgage holders struggling to make ends meet - and those waiting on the sidelines to see what the market will do before delving in.

SOURCE: The Examiner