Saturday, August 08, 2009

City of Chicago Real Estate Transfer Tax Hits Record Shortfalls

The City of Chicago just released the dismal 2010 projections for the revenue projected to be generated from the real estate transfer tax charged to buyers and sellers on any real estate transaction closing within the City.

As I have been projecting real estate sales will continue to decline slightly in 2010 with unprecedented record drop in units sold (and money generated). What I have not reported as a prediction is where the City will look to make up the real estate transfer tax deficit. In my opinion, although illogical and certainly open to appeal, the city of Chicago will increase property valuations and real estate taxes will increase for most neighborhoods and properties within the city limits. Of course, they will highlight as they have done for the recently released Lakeview township tax assessments that four of the areas did see an increase. However in Edgewater for example, my three unit property saw an increase of over 10% in valuation regardless of the fact that median pricing has been down consecutively for multi-unit properties was down 15% in from 2008 to 2009 and an adjusted 5% drop over the past three years.

Here is the transfer tax history over the past seven years and the revenue that was generated from the tax:
Real Estate Transaction Transfer Tax (source: City of Chicago)

Historically -     

2002                             $140 million range                     
2003                              $150 million range                      
2004                              $200 million range
2005                              $230 million range
2006                              $250 million range
2007                              $210 million range
2008                              $120 million range                    
2009                 EST      $55 million range                      
2010                 EST      $53 million range

As you can see this money will need to be made up somewhere and you can rest assured homeowners will not like the consequences of the decision.