NEW YORK, June 8 Southern California's housing
market appears to be bottoming out after one of the nation's
worst drops and its pattern may be repeated across the
country, Standard & Poor's Ratings said in a report released
But as property-tax revenue begins reviving, cities and
states will face the longer-term problems of paying for their
workers' pensions and healthcare, upgrading roads and bridges,
and dealing with new green legislation.
"In our view, in the longer term, the challenges that
cities and states face are more about liabilities than lower
real estate values," S&P said.
The recent improvement seen in some of Southern
California's housing market partly stems from the slim
recovery in the prices of homes that were bought in the bubble
years -- from 2003 to 2008 -- whose owners were among those
likeliest to default.
These gains must be sustained for the overall market to
recover, S&P said.
"We believe things may finally be looking up in that, even
in the worst housing markets, the slide in home values appears
to have bottomed out, with some markets experiencing their
first bit of good news as recently as March 2010," it said.
For example, median home prices rose 15.8 percent in San
Diego County in the second quarter of 2010. That gain
contrasts with last year, when property-tax assessments were
cut for 216,636 homeowners and business owners, S&P said.
While lower property-tax revenues can open budget gaps for
counties, cities, and schools, these governments have
benefited by using more conservative policies than the private
"Governments aren't out to maximize shareholder value, in
our view, state and local governments exist primarily to
provide essential services such as education, trash
collection, clean water and transportation infrastructure, and
therefore, we believe that they tend to handle their finances
more conservatively and take fewer risks," the report said.
Even San Bernardino County has a "healthy" budget reserve
though 93,000 homeowners lost their homes after the bubble
burst and houses sell for a third of their 2006 prices, S&P
said. Any rebound for this inland county, whose expansion was
depended on luring people from the more costly coastal
counties, "is still well into the future," S&P cautioned.
In Los Angeles County, property taxes are unlikely to
recover anytime soon, but its politicians have a long history
of managing a $23 billion budget and dealing with problems,
from state mandates to a $42 billion pension liability, the
credit agency said.
(Reporting by Joan Gralla; Editing by Jan Paschal)