The AARP newsletter this month has a story about property taxes that seems to share many people's confusion about how the amount of property taxes they pay is determined. Once you understand the system, you realize there is no reason to expect your property tax bill to decline when property values decline or for it to increase when property values increase.
Many people think that local governments budget like they do. First you figure out how much money you have and then you decide how to spend it. But that isn't the case. In most jurisdictions, they start the process by deciding what to spend. Local elected officials decide what services they will provide and at what cost. This becomes the basis for making a levy of taxes against local property values.
1) The meltdown in the financial market had little to do with people getting mortgages they couldn't afford. The collapse of the mortgage backed CDO's was caused by the collapse in the value of the houses which provided the collateral. It turned the mortgages behind the "collateralized debt obligations" (CDO's) into mostly un-collateralized debts. The result was that they went from AAA rated bonds to junk.
2)So what caused the housing bubble and collapse? Many people blame the fed, but don't have the story right. The fed did play a role. By keeping interest rates on Treasury Bonds low, they provided a market for alternative bonds that would pay a greater return.