Property tax revaluation
The N&O is reporting today that Durham County is getting ready to mail out tax notices reflecting the new assessed values of property in the county.
We've talked about this in the past, mostly in the context of the transfer tax debate. NC law requires that property revaluations be "revenue neutral," so that the increase in value of property over time between assessments is compensated for by a lowering of the tax rate.
This, however, just strikes me as intuitively wrong:
It's been 7 years since the last assessment, during which time the real estate market in the rest of the country has gone absolutely nuts. Durham may have escaped some of the worst excesses of that, but residential properties are up only 24% over 7 years? That's a shade over 3% a year after compounding. Which simply doesn't jibe with anectdotal reports of home sales that i've been hearing.
I can only think of a couple of reasons for this. One is that there's a much greater number of new units in the tax base than i thought, and that most of these were already assessed at their current value. This would mean that new construction has been much higher in the last two years than in the previous 5. I don't know if that's the case. A second is that the assessment actually caught some of the recent housing market downturn. My real estate friends keep telling me, though, that Durham hasn't been affected by that so very much.
Other reasons i can think of are sheer speculation, and i don't feel like printing them, but feel free to explore your imaginations in the comments.
What i will say is, if you live in a neighborhood that's appreciated more than 30% over the past 7 years, be prepared for some sticker shock when the new tax bills come out.
UPDATE: Obviously, the simplest explanation is that, on average, property values in Durham have only increased by 24% over the past 7 years. But that would mean large chunks of town have seen property values fall in order to balance out the increases in other parts of town. I know there are major depressed neighborhoods, but is that enough to counterbalance the increases in value seen elsewhere?
We've talked about this in the past, mostly in the context of the transfer tax debate. NC law requires that property revaluations be "revenue neutral," so that the increase in value of property over time between assessments is compensated for by a lowering of the tax rate.
This, however, just strikes me as intuitively wrong:
The value of property in Durham County will rise an average of 30 percent next year under the county's recently concluded revaluation, officials said Monday.
Residential property values alone rose an average of 24 percent.
The 30 percent increase covers all property in the county including commercial and industrial.
It's been 7 years since the last assessment, during which time the real estate market in the rest of the country has gone absolutely nuts. Durham may have escaped some of the worst excesses of that, but residential properties are up only 24% over 7 years? That's a shade over 3% a year after compounding. Which simply doesn't jibe with anectdotal reports of home sales that i've been hearing.
I can only think of a couple of reasons for this. One is that there's a much greater number of new units in the tax base than i thought, and that most of these were already assessed at their current value. This would mean that new construction has been much higher in the last two years than in the previous 5. I don't know if that's the case. A second is that the assessment actually caught some of the recent housing market downturn. My real estate friends keep telling me, though, that Durham hasn't been affected by that so very much.
Other reasons i can think of are sheer speculation, and i don't feel like printing them, but feel free to explore your imaginations in the comments.
What i will say is, if you live in a neighborhood that's appreciated more than 30% over the past 7 years, be prepared for some sticker shock when the new tax bills come out.
UPDATE: Obviously, the simplest explanation is that, on average, property values in Durham have only increased by 24% over the past 7 years. But that would mean large chunks of town have seen property values fall in order to balance out the increases in other parts of town. I know there are major depressed neighborhoods, but is that enough to counterbalance the increases in value seen elsewhere?
Since 1949, Durhamites have slept soundly, secure in the knowledge that, in our town, erection can be depended upon. Now, thanks to the power of the internets, we can spread that security all over the world.
17 Comments:
Not sure how reliable this data is, but on Trulia.com, the 5-year trend for Durham is showing almost no appreciation at all, with the last couple of month seemingly wiping out any appreciation made over the previous 4 1/2 years.
By
toastie, at 3:22 PM
Maybe the revaluation was sensitive enough to pick that up, then.
The last revaluation was in 2000; i was expecting to see a 40 - 50% increase in overall valuation since then (6 - 6.5% annual appreciation).
Maybe i'm just nuts.
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Barry, at 3:31 PM
There is a difference between market value and tax value. The increase in sales prices is due to the rise in market value (or what someone is willing to pay). In N.C., the tax value has little or no correlation to market value. Anyone that markets a house 'below tax value' is hiding something - it is likely to be in a less desirable area, or something else is wrong - and is targeting folks that don't understand how the 'system' works.
N.C. is different than other states where tax and market values are lock-step.
Hope this helps.
SB
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Anonymous, at 7:28 PM
i don't know that it's fair to say "little or no correlation."
There's supposed to be a relationship between the two. One of the reasons for revaluing property every so often is to adjust for changes in market value between different parts of town, and also to bring older areas that are appreciating into line with newer, higher priced areas (and conversely, if older areas are not keeping up with appreciation, their taxes can be decreased.)
Agreed that the results often don't match up with what the market says a property might be worth, but i think that's a flaw in the system, not the intended result.
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Barry, at 9:36 PM
I'll say they don't often match up -- I bought a house in Forest Hills for $209,000 in 1997 (it was huge, but needed a lot of work) only to have the tax office try and tell me it was worth $465,000 three years later. I put it on the market, where it sat for over a year at $300,000 and just under, thanks to 9/11 and finally went for $265,000 with that massive tax valuation and bill attached. The appeal was still winding its way through the system when I finally unloaded it.
As for average appreciation in Durham -- I assure you it varies wildly according to neighborhood and, as is the case throughout Durham, even a block can make a huge difference. I don't have much confidence the tax appraisers will pick up on those nuances.
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Anonymous, at 8:45 AM
You laughed at me when I told you Durham's rep would hurt the tax base. Who's laughing now?
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Anonymous, at 10:22 AM
i'm not sure how a 30% increase in valuation hurts the tax base.
Perhaps on your planet math works differently.
Besides, the biggest problem with Durham's tax base is pretty well known. It has to do with the fact that our largest employer and property owner doesn't have to pay any property taxes.
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Barry, at 11:15 AM
Tax revaluation is an art that tries to be a science. It's easy to plug in numbers for the newer cookie-cutter houses in the subdivisions, and those usually are fairly close to the money.
Where it gets tricky is the in-town urban neighborhoods with the older homes. Renovations and additions get done without pulling permits. There is no way for the assessor to know if or when a house has been updated or how well it was done. Trust me, the "best" of the 70's doesn't set well in a 1928 Italian Renaissance brick two story in Trinity Park.
The paper mentioned that Forest Hills may see an increase of 69%, and Trinity Park may see 63%. I predict that homeowners in Old West Durham and Watts Hillandale will also fall off their chairs. The numbers will vary from block to block and one side of the street to another. For example, Duke & Gregson values should reflect the impact traffic has on marketability and value. Will the new tax values show that? We'll soon see.
I've been selling houses for 27 years so I've seen several revaluation processes. All I know for sure is that my phone will ring like crazy with unhappy clients freaking out and mad as hell. If history holds true, I will spend the next seven years explaining to buyers why the tax values in Durham's urban neighborhoods make no damn sense.
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Anonymous, at 11:53 AM
Renovations and additions get done without pulling permits.
It would be very helpful if city officials would respond to complaints and inquiries about additions (especially those that may bring the residence out of compliance with zoning ordinances) that may not be permitted, rather than simply say, it's not my job to monitor those.
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Barry, at 12:00 PM
There's also lots of properties out on the outskirts of town -- and I mean lots -- that were built relatively recently, and hence are seeing more like 2% annually in a slow real estate market. (Which would be 15% over 7 years.) Some of those saw 5-7% annual increases several years ago, but the market has gotten really soft, particularly with the new suburbs being essentially overbuilt at this point.
It's really been just the old urban neighborhoods, particularly in the north, west, and southwest parts of town, that have taken off like rockets.
By
Unknown, at 3:55 PM
Michel,
You bring up a very good point. Some of these new neighborhoods (that were marketed to buyers who took out 100% loans or subprime loans) are seeing high numbers of foreclosures. I have never seen so many foreclosure listings in the Durham paper. Certainly this is not happening only in Durham; I am seeing stories from all across the country. Las Vegas, Arizona, Michigan, Charlotte, the Outer Banks...and Florida? Fasten your seat belt!
It's true that real estate is local, and overall in Durham we are blessed with a healthy market with good demand. At the same time, there are pockets and price ranges where all is not well. Add to that the impact across the board from people taking new jobs here who want to buy here who cannot sell their previous homes.
The key is balance. If it's a tough time to sell, then it's a good time to buy, and vice versa. The pendulum will swing back in a year or so. For now, if you are a buyer and are flexible about location, you can likely go beat up some builder or seller on price and concessions and get his first born to boot. If you want to be in one of the "hot" neighborhoods, sorry, we are still seeing multiple offers and houses bid up well over list.
Some areas will see low rates of appreciation, some high. The same article that quoted 69% for FH and 63% for TP also mentioned 13% for East Durham.Downtown folks will have heart attacks. The bottom line is what *your* tax bill will be once the new rate factors in.
By
Anonymous, at 6:18 PM
Michael,
I am so sorry I misspelled your name!
Please forgive me!
By
Anonymous, at 6:21 PM
Looks like the new tax values are posted. You can search by address or name.
http://www.ustaxdata.com/nc/durham/durhamsearch.cfm
I ran a couple dozen of the houses I've sold in the past 18 months and the new values are all over the map, some as low as less than half actual market value and a very few a third again as much over. In town or old or new, more misses than hits. Guess they don't look at actual sale data.
I'd bet that those with low numbers will be silent and smug, but those of you with high numbers have the right to appeal.
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Anonymous, at 10:16 AM
I'd bet that those with low numbers will be silent and smug, but those of you with high numbers have the right to appeal.
True, but remember, if you feel your neighbor's valuation is far too low, you can enter that into an appeal process as well. Yes, you can appeal someone else's low valuation.
This goes for commercial structures as well. I'm sure the lawyers for many buildings downtown may be considering an appeal, so watch out. From what I understand, a good majority of tax dollars come from commercial structures. Correct me if this is misinformation.
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Anonymous, at 11:44 PM
interesting points. are you saying that you acn appeal your neighbor's low valuation without appealing your own high valuation?
for example, if your neighbor has built a 900 square foot addition, but never applied for a permit from the city, their home would be valued at the previous size, not the newer size. are you saying that is something that can be brought up?
also, re: downtown values. You have buildings that were vacant 6 years ago now selling for $200/square foot and up as condo space. what were people expecting would happen to their tax value?
finally, going back to anonymous in comment 3, there may be real world differences in manrket v tax value, but the tax forms clearly indicate that the assessed value is based on some analysis of the property's market value.
By
Barry, at 11:08 AM
I bet all those people crying about their value would not be putting their houses up for sale less than the tax value! My value did not change much but you know what I wish I was in an area that went through the roof. That way I could put it on the market and laugh all the way to the bank while relocating to a cheaper town!
Anyway my point is people will whine over ANYTHING. Most people who are complaining don't even know what the value of their property really is. People don't report when they make improvements and I am sure even if they are experiencing "sticker shock" it is not the value it should be if their bonus room or additions were counted. They will probably get caught when they appeal their value. THEN they will have something to cry about!!
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Anonymous, at 6:49 PM
oh and by the way that is ABSOLUTELY FALSE that you can appeal your neighbors property. You can snitch on the them but you can not appeal their prperty for them unless they give you POA or a notorized statement saying they are letting you represent them. I called and asked about it today.
By
Anonymous, at 2:17 AM
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