Md. home values rise fastest in a dozen years

Statewide average at 12%

assessment limits blunt tax increases for some

December 31, 2003|By Larry Carson | Larry Carson,SUN STAFF

Maryland home values are rising at the fastest rate in more than a dozen years, state officials said yesterday as they mailed 645,000 property assessment notices statewide.

The 12 percent statewide average increase for each of the next three years is good news for homeowners, who benefit from their growing investment but are protected from ballooning taxes by the state's system of assessment limits, experts said. Each year, Maryland inspects one-third of the properties in each of its 24 jurisdictions; the new values are phased in over a three-year period.

Baltimore City and Baltimore County showed increases at levels just over half the state average - partly because the areas inspected this year included older and lower-income neighborhoods along with some of the hottest markets.

Baltimore's faster-growing suburbs tended to do better, with a 16.3 percent average increase in Anne Arundel, 13.1 percent in Howard, 12 percent in Carroll, and 11.2 percent in Frederick. Harford County, where the rural north was inspected, increased 8.5 percent.

The rising values have also helped the economy, as homeowners refinanced their mortgages this year to take advantage of lower interest rates. Using home equity to build additions, buy cars or purchase new appliances has softened the recession's effect, according to area economists and real estate agents.

"Not only are they using their cash for [home] additions, but for other big-time purchases. It's a very real factor," said Towson University economist John Hopkins.

Although home sales may slow a bit next year, no one expects the trend toward higher values to stop.

"The rental market now is insane," said Cindy Ariosa, president of the Greater Baltimore Board of Realtors, explaining that few people want to spend what could be a mortgage payment on high rents each month.

"We're hiring real estate agents like there's no tomorrow," said Ariosa, a vice president and regional manager of Long & Foster.

The worry, Hopkins said, is "the have and have-nots" - the trend toward economic housing segregation produced by high prices blocking many middle- and low-income families out of the suburban home market.

Even lower-priced homes are becoming more expensive, though commercial property is lagging, said C. John Sullivan Jr., director of the State Department of Assessments and Taxation.

Despite the sharply higher values, state officials don't expect a repeat of taxpayer protests that erupted in 1990, when values increased 14 percent statewide, Sullivan said.

"We have 112,000 sales analyzed," he said. "Every homeowner out there knows what's going on in their own neighborhood," or can find out on the state department's Web site, And the assessment limits blunt the tax increases, although buyers of existing homes must pay taxes based on the new, higher values.

The surge is being led by high prices for big, expensive homes - especially in Maryland's waterfront areas. Worcester, Montgomery and Anne Arundel counties led the state with average one-year value increases up to 50 percent higher than the 12 percent statewide average.

"It's a beautiful county to retire to," said John E. "Sonny" Bloxom, president of the Worcester County Commission. "The county income tax rate is the lowest in the state, and we have the second-lowest real estate tax rate."

Attracting older couples means no strain on county schools, either, Bloxom said, noting enrollment was down this year by 25 children.

The combined attractions of inland waterways, golf courses and the nearby beaches added up to an 18.5 percent average annual increase in Worcester - a 56 percent boost over the three years until the West Ocean City and Ocean Pines areas are reassessed.

In contrast, economically depressed Allegany County showed the lowest increase, at 3.5 percent.

Maryland limits assessment increases to 10 percent, although several counties have lower limits: 4 percent in Baltimore City and County; 5 percent in Howard, Garrett, Kent, St. Mary's and Worcester; and 2 percent in Anne Arundel and Prince George's. Talbot County has a zero cap.

The difference between Montgomery County's 10 percent limit and the much lower limits in Baltimore City and Anne Arundel County is huge, leaders in those jurisdictions said.

"Because of our red-hot real estate market in the city, you see the assessed value greatly outpacing our ability to take advantage of it," said Baltimore Mayor Martin O'Malley.

"There has been some talk about increasing our cap," O'Malley said, complaining that, in his view, "generally the state underassesses city properties."

Howard County Budget Director Raymond S. Wacks said he likes the predictability of knowing that property tax revenues will increase 5 percent a year but noted that without the limit, the county could have had $14 million more revenue this year.

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