Housing market slips, valuations rise

Md. homeowners see biggest assessment increase in 25 years

December 30, 2005|By LARRY CARSON | LARRY CARSON,SUN REPORTER

Even as the housing market shows signs of softening, 711,000 assessment notices being mailed today to one-third of Maryland's property owners represent the largest increase in values since the current system was devised a quarter-century ago.

"It's even higher than last year," said Howard Levenson, Howard County's assessment supervisor, who had declared last year's increases the largest he'd seen in more than 30 years on the job.

The average one-year increase statewide was 20.1 percent - one-third higher than last year and more than double the average three years ago when these same areas were last revalued. Worcester County, where Ocean City is located, led the state with a 26.3 percent one-year increase, while economically depressed Allegany County trailed behind at 7.1 percent. In the Baltimore metropolitan area, Anne Arundel County led with a 22 percent average one-year increase, while Baltimore City was last with a 15.2 percent average increase.

Three years ago, when these same areas were last inspected, assessments rose an average 8.8 percent statewide for one year.

Maryland physically inspects one-third of the state's properties each year and phases in the changes over a three-year period. This process protects homeowners from large single-year property tax hikes but also guarantees local governments a steady, predictable flow of revenues. Assessment caps imposed on a county-by-county basis further limit sudden property tax increases.

The new assessments are based on inspections conducted during 2004 and the first half of 2005, when the local real estate market was especially robust.

"All indications are that we have seen the peak as far as the rate of growth" in assessed valuation, said John Hopkins, associate director for applied economics at the Regional Economic Studies Institute at Towson University, though prices could still continue their upward climb at a more moderate pace.

With the federal government sending thousands of defense-related jobs to Maryland, real estate - especially in Baltimore - should remain in demand, said Katie Grove, president of the Greater Baltimore Board of Realtors. She said she is looking forward to some market leveling. "However the market is still good in our area," she added.

The big cost driver, said Maryland Home Builders Association President Linda Veach, has been the scarcity of land available for building in Maryland.

"That's the major cost of housing," she said, explaining that a house her firm, Bob Ward Builders, is building in Bel Air costs over $100,000 more than the same house in Red Lion, Pa.

In Worcester County, according to assistant supervisor of assessments Terri Smith, people from New Jersey, Pennsylvania and Maryland are paying up to $1 million and more for vacation homes and condominiums as the beach town replaces older buildings with expensive new units.

"We are very pleased with the evolution of Ocean City," said Mayor James N. Mathias Jr.

In Baltimore, where the southern third of the city, including the waterfront and harbor areas, was revalued, the increases cheered budget director Raymond S. Wacks.

"It's something we're happy about because it means the city is on the path to recovery," he said. "The city's assessable base is growing, something it didn't do in the 1990s."

Owen C. Charles, assessments supervisor in the city, said "most of the increases are basically around the hot spots" like Canton, Fells Point, the Inner Harbor and Federal Hill, though modest homes in Brooklyn and Westwood appear to be increasing, too.

Residential values continue to lead commercial ones, with homes worth 67.4 percent more over three years compared to 37.4 percent for business properties. But C. John Sullivan Jr., director of the state Department of Assessments and Taxation, noted that commercial values rose more steeply than residential ones in Queen Anne's County, where vigorous business growth occurred on Kent Island, and in Somerset County, where development is strong along Route 13.

"We don't see the slowdown in values. We're still seeing sales coming in here with tremendous increases," Sullivan said. At the same time, Sullivan said, "some of the sharpest increases across the state were for properties valued at less than $300,000," as buyers search for affordable dwellings.

The steep escalation of prices in recent years has even veteran tax protesters baffled.

"I don't know where these people are getting this money to buy these houses," said Harold Lloyd of Baltimore County, a former state assessment office employee who counsels taxpayers upset about their assessments.

A Sun review of data from the state Department of Assessments and Taxation at midyear offered a clue. It showed that two out of three houses bought in Baltimore City were purchased by investors who did not intend to live in them and were banking on price increases.

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