Nearly all Maryland homeowners due to receive new property assessment notices being mailed today will see a lower assessed value on their houses, reflecting what officials say is the largest decline in the state assessment office's history. On average, residential property values dropped 19.7 percent over three years, according to C. John Sullivan, director of the state Department of Assessments and Taxation.
"I've never witnessed anything like it. It's unprecedented," said Sullivan, who has worked in the state's assessment agency since the mid-1960s.
The decline is the downside of the sharp increases in home values during the housing bubble in 2005-2006, a slide that is expected to continue into next year.
Commercial properties increased slightly in value, however, meaning that overall property values dropped 16.1 percent statewide since 2006, the last time these same areas were evaluated, he said.
Sullivan said 673,221 notices were to be mailed Tuesday, reflecting physical inspection of nearly one-third of the properties and a review of 68,261 sales over the past three years. More than 93 percent of the homeowners who will receive notices in the coming days will see a decline in the assessed value of their property.
"These areas were last valued three years ago, and that was at the top of the market," said Larry White, assessment supervisor in Carroll County, where residential values in the southern third of the county dropped 21.5 percent. The state sets home values, while local governments set tax rates.
Many homeowners will not see corresponding declines in their tax bills come July 1, however, officials warned, unless local governments reduce the tax rate, which is unlikely because they need the revenue.
Many residents are paying taxes on only a fraction of their home's assessed value because the state's Homestead Tax Credit program caps the amount of increase that may be taxed each year. As home prices climbed rapidly early in the decade, owners were protected from sudden jumps in tax bills. While statewide the cap is set at 10 percent, most jurisdictions have lower ceilings.
In Howard County, for example, if a home doubled in value, the owner pays taxes on only 5 percent of that increase yearly. So even this year's 23.1 percent decline in residential value won't produce a tax bill cut.
"Unless they bought a home in the last two years, they will still see an increase in property tax," said Raymond S. Wacks, Howard County's budget director, because the county's cap is suspended on newly purchased homes for one year. That revenue cushion may disappear in another year or two, however, if prices continue to fall, he warned. Anne Arundel officials expect a similar scenario, despite the 19.7 percent drop in home prices from Annapolis north. Overall values, of residential and commercial properties, in Arundel declined 17.9 percent.
"It will have minimal impact" on revenues, Anne Arundel County Executive John R. Leopold said, because of his county's 2 percent annual assessment cap.
Still, the lower assessments and the prospect of lower taxes in the future could help those who haven't been able to sell their homes during the economic downturn, or at least make staying in their homes less onerous.
"If we end up staying here, we'd love to pay less taxes," said Chang Woo Lee, who owns an imposing house on the corner of St. Paul St. and East 39th St. in Guilford that she and her husband bought in 2006, renovated for a year and a half and then put back on the market.
Lee, a cellist with the Baltimore Symphony Orchestra, said she and her husband have already lowered their asking price to $1.68 million, "a lot less than [the $2.3 million] we invested," but plan to go no further.
"This was more of a fun project, but it was a terrible time to be doing my fun project, and I'm paying the price for it," she said, standing in her doorway Monday as the afternoon sun fell on the house's red brick facade.
Baltimore officials are happy prices haven't plummeted as much as in the suburbs. "We've maintained a stable [housing] base," Baltimore Mayor Sheila Dixon said about the average 5.5 percent decline in residential property values across the northern third of the city. "It's good that [prices] haven't gone down a lot." The overall city decline, including commercial values, was 2.6 percent.
Dixon expressed hope that a slots parlor downtown will enable the city to cut its high property tax rate - eventually. The state recently tossed out an application by a group of developers for the city slots license and will start the bidding process over.
City budget director Andrew Kleine noted that with a projected shortfall of $50 million this fiscal year and $126 million in fiscal 2011, "the only bright spot has been property taxes." Assessment increases in the previous two years should keep those revenues going up for now, he said.