Your Home Increasing in Value – Not a Good Thing

if your payment went up signifacntly in a short period of time, you may be in ARM adjustable rate mortgage and might be better served to consider refinancing while the getting is still good.
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Linkat,

Two thoughts,

First, we're seeing a similar problem in our community where long-time residents who are living on a fixed income are being taxed out of their homes. We are a small community with private wells, private roads, no park district, library district or community center. In the past few years we have been discovered by developers who purchase our modest homes that sit on large properties and build multi-million dollar McMansions in what was woodland. As new folks move in to their McMansion they want public services such as water, parks, libraries, sidewalks, and on and on and on. The property values are skyrocketing and the tax assessments are skyrocketing along with them. Not only are the assessments increasing, the cost of the new services are added to the tax bills as well. It's a big problem here. Most of us could no longer afford to buy our own homes!

Second, I think your assessment might be wrong. Assessed values should reflect a certain percentage of the fair market value of the house. If no homes are selling at or near your assessed value, you should get relief. Do you have last year's tax bill? Is it the assessed value that has increased or are there other line items on the tax bill that have gone up? We recently approved a school bond and it showed up on this years tax bill as a big increase.

Linkat - You can challenge your assessment - they are often incorrect.

Otherwise, I think you are right about values. Our taxes have doubled in the last 8 years because the area is hot, prices are high and developers are only building "starter castles" with big price tags.
A few of my original neighbors have moved to states like TN, LA and MS because they could cash in on their home's increased value, buy a new house with cash and pay much lower taxes.

Fortunately for us J_B, we can afford it, although it will be tough. We will have to tighten our belts somewhat; however, we will not be forced to sell our home. I really feel for those that are forced to sell their homes just because taxes are so high they cannot afford to live there.

I do believe that they are going to adjust our home values. My take on it is that the same builder that built our condos recently built in another area of the same town. This area is a much more expensive spot - right on a Marina and the homes and condos built were much larger and significantly more expensive. The assessor could have gotten confused between the two locations. In speaking to her, she did seem sincere in reviewing the information we sent, especially since she received huge amounts from all the people living in our complex that were also re-assessed this year.

I have the tax bills, and it is definitely the assessed value that went up - tax rates actually decreased slightly. There were no other line items on the bill - such as you state with certain services or anything.

Theloandoc - not sure if Mass bases their assessed values in the same way. The assessor actually told me they base it mainly off what other homes in the area have been selling for - or fair market value. And as all the owners that were re-assessed this year had the same issue, I doubt it has anything specifically to do with a type of mortgage.

I agree Greenwitch that values have gone up and I would expect my taxes to increase, however, the amount it increased is ludicrous. The town I live in does have higher than normal taxes any way. I know that next time I move, I am definitely going to consider the tax rates.

BBB
bm

i had a friend who challenged their assessment and won, reducing their taxes by about a third. amazing. we thought about it, but since they assessed us at round about what we paid (seeing as real estate assessments gov't or otherwise are supposed to be fair market value) we didn't fight. i would fight it esp. if they have no basis to go on as you said. good luck!

California has the so-called Mello Roos provision, which imposes the cost of new infrastructure on buyers of new homes, so assessments don't escalate as long as home ownership doesn't change hands. It's why Warren Buffett pays less tax on his Malibu property than on his Omaha property. On the other hand, each time a house is resold, it's reappraised in line with market values, so in effect new homeowners subsidize longterm home owners.

Housing bubble, not a pop, just a hiss
August 8, 2005
That Hissing Sound
By PAUL KRUGMAN
New York Times

This is the way the bubble ends: not with a pop, but with a hiss.

Housing prices move much more slowly than stock prices. There are no Black Mondays, when prices fall 23 percent in a day. In fact, prices often keep rising for a while even after a housing boom goes bust.

So the news that the U.S. housing bubble is over won't come in the form of plunging prices; it will come in the form of falling sales and rising inventory, as sellers try to get prices that buyers are no longer willing to pay. And the process may already have started.

Of course, some people still deny that there's a housing bubble. Let me explain how we know that they're wrong.

One piece of evidence is the sense of frenzy about real estate, which irresistibly brings to mind the stock frenzy of 1999. Even some of the players are the same. The authors of the 1999 best seller "Dow 36,000" are now among the most vocal proponents of the view that there is no housing bubble.

Then there are the numbers. Many bubble deniers point to average prices for the country as a whole, which look worrisome but not totally crazy. When it comes to housing, however, the United States is really two countries, Flatland and the Zoned Zone.

In Flatland, which occupies the middle of the country, it's easy to build houses. When the demand for houses rises, Flatland metropolitan areas, which don't really have traditional downtowns, just sprawl some more. As a result, housing prices are basically determined by the cost of construction. In Flatland, a housing bubble can't even get started.

But in the Zoned Zone, which lies along the coasts, a combination of high population density and land-use restrictions - hence "zoned" - makes it hard to build new houses. So when people become willing to spend more on houses, say because of a fall in mortgage rates, some houses get built, but the prices of existing houses also go up. And if people think that prices will continue to rise, they become willing to spend even more, driving prices still higher, and so on. In other words, the Zoned Zone is prone to housing bubbles.

And Zoned Zone housing prices, which have risen much faster than the national average, clearly point to a bubble.

In the nation as a whole, housing prices rose about 50 percent between the first quarter of 2000 and the first quarter of 2005. But that average blends results from Flatland metropolitan areas like Houston and Atlanta, where prices rose 26 and 29 percent respectively, with results from Zoned Zone areas like New York, Miami and San Diego, where prices rose 77, 96 and 118 percent.

Nobody would pay San Diego prices without believing that prices will continue to rise. Rents rose much more slowly than prices: the Bureau of Labor Statistics index of "owners' equivalent rent" rose only 27 percent from late 1999 to late 2004. Business Week reports that by 2004 the cost of renting a house in San Diego was only 40 percent of the cost of owning a similar house - even taking into account low interest rates on mortgages. So it makes sense to buy in San Diego only if you believe that prices will keep rising rapidly, generating big capital gains. That's pretty much the definition of a bubble.

Bubbles end when people stop believing that big capital gains are a sure thing. That's what happened in San Diego at the end of its last housing bubble: after a rapid rise, house prices peaked in 1990. Soon there was a glut of houses on the market, and prices began falling. By 1996, they had declined about 25 percent after adjusting for inflation.

And that's what's happening in San Diego right now, after a rise in house prices that dwarfs the boom of the 1980's. The number of single-family houses and condos on the market has doubled over the past year. "Homes that a year or two ago sold virtually overnight - in many cases triggering bidding wars - are on the market for weeks," reports The Los Angeles Times. The same thing is happening in other formerly hot markets.

Meanwhile, the U.S. economy has become deeply dependent on the housing bubble. The economic recovery since 2001 has been disappointing in many ways, but it wouldn't have happened at all without soaring spending on residential construction, plus a surge in consumer spending largely based on mortgage refinancing. Did I mention that the personal savings rate has fallen to zero?

Now we're starting to hear a hissing sound, as the air begins to leak out of the bubble. And everyone - not just those who own Zoned Zone real estate - should be worried.