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Property Taxes Increase
Even though housing prices in many parts of the country are beginning a downward movement, it is more than likely that property taxes will continue to rise in the near term at least, according to a USA Today analysis of data released by the government.
The overwhelming reason for this seeming conundrum is that millions of homes still have a market value which exceeds the assessed value which is the figure used when calculating the tax rates.
It can be quite irritating to people when they find their house's market value has decreased because the market downturn in real estate, then the tax bill arrives and they see an increase.
The evidence of the slumping market in real estate was reflected in the report by the National Association of Realtors documenting the highest decrease rate in the past 18 years.
These figures compared sales of existing homes in March 2007 with sales from one year previous.
During a time when home values were soaring, legislation to limit the amount of growth in property tax limits seemed like a good idea.
These limits allow assessment values to increase slowly until such time as market value is reached. Most property taxes collected from businesses and homeowners go to fund local governments, covering the cost of such services as police, roads and schools.
Collections during 2006 rose 7 percent over the previous year, topping $377 billion. During the same time period, the median price for home sales increased 1% over all and dropped sharply in many areas of the country.
Many people read about the falling market in real estate and assume that will mean a drop in the price of the tax bill, but the market doesn't affect the tax assessment for quite a long time. Only one small group could benefit from the falling market values.
Those who purchased a home recently while the market was at its highest, then prices dropped may come out ahead in the long run.
This scenario will be the basis for review to see whether a tax cut might be appropriate. Jurisdictions such as Ventura County in California is reviewing the 20,000 home sales which occurred in 2006 in that County to determine if a tax cut is warranted.
In Ventura County, the median home price stands at $567,000 which reflects a 5% decrease from its March 2006 peak. Homeowners who bought at or near the peak in late 2005 and then saw a quick loss in value will likely get a tax cut. Those who have enjoyed double digit increases in their home value can't expect to see a tax cut upon a market dip.
Unfortunately, although the tax increases follow the law and make good sense in a soaring market, when the market turns in the other direction it may be enough to put many homeowners over the edge into foreclosure proceedings. A glut of foreclosure homes on the market will have the effect of further depressing housing prices.