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 Declining Property Values Double the Pain
by Tom Campbell
November 13, 2008
When property values increase, as they have in most North Carolina communities over past years we rejoice in the prospects of gains when we sell our property. But what happens when property values decline, as is currently the case in much of our state?
Some who purchased in the past couple of years may be discovering that their property might not be worth what they paid for it or even what they currently owe, leaving them with the choice of either waiting on the market to rise to the point where they can break even or selling for a loss. Some circumstances preclude people from being able to wait out a bad market.
Another and equally troubling pain occurs when property taxes are assessed on the inflated values instead of on current market values. Taxpayers in Wake, Durham, Johnston and other counties that recently revalued property are facing these circumstances and tax officials report some are angry about having to pay greatly increased taxes on property that isn’t worth what it was appraised for just a few months ago.
North Carolina law requires counties to reassess property at least every eight years, but if they choose this revaluation can be conducted every two, four, or six years. Few counties opt for the most frequent updating because the process is both costly and time consuming. Once your property value is assessed it remains until a new valuation is made.
It is the proverbial double edged sword. In times of declining values, such as now, you might find yourself paying taxes based on a value that is higher than your home is worth. Revenue officials also point out that since assessments are traditionally conducted every eight years there are probably some years in which your home is worth more than the valuation on which you are paying taxes, resulting in a lower tax bill. That doesn’t help ease the pain when assessed values increase as much as forty percent between valuations and property taxes skyrocket. In addition to the increased valuation it is frequently the case that tax rates also increase as the cost of government increases concurrently. Nobody believes public officials who say the increased valuation will result in “revenue neutral” tax bills, meaning a property owner won’t pay any more net dollars. It never happens.
Don’t expect property taxes to be reduced or eliminated. Our cities and counties depend heavily on ad valorem property taxes to fund their basic operations. The irony is that our federal government is spending billions of dollars bailing out large corporations and is now talking about trying to help “main street” homeowners who are struggling to make mortgage payments, but there is no consideration for those property owners who have been paying their mortgages and taxes for many years, but suddenly find themselves overwhelmed by huge property tax increases. This is especially problematic with seniors who have been in their homes many years and live on fixed incomes.
We probably shouldn’t complain, however. Many of our newer residents came to this state because their property taxes were so much higher where they came from. Nonetheless it doesn’t make it any easier when faced with mortgage balances on homes that are greater than the property is worth or property taxes that don’t reflect market value. The pain is real in either instance.
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