Baltimore's property values are growing faster than anywhere else in Maryland, while the rate of increase in wealthy Montgomery County trails the state, according to 728,185 reassessment notices to be mailed today by state officials.
The topsy-turvy results showed the smallest percentage increases in the state's most prosperous places -- such as Montgomery and Howard counties -- while areas that often lag economically saw much greater gains, despite a sluggish real estate market.
"Anyone who's been paying attention to the city of Baltimore has watched it become a much more desirable place to live," said Sterling Clifford, a spokesman for Mayor Sheila Dixon, referring to recent news of a slight increase in the city's population after decades of population declines.
State officials and economists said other factors could be at work, too.
"Some of these regions peaked before others," said C. John Sullivan, director of the state Department of Assessments and Taxation. Despite the slowing real estate market, he said, assessments are usually still lower than actual sales prices -- and state and local caps limit tax bill increases for most homeowners.
In November, a Metropolitan Regional Information Systems report showed, the number of homes sold in the Baltimore metro area was down 30.8 percent from November of last year, and the number of days a home remained on the market shot up 40 percent. Despite that, the average sale price dropped less than $1,300.
"Obviously, these assessments are a reflection of the past and not the present," said economist Anirban Basu, referring to the fact that these same areas were last revalued in 2004.
Cathy Werner, president of the Greater Baltimore Board of Realtors, predicted a better market in 2008 than this year, including in Baltimore.
"The city is a great place to buy right now because of the inventory," she said, as long as sellers keep prices realistic.
"That was our problem last year. Sellers had had four years of 'name your price,' and that was not the case anymore."
Room to grow
The assessment news is particularly good for the city, where the average annual increase in value was 25 percent -- more than four times Montgomery County's 5.4 percent annual growth in expensive communities such as Potomac and Chevy Chase.
"Baltimore City has a lot of room to grow," said Daraius Irani, director of applied economics at RESI, Towson University's research arm. In such places as Montgomery County, "prices ran up fast and furious," attracting speculators, and now there is little room for further appreciation.
Most of the Baltimore metropolitan-area counties were closer to the statewide average of 11.1 percent growth per year for three years. That's significantly lower than last year's average annual increase of 18.7 percent, or the peak 20.1 percent jump at the end of 2005. State assessors examine one-third of each jurisdiction's properties each year, then phase in the increases.
Howard County's increase was 8.1 percent for the rural third covered by these notices, while Baltimore County's central section -- from the city line to Pennsylvania -- showed a 10.9 percent increase. Northwestern Anne Arundel's values were up 11.6 percent, while Harford's central region was up 12.9 percent and Carroll County's northeastern third rose an average 12.5 percent.
"We're still raising the assessments, but it's the lowest [increase] in three to five years," said Howard Levenson, assessment supervisor for Howard.
"The bubble is clearly over," said Raymond S. Wacks, Howard's budget director. Three years ago, this same third of Howard County saw values go up an annual average of 16.2 percent -- double this year's average.
Regardless of the rise in values, homeowners are mostly protected by the Homestead Tax Credit program -- assessment caps that limit how much of a home's higher worth is subject to property taxes for owner-occupied homes.
Local leaders said the assessment caps limit revenue increases and, more important, protect longtime residents from being taxed out of their homes.
"It creates stability in the long term," said Keith Dorsey, Baltimore County's budget director, who explained that the county can count on slightly more than a 4 percent boost in property tax revenues each year.
Anne Arundel County Executive John R. Leopold said he supports his county's 2 percent assessment cap, because many older homeowners live in houses "that have appreciated in value, but they have no more income coming in." He is pursuing other new forms of revenue, he said, such as higher impact fees on developers and more federal funding for improvements around expanding Fort Meade.
Given the contrast with repeated news accounts about the national slowdown in real estate sales, Basu predicted a higher number of assessment appeals in 2008, while Sullivan said he expects appeals to remain low.
Harold Lloyd, a former state tax official who for years has helped taxpayers appeal their assessments, agreed with Basu.
"The average homeowners are going to feel that the market is down, so the [home] value should not go up," he said. A change in the law governing the Homestead Tax Credit program will also help provoke appeals, he predicted.
Small rise in big price
In Montgomery County, which three years ago saw a one-year value increase of 21.7 percent in these same areas, this year's modest increase was a sharp contrast.
"We're dealing with some of our higher-end properties," said John W. Brennan, supervisor of assessments in Montgomery. The figures don't mean properties in central Baltimore are worth more than those in Potomac, however.
"In Montgomery County, we have higher-end, and then we have super-higher-end," Brennan said. The former group's homes might sell for about $1 million, "which is quite common," he said. The "super" category he defined as above $2 million. "They don't worry about mortgages," he said of those owners.
The section of Baltimore City examined for this year's revaluation concentrates on a central swath, including areas seeing significant rehabbing of older homes such as Woodberry, Charles Village and Patterson Park, as well as new homes going up east of the Johns Hopkins Hospital, officials said.
The growth in values can be misleading , said Owen C. Charles, state supervisor of assessments for Baltimore City, because of a surge in economic activity in that third of the city. "You have increases in newly developed areas," in sections of the city once dominated by rentals and older, lower-priced homes, he said.
The Homestead Tax Credit law limits the taxable portion of higher values to no more than 10 percent. But 19 of the state's 24 local governments have adopted lower caps that apply annually to their local property taxes, including a zero cap in Talbot County, 2 percent in Anne Arundel, 3 percent in Prince George's, 4 percent in Baltimore City and county, 5 percent in Howard, 7 percent in Carroll and 9 percent in Harford County. The caps apply each year to owner-occupied homes on 1 acre or less, but are suspended for one year when a home is sold.
The five counties using the 10 percent cap are Montgomery, Calvert, Allegany, Somerset and Wicomico.
Sullivan said 476, 388 of the notices mailed will go to owners protected by the caps, but recipients must now apply for that protection to continue receiving it past 2012. The tax credit was previously automatic.
Each notice includes an application for the Homestead Tax Credit, which can be mailed in or filled out online at www.dat.state.md.us. State law was changed this year to help eliminate scofflaws who get the credit for rental property or for more than one home.
Sullivan said this year's assessment form explains the Homestead Tax Credit program in red ink, to make sure people understand how it works and what to do to keep receiving its benefits.