We warned more than a year ago that it might happen, and now it’s happening: After five years of double-digit increases, Northern Virginia property values are expected to increase only one percent this year, according to the Washington Post. The region hasn’t seen a drop in prices yet, as I feared might happen, but that still could come. As Bill Turque reports of Fairfax County:
The number of homes sold in the first five months of 2006 fell more than 20 percent, to 8,232, compared with the same period in 2005, according to an analysis by county staff. Listings of homes for sale have increased more than threefold since May 2005. Houses in Fairfax are now on the market for an average of 56 days, compared with 21 days in 2005. Multiple bids are not as common. And in May, homes sold for 97.3 percent of list price, compared with 101 percent in May 2005.
Fairfax County is wrestling with the implication for taxes. Soaring values allowed the County to cut its tax rate to $.89 per $100 of assessed value, the lowest in modern history, while still increasing the average take from homeowners. Fairfax homeowners are paying an average of $328 more in taxes than last year.
The pain of $328 per year in higher taxes is bearable, I’ve argued, when homeowners can console themselves that their property values have increased $50,000 to $60,000. For years, people could remortgage at lower rates, offsetting the higher taxes, or just borrow against the higher value of their homes. But now the refinancing boom is spent, climbing interest rates make it more expensive to borrow, and thousands of homeowners with Adjustable Rate Mortgages will find themselves paying more. Northern Virginia politicians are facing political dynamite.
