June 08, 2006
Homes selling for below assessed value in Greater Boston
During the past three months, March through May 2006, another trend has emerged signaling the end of the housing boom in Greater Boston: nearly one in four single family homes is selling for below assessed value, according to an analysis of sales in 27 of the most expensive cities & towns in Greater Boston conducted by The Real Estate Cafe.
During the three month period, 921 single family homes sold across the 27 towns, including 216 sales below assessed value (see related map) identified in listing data from MLSPin.com. According to an interview conducted with Lawrence Yun, senior economist for the National Association of Realtors earlier this year, "There's no solid data, but it's pretty much well known that the government assessment is nearly always below the market value."
Preliminary data for May 2006, suggests that the number of homes selling below assessed value is rising, even though the percentage may be falling slightly. During March 2006, 71 of the 275 single family homes in the surveyed towns sold for below assessed value. That number fell to 61 in April when 257 homes sold across the 27 towns. However, preliminary sales information from May 2006, show that 84 of 389 homes sold for below assessed value -- an increase of 23 sales or 38% over the previous month.
More important, the year-over-year change raises concerns. During May 2005, only 23 of the 342 single family homes sales in the top 27 cities and towns surveyed sold for under their assessed value. A year later, that percent tripled, rising from 7% to 22%; and the number of homes selling below assessed value nearly quadrupled, rising from 23 to 84 sales.
Opinions vary about whether the rise in homes selling for below assessed value signal a loss in housing value, distressed sellers, or town assessments which have overshot a changing housing market. In coming days, weeks, and months, The Real Estate Cafe will take a closer look at those questions, and discuss which cities and towns are most impacted by this new trend, which towns are improving and which are getting worse. We invite readers elsewhere to let us know if homes are selling for below their tax assessment in your communities, too, in Massachusetts and beyond.
If you're concerned about this emerging trend in Boston, check out these pull quotes from a newspaper article in Ohio entitled "Real Estate Bargains" published on April 30, 2006:
In one Akron neighborhood, 40 percent of the homes sold since January went for less than assessed value.
A nearly equal number of homes in Summit County sold for above and below assessed values in the first three months of the year...
Yun said it would be highly unusual for roughly the same number of homes to be selling below assessed value as above, but a three-month period isn't long enough to conclude that homes are losing value.
Still, the article concludes, "The bottom line is that in Summit County, buyers have a good chance of paying less than the assessed value for a house, depending on the neighborhood they are searching." Will the same become the norm in some neighborhoods or communities in Greater Boston? Don't laugh, LowellDeeds.com summarized 116 market transactions in April as follows:
... 87 sold for more than the assessed value while 29 sold for less. Of those selling for above the assessed value, the average sales price was $265,270 while the average assessment was $218,683, a difference of 48,822. Of those selling for below the assessed value, the average sales price was $249,036 while the average assessment was $310,479 (making the selling price $61,443 below the assessed value).
Here's the serious question, and it's no laughing matter: If properties continue to sell below their assessed value, or worse, drop 10 to 20% in coming years, what impact will that have on the ability of local cities and towns across Massachusetts to finance municipal services, particularly those towns which rely heavily on property taxes? We welcome your opinion as a comment below, or a recording on our listener line: 617-876-2117.
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