Did you miss my post about property taxes
Judging by the number of post views it appears that many regular readers missed my post last Sunday, just before the Super Bowl started, explaining how property taxes are calculated.
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If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, feel free to contact me on 617.834.8205 or [email protected].
Andrew Oliver is a Realtor with Harborside Sotheby’s International Realty Sotheby’s International Realty® is a registered trademark licensed to Sotheby’s International Realty Affiliates LLC. Each Office Is Independently Owned and Operated
@OliverReports
Million Dollar sales jump in Essex County
Sales of Million Dollar homes in Essex County in 2014 jumped by 40% and are within 10% of peak levels of 2005/2006.
Of the 34 cities and towns in Essex County, 30 recorded at least one sale over $1 million in the last 15 years; 20 saw a sale over $2 million; and 18 notched up a sale above $3 million.
For those wanting a town by town break down, here is a spreadsheet with all the details: Essex_County_Million_Sales_2000_14_town (more…)
Record Marblehead Million Dollar Sales
In line with my forecasts during the year, sales of Million Dollar houses in Marblehead reached a new record level in 2014.
Over the last 2-3 years we have seen the normal trend in a recovering market. The improvement started at the lower end has since spread upwards, reaching the upper end in 2014.
At the highest level, however, there are substantial variations. On the one hand are modernized, well-protected houses that are selling at good prices. But houses that need substantial work or need completely redoing, or which have weather-related exposures which are better understood with all the publicity given to flood insurance in the last few years, are selling at what can appear to be bargain levels.
Truly at the top end, buyers need to be aware of what they are getting – and they seem to be. (more…)
Would you like to buy Big Papi’s penthouse?
Fear not, Red Sox Nation, David Ortiz is not leaving town.
While Why Jon Lester may not be returning to the Red Sox proved to be correct, Big Papi is retaining his main house in Weston, while selling – at an asking price of $3.2 million – the Chestnut Hill condo he has been using during the baseball season.
According to Mapquest the journey from Fenway Park to Weston takes 19 minutes, so maybe Ortiz has decided that, with retirement looming, he needs to save the $28,000 a year he pays in taxes on his condo. Or maybe not. (more…)
Marblehead’s shrinking housing inventory
Somebody once said a week is a long time in politics. So also in real estate. A week ago the focus was on the limited inventory and the surprising drop in mortgage rates which was giving buyers another great opportunity. (more…)
Essex County Inventory declines
Somebody once said a week is a long time in politics. So also in real estate. A week ago the focus was on the limited inventory and the surprising drop in mortgage rates which was giving buyers another great opportunity.
This week the focus is on snow, snow and yes snow. Just imagine how bad these storms would feel today had not the Patriots won last night? (more…)
How Your Property Taxes are calculated
Third quarter property taxes are due today. This topic interests us all and yet it is probably the least understood aspect of owning real estate. This article will attempt to explain how property taxes are calculated. I will also make an estimate for the tax rate for Marblehead for FY2016.
Let’s get started.
Tax year
The fiscal year (FY) runs from July 1 to June 30. Thus we are currently in FY2015.
What sales are used as the basis for assessments?
Assessments for the FY2015 are based upon values as of January 1, 2014, using data from calendar year 2013 sales.
It is crucial to understand this time lag. Sales occurring in 2014 will be the basis for FY2016 assessments to be announced in late 2015.
How much can taxes increase each year?
Asking this suggests you are familiar with Proposition 2 1/2, which limits the $ amount that can be raised from property taxes to a 2 1/2% increase from the prior year plus any new growth in the tax base such as new construction. Note that Prop 2 1/2 does not apply to debt exclusions or general overrides. And note also that this limit applies to the overall taxes collected, not to individual tax bills.
Click here for a brief explanation of Prop 2 1/2 on the Marblehead Town website.
Now let’s show how Marblehead’s FY2015 tax rate was calculated. Here’s a table:
The starting point is the amount of the levy for the prior year, i.e. FY2014, of $52.46 million. To this is added the allowed 2 1/2% increase and also new growth, taking the total to $54.1 million. Now add on debt exclusions of $4.9 million bringing the total levy for FY2015 to just over $59 million.
For FY2015 the total assessed value of all property – residential, commercial and personal – is $5.3 billion. Divide the tax levy, $59 million, by this $5.3 billion, and the result is a tax rate of $11.08 (per $thousand).
FY2016 Tax Rate estimate
In January this year the Town Administrator presented the FY2016 Financial Outlook to the Board of Selectmen (see AAA Marblehead). This contained projections for the tax levy for FY2016 as follows:
Now we know how much tax needs to be raised. The tax rate will be calculated by dividing this number by the Assessed Value of all real estate for FY2016, i.e. based upon sales that occurred during calendar year 2014. In 2014 the median price of a SFH in Marblehead increased by 10% while condo prices were stable. I am going to go with an 8% increase in Assessed Values to $5.75 billion.
This will give a FY2016 tax rate of …….. $10.65 vs the FY2015 rate of $11.08.The only other factor would be any additional debt exclusions approved by voters.
Bear in mind that the tax rate will depend upon the actual Assessed Values for FY2016 and these may well differ from my estimate, but I feel that $10.65 is a reasonable number at this stage.
Are overrides included in the tax rate?
In asking this question of several people I discovered that most assumed that debt exclusions and general overrides were a separate item. They are not. They are included in the tax rate that is announced each year. Here is the breakdown of the tax rate for the last three years with my estimate for FY2016:
What is the difference between a debt exclusion and general override?
Here are some quotes from the MA Department of revenue website:
“An override is a voted increase in the levy limit. The amount of the override becomes a permanent part of the levy limit base.The budgets adopted by town meetings in Massachusetts are affected by the Proposition 2 1⁄2 limitations upon local property tax levies. So-called overrides of these tax limitations,which allow for additional taxing capacity to fund the budget, may only be approved by a general referendum vote of all town residents.”
“A debt exclusion creates a temporary increase in the levy limit to fund the payment of debt service costs for capital projects funded by borrowing. The additional amount for the debt service is added to the levy limit for the life of the debt.”
Thus an override to fund an operating deficit becomes part of the permanent tax levy and increases occur each year from this higher base.
A debt service exclusion is temporary and disappears when the specific debt is repaid.
Marblehead’s FY2016 Financial Outlook stated: ” there is no need to consider any permanent overrides to fund the town’s operating budget. This has been the case now for 10 years.”
What does Marblehead’s debt exclusion cover?
By far the largest proportion (72%) of the FY2015 exclusion of $4.9 million relates to school costs at MHS, Village and Glover. Next at 17% is the Causeway Seawall. The balance of 11% comes from a variety of sources including the new fire truck, Lead Mills, Stoney Brook clean up, and the Landfill/Transfer Station work.
What effect would general overrides have on the tax rate?
Marblehead’s annual budget is around $70 million (property taxes contribute about three-quarters of the total revenue raised). What if MHD had a budget shortfall and asked residents to vote for a $1 million override? The next table shows the impact if this were to happen for three years in a row:
While it is highly unlikely to impossible that this would happen in Marblehead for a number of reasons, you can see the impact sustained deficits could have on a town’s tax rate.
Conclusion
Low tax rates don’t just happen: they are the result of wise and prudent financial management by a town and a concerned and involved citizenry. In Marblehead we have both.
GO PATS !!!!!!!!!
If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, feel free to contact me on 617.834.8205 or [email protected].
Andrew Oliver is a Realtor with Harborside Sotheby’s International Realty Sotheby’s International Realty® is a registered trademark licensed to Sotheby’s International Realty Affiliates LLC. Each Office Is Independently Owned and Operated
You can REGISTER to receive email alerts of new posts on the right hand side of the home page at www.OliverReports.com.
@OliverReports
When is the best time to sell my house?
I posted an article Reasons to sell your home in winter recently giving the pros and cons of selling in winter. Following up I am adding a table which shows the number of accepted offers by month and price range for Marblehead SFHs in 2014.
January 2015 has started quite well with 13 accepted offers with list prices from $400,000 to $1.8 million. Brokers reported strong turn out at Open Houses, as buyers looked to take advantage of the unexpected drop in mortgage rates. (more…)
Marblehead Winter Wonderland after the Blizzard
How magical is Marblehead in the aftermath of a snowstorm? It seems to me that the “day after” always sees beautiful blue skies and the town looks like a film set.
I can’t figure out how to post a direct link but to see a video of Marblehead after the storm click on MHTV to go to Marblehead Community Access’s Facebook page and view the video posted at 11:48 p.m. on January 28.
I know it’s a little effort, but it’s well worth it. (more…)
Tom Brady’s Boston real estate adventures
This The greater Boston real estate adventures of Tom Brady article from boston.curbed.com is much more interesting than ones about you know what.
Roll on Sunday. GO PATS!!!
If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, feel free to contact me on 617.834.8205 or [email protected].
Andrew Oliver is a Realtor with Harborside Sotheby’s International Realty Sotheby’s International Realty® is a registered trademark licensed to Sotheby’s International Realty Affiliates LLC. Each Office Is Independently Owned and Operated
You can REGISTER to receive email alerts of new posts on the right hand side of the home page at www.OliverReports.com.
@OliverReports
Trulia’s “statistics” now even worse
My post Why I don’t rely on Trulia last week generated a lot of views, so I was intrigued to see what the weekly Marblehead Weekend Update would bring this week. (more…)
Luxury condo shortage in Boston !
It may come as a surprise – it did to me – but despite the booming luxury condo market in the last few years, Boston is actually facing a shortage of luxury condos, according to this article Luxury condo shortage – believe it or not by Scott Van Vorhis on boston.com. (more…)
No writing this week
My outburst of articles last Friday-Monday was, in part, because I was having hand surgery this week and I thought that typing afterwards would be difficult.
It is. I hope to be able to resume typing next week. (more…)
The Mortgage Mistake?
In this article The Mortgage Mistake from a recent issue of The New Yorker, sent to me by fellow Harborside Sotheby’s agent, Joe McKane, the writer argues that incentives to encourage home ownership – including subsidized mortgage rates and tax deduction of mortgage interest – do little to increase the number of homeowners. Other Western countries have similar rates of home ownership without the same range of incentives.
Almost all the economic benefits of the mortgage deduction go to people earning more than $100,000 a year. Result: people overinvest in housing and underinvest in other types of asset. And because people tend to invest more in housing when the economy is doing well and less when it is doing poorly, housing tends to amplify the economy’s ups and downs.
The trigger for this article is the new 3% down mortgage offered by Fannie Mae and Freddie Mac for first-time home buyers (see my recent 3% down mortgages are back post.) Default rates for mortgages with down payments of 3-10% are almost 50% higher than for those with down payment above 10%. Thus, the New Yorker writer argues, while the new mortgages may turn more low-income people into homeowners, it will also likely increase the default rate.
Two questions come to my mind: is increased home ownership an unarguably good thing? And does mortgage interest deduction encourage home ownership?
(more…)
Reasons to Sell your Home in Winter
Today’s Boston Globe carries this article Why selling in winter may be a good idea.
In addition to the benefits mentioned – less inventory means less competition for sellers, while those buyers who are out there are serious – I would add that mortgage rates have dropped sharply already this year and are not far off record lows. See my Mortgage rates: how low can they go? post from yesterday. (more…)
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