Why home prices will go up in 2015
I have been asked more than once recently when the supply of homes for sale will increase and return to more normal levels.
My answer is that the improving economy, increased job security and higher incomes, unexpectedly low mortgage rates, and the realisation that real estate has not appreciated as much as other asset classes all combine to create a market with more buyers than sellers.
And we know what happens when demand exceeds supply – prices go up. And higher prices are what I think it will take to get more inventory onto the market.
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
The best and worst performing real estate markets
I have read a number of articles recently about the best and worst real estate markets but none of them mentioned Essex County. This article corrects that oversight.
The first table follows the pattern of many articles in looking at the extent of the recovery since 2009: (more…)
Marblehead housing market: “there’s nothing to buy”
If only the snow would shrink as quickly as Marblehead’s housing inventory.
Buyers are surprising active given the weather:
Source: MLS, Oliver Reports
While sellers appear to have hibernated: there are just 19 houses for sale currently under $1 million. (more…)
Is it too late to “flip” houses?
Trulia recently issued a report suggesting that house flipping is a declining activity because prices aren’t increasing enough to make it profitable.
As this excellent Huffington Post article points out there are two types of house flip: one based on price appreciation; and one based on creating value by rehabbing a property. (more…)
Marblehead sales history under $1 million
After I published my Record Million Dollar Sales post with numbers for the last 15 years I was asked to do the same for sales under $1 million. Here goes – in chart form!
First, the number of sales. Note that in 2000 there were 54 sales under $300,000. That number slumped to just 1 in 2005 as prices increased. Similarly, the number of sales from $300-499k more than halved in the strong market of the early 2000s, while sales from $500-749k doubled. The trends then reversed during the slump and changed again as the market recovered.
Source: MLS, Oliver Reports
How your Property Taxes are calculated
This is a repost of the article originally published on February 1st.
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, containing 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. [Note: the actual increase in Assessed Values was only 4% to $5.53 billion, so the tax rate was $11.10: $61.3 billion divided by $5.53 billion. This demonstrates that the top line – the amount to be raised by property taxes – is much easier to predict than the denominator, Assessed Values, which in turn have a great impact on the tax rate.]
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
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.
The easiest way to make sure you do not miss posts is to register to receive email alerts of new posts. This ensures that you do not miss articles and allows you to read those which are of interest to you.
To register go to the home page at www.OliverReports.com and on the right hand side, below the page titles you will see this:
Enter your email address, hit Subscribe and click CONFIRM FOLLOW in the email you will receive instantly.
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
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.
Source:MLS, Oliver Reports
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…)
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…)
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:
Source: Board of Assessors
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:
Source: Town of Marblehead
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:
Source: Board of Assessors, Oliver Reports
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:
Source: Assessors Office, Oliver Reports
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.
Source: MLS, Oliver Reports
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…)
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…)
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…)
AAA Marblehead: Finances stay in the Black
New town Administrator, and former Finance Director, John McGinn presented the FY2016 (July 2015 – June 2016) Financial Outlook this week.
The headlines are:
– Marblehead is one of just 22 Massachusetts communities rated AAA by Standard & Poors
– As has been the case for the past 10 years there is “no need to consider any permanent (tax) overrides to fund the town’s operating budget.”
– Marblehead enjoys “No deficits; strong budget oversight; and appropriate revenue estimates, all of which allow us to avoid fiscal emergencies.”
– 78% of the Budget revenues derive from property taxes, 9% from State Aid, 5% from local receipts (excise taxes, permits etc.) and 8% from free cash and enterprise payments.
This presentation will form the basis of the formal Budget to be voted at Town Meeting on May 4th.
Here is the Marblehead FY16 Budget presentation. (more…)
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