In a perfect world, it would be grand if we could sell our homes at current values assessed by the mortgage banks or by local tax assessors ending in 2006. In the real world however, in this depressed market, the value of most everyone’s home falls somewhere near 2002 levels. Caught between inflated value and actual value, the hope for selling in this market, at current assessed values is all but a pipe dream.
In most states around the nation, property assessments for tax purposes are continuously adjusted annually, up or down, based on market conditions.
Most states, that is, except Maryland.
In Maryland, government revenuers use a subjective three-year cycle based solely on the needs of the states revenue stream and spending desires. No matter what the market does in a three-year period, the Governor, and his allies on the State’s Public Works Commission mandate the assessment increases by whatever arbitrary percentage deemed necessary to keep state coffers solvent. Local or county governments adjust the Cap based on local spending predilections. No matter what your county cap is, the overall increase rolls over into the next year and so does the yearly tax.
Some counties are on the low end of the Cap at 3 percent and some will eat up the entire cap of 10 percent as Carroll County has done for most of Julia Gouge’s political career. In fairness, last year Gouge did favor taxpayers with a token gift and adjusted the rate to 7 percent. Gouge apparently did not see the crisis that was to loom over the county with the disintegrating home building market.
Albeit, understanding how we reached this point is not so complex. The accelerated uptick in the housing market coincides with the Clinton administration, which renewed efforts to broaden the scope of the Community Reinvestment Act (CRA,) the brainchild of the Carter Administration.
The graph below bears out the extraordinary rise in values in relation to the CRA and the Clinton administration’s propensity to favor the bankers and gut the middle class and the elderly.

As indicated in the graph when CRA regulations favored bankers the real estate bubble began in 1998 and peaked in 2006, a year before the recession hit. We are now experiencing home prices depreciating, relative to inflation. Based on falling values, prices may still decline an additional inflation-adjusted 20-30% to bring the market back within historical norms. The housing correction in the 1920’s took 20-25 years to rebound and this bubble has peculiar similarities.
Overvaluing accelerated housing prices to keep up with the inevitable foreclosures the Wall Street bankers knew were coming. Forced to offer toxic loans, by liberal politicians, to those that could not afford them, bankers tended to overvalue properties, through willing brokers to unsuspecting consumers. Government bureaucrats were ecstatic, and not to be outdone, Maryland Governors, past and present, aware that the market was not sustainable under those conditions, stopped doing outside assessments and relied on paper-thin assessments furnished by Realtor/brokers. The entire lot became surrogates under the umbrella of Citigroup Wall Street scoundrels.
The unwary homebuyer that unwittingly purchased a home on the high side paid their 1-4 points up front with the standard 20 percent down to cover the eventual meltdown. Ultimately, the hard working homeowner subsidized the Community Reinvestment Act, enabling banks to offer zero down interest only loans. Mortgages were offered to folks that could not afford the purchase with down payments or sustain mortgage payments for the overinflated home down the street.
What the bankers and profiteers did not consider was the accelerated new home building market. As home contractors and developers built to fill the demand for young impressionable homebuyers, children of the baby boomers, government created an entitlement class or no-income buyers, the free market over saturated the market with an overabundance of new homes. Not only were ther too many new homes, baby boomers were in the beginning stages of cycling out of the homes left empty without buyers.
When the defaults came, the bankers assumed that there were enough buyers to fill the void and buy up the foreclosures at the overinflated values. The problem for lenders holding toxic loans became evident when buyers fizzled out. Baby-boomers whom far out-numbered generation x and y’s, were settled in their homes and are now suffering under the weight of greed levied by the banking industry and with government by over taxation on property that is valued and only sellable at 2002 prices. Boomers are literally being forced out of their homes by the greed still levied by government. The glut in homes both new and resale remain empty without buyers. Government has not and shows no willingness to adjust for the downside in Maryland.
In today’s market, desktop assessments have become the norm for lenders and assessors who have all but stopped going out into the community to do door to door real property assessments. Computer based analysis on so-called comparables have replaced the personal contact that at one time was the model for appraisal by the assessor’s office and lending institutions.
Based on the way assessments are handled, by today’s computer generated comparables, the State, for all intent and purpose, can consolidate local county offices into a central location in the Governor’s mansion. It would save the State millions per year to change the system to an annual market base formula. Closing county assessor offices that in no way assist taxpayers anyway, will not be missed. It will also eliminate the corruption in the assessor’s office that favor local government and elected friends. It happens, take your head out of the sand.
Let’s face it, when was the last time anyone has seen an assessor do site surveys to determine your home value. It no longer happens for the most part, because everything is done in the office and through the mail in the form of a bill. Even the appeal process has been turned into a convoluted system by self-important legislators that make it all but impossible to refute or argue against the arbitrary system in place. It is almost to the point that homeowners will need the aid of an attorney to argue their case for a reduction in property assessment. In fact, that art of intimidation is the rule by the self-important bureaucrat whom all but tells the weary taxpayer that the analysis is much too complicated to understand. Arguing a case for a reduction in the over assessment is a test of wills and normally is rejected out of hand. Ask any retiree if they feel confident in their dealings with Assessment and Taxation department representatives.
The problem with desktop assessments, fueled by government pressure to meet budget largesse and Smart Growth social engineering schemes, is that established neighborhoods are being penalized with newly constructed overbuilt new homes in the community that do not necessarily fit in the overall arrangement. Comparables become distorted as a 3,800 square foot home, on a quarter acre lot; in a neighborhood of older 2,200 square foot homes on one acre parcels, older smaller homes are unfairly inflated in value. The land is worth more than the dwelling with Smart Growth meddling in established neighborhoods.
Smart Growth policies are meant to force the evacuation of older homes clearing out old neighborhoods and compressing or clustering new homes to replace the one per acre lots with four per acre. They call this consistent with economic growth policies to justify building strip centers and larger office space for the government bureaucrats that contribute to the overall destruction of the established community for a larger piece of the tax pie. Smart Growth policies include the token moderate and low-income housing tucked and hidden away behind some industrial complex to provide a work force for the low paying jobs locally in the strip centers the commuter will patronize in their precious little off hours.
Nonetheless, homeowners do have an option to refute or challenge the assessment yearly, but must jump through numerous challenges to prove their argument. The state does not advertise yearly petitions but they are available to all property tax payers. In most cases, the homeowner’s argument is rejected outright though, and grievances must be detailed without assistance from the assessment office. They may know the market is down, they will not acknowledge the fact, and the burden is on the homeowner. In today’s market, whereas everyone knows that values do not match assessments and the powers to be are rejecting applications because there are no actual comparables in a market that is all but dead. If there is no house being sold there are no comparables, therefore there will be no adjustment.
To further the pain, assessments that are currently being done in a third of each county throughout the State, values are not being adjusted down, assessments are actually increasing and will for the subsequent three years. The Governor is promoting outright theft in collecting taxes on non-existent value to protect a runaway budget. The Governor is violating state law, which clearly states that assessment cannot exceed market value.
In these untoward times when no one has a handle on what home values really are or will be, it is clear that wishful thinking is driving the assessment process. We do know what the market will not bear and that is its current assessment values purported by the State. From the federal government to local county officials we hear the cry, that if real estate value can be sustained the economy will benefit and government can continue to fund pork projects.
We hate to break it to you, but hoping the market will rebound quickly is not going to sell homes or strengthen the market. Keeping assessments at current levels is a violation of state law and demands redress. The wishful mindset is actually deepening the pain for both homeowner and the State. Government spending continues as if all is right in the world as far as assessment revenues continue unabated.
The current housing condition we find ourselves in is a long overdue correction. State government must acknowledge that correction and adjust accordingly. The correction is due to various factors resulting from Smart Growth policies and greedy bankers that have overinflated home values with desktop assessments to garner the most ‘bang’ out of government promoted toxic loans, under the auspice of CRA.
If anyone in government or the banking industry tries to convince you that the market values are going to return or home purchases are a great investment, are pulling your chain and simultaneously grabbing at your wallet. They have lied for so long and profited so much, their credibility is as worthless as AIG, Fanny and Freddy stock value.
Realtors, government assessors and mortgage bankers that continue to promote and advice that, ‘home value always increases,’ are in denial and frankly they are delusional. The harsh reality is that under normal honest inflation-adjusted dollars the housing market will be stale for the next decade and maybe beyond. Greed has made homeownership a lousy investment for everyone.
The bottom line here is that homeowners that are currently being assessed and those of us that are still in the three-year cycle must, in mass, demand a fair and reasonable adjustment to match the deflated market values of homes that have stagnated in the market.
The heck with the State that should suck it up and cut pork and personnel from the budget, taxpayers need the relief now and it is time to grant that relief. It is truly unconscionable that taxpayers foot the bill so government can ride out the storm secure in their jobs while the taxpayer flounders.
It is high time for boomers to raise their collective voices and change the behavior of the petulant child that runs the State House.
Doing anything less than provide immediate relief to taxpayers is outright criminal, by not only the Governor, but also the self-serving Legislators and the Citigroup disciples that make up former Senator Barack Obama’s economic team.
The public reaming must end.
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Filed under: Government Largesse, O'Malley, Property Taxes