Wednesday, May 07, 2008

District Assessments: Cityline at Tenley

Recently I was looking at District records for a condo I was interested in. The owner has listed it for sale at $759,000, a mere $17,000 more than he paid in 2005 [basically, he's selling it at a loss when his sales costs are considered]. However, what caught my attention is the District's real property assessment for the condo.

According to the District's database, the property's current full value [before the homestead exemption is applied] is $662,570 and its proposed new value for 2009 is $581,050.

  • For 2008, the District values the condo at 10.7% less than its original purchase price;
  • It projects a further 12.3% reduction in value during the next year; and
  • As far as the District is concerned, the condo has lost 21.7% of its value in three years.

But this is simply one condo in a building of three condos. Is there a trend? What is the District projecting for other, larger buildings? Well, I decided to revisit an old friend, Cityline at Tenley [you may recall my post about the building], to find out. I compared sales data for the building against the District's real property assessment database. I found that of the 188 units that have sold, the assessed value of 68 has increased while that for 120 units has fallen. In other words, the District values 120 units at less than their last sales price, and some by a substantial percentage.

Interestingly, an unscientific sampling shows that no unit with two bedrooms has an assessed value higher than its last sales price. Why? I don't know.

For each unit sold in Cityline, the table below lists the District's 2009 proposed assessment value compared to its last sales price. Use the scroll bar on the right to browse the table.

One may not agree with the District's real property assessment methods and one can argue that the District's proposed assessed value is not really an accurate reflection of market value, but it's important to note that the District is preparing for a large drop in property values since the property taxes that flow as a consequence of these assessments obviously affect the funds available to operate the District in 2009.


Anonymous said...

Interesting point. I do have a question though, is this a new trend or something specific only to condos (i.e. not SFH)?

The reason I ask is some counties are much more agressive in assessed value than others. Some counties prefer to knock a percentage off the sales price (and consequently deal with less assessment challenges) than others. Does DC fall into this category and they do it for all properties, or is this something new and they only do it for condos?

Keith said...

I don't know. When I looked at the condo I mentioned at the beginning of the post, I looked at the assessment record for a rowhouse on the same block. Its assessed value had increased. However, I've not done a broader scan to see whether this bears out District-wide.

Anonymous said...

Interesting blog. You don't take into account what reason the owner may have for listing their property at such a high price. Does the city know if the owner has done extensive renovation to the property, thus increasing the value substantially? Of course not! They don't make adjustments for that information because they aren't privy to it. County and city assessments are always lower than what property is really worth.

Keith said...

I have no argument with the condo's price other than to note that the fellow will be selling at a loss if he gets his asking price. More power to him and his real estate agent.

That condo and the Cityline are both about three years old. I seriously doubt, for example, that swapping out the wood floors and putting in higher-end appliances will _significantly_ increase the value of the property, if at all.

As I said at the bottom of my post, one can argue about whether the District's assessment process and methodologies are correct and defensible. I'm not going to get into that.

The key point is the District, which relies on property taxes and sales recordation fees for a portion of its revenue, is forecasting lower assessment values for 2009 and thus, lower property tax revenue. If you read the WaPo, you can already see the impact of this: a $2.5MM cut to the police department's budget.

This is not unique to the District. Vallejo, CA declared bankruptcy the other day specifically because of lower housing sales, which led to lower sales recordation fees, and lower property tax revenue, thanks to falling values.

The District assesses property values on an annual basis so one can assume its assessments are a closer reflection of market realities than other localities.

Anonymous said...

Do you have the dates of all the sales at the Cityline? Any of them sell twice? DC may be using a repeat sales index to measure property value changes. They would most likely run one model for SFH and one for condos, since price dynamics are different.

Keith said...

Yes, I have all the dates and several units have been resold since 2005. Tell me how this approach works, maybe I can model it.