Property Value Reset

Falling property values are the quiet news of the day on the Vineyard, where assessors in every town are preparing revaluations. And while there has been no precipitous crash here and thankfully no foreclosure floods of the type that have been seen on the mainland, values have fallen significantly. This a direct reflection of a real estate market which is going through a significant correction amid ongoing reverberations from the economic recession.

In Tisbury it was announced three weeks ago that the tax rate will be increased to adjust for falling property values. In Oak Bluffs and Edgartown the story is the same.

Falling values lead to the need to increase tax rates in order to meet town budgets, but this does not necessarily mean an increase in property tax bills for individual homeowners. Here is how it works: If a property previously valued at one million dollars is now worth five hundred thousand dollars (Island values have not fallen this much but the example allows for simple math), and the property tax rate was previously one dollar (per thousand dollars of valuation), and the town budget stays the same, then the tax rate must go up to two dollars in order to pay for the budget. But the property owner will be paying two dollars per thousand on half a million where previously she paid one dollar per thousand on a million; as a result the property tax bill will not change.

Other factors are used in the formula, including rate of growth, but stated in the simplest terms, rising tax rates and falling property values do not generally mean higher tax bills.

The changing climate does force the towns to keep their budgets lean because any large increase would mean an increase in taxes; this is expected to lead to what is called forced restructuring, where towns begin slowly to consolidate positions. This has begun to happen already in most Island towns, and more is contemplated as many workers reach retirement age and discussions continue about consolidation and also regionalization of some services.

The Vineyard has both benefitted and suffered from its resort-based property values. The benefits lie in excellent public schools and low property taxes thanks to a relatively low need for public services. The suffering lies in the fact that so many people in the middle income brackets have been slowly squeezed out of the housing market here. The irony is rich; we have good teachers but no place for them to live affordably.

The situation is changing slightly. There are now houses for sale in the five hundred thousand dollar range that were priced at seven hundred thousand dollars just three years ago; fixer-uppers can be found for less. Truthfully it’s not enough, especially given the fact that median incomes on the Island fall into the low end of the spectrum for Massachusetts, and the real estate market here is not immune from the mainland problems of tight credit and nervous would-be homebuyers who are keeping their money in the bank.

How much more will things fall? No one knows, but some predict the Vineyard will weather this storm better than other places because it has managed to avoid too many extremes. Savvy high-end buyers are reportedly still looking at Vineyard property as a long-term investment.

Is that a good thing? What happened to property being a place for people to live? It’s a complicated problem with no easy solutions.

Meanwhile Islanders who are still managing to get by can be thankful that their property tax bills will not skyrocket as long as town budgets remain in check.

These days every penny counts.