Slowed housing market poses challenges for Swain property revaluation
The burst of the nation’s housing bubble has caused real estate markets to tank — everywhere, it seems, but in Swain County. Property values there have increased 30 percent over the past four years, according to the county’s latest property tax revaluation. The increase prompted a stir of disbelief among local residents.
“I do not see how the property values for our homes would jump this much in this economy,” said resident Brenda Denargo to Swain County commissioners at a meeting in April where scores of residents turned out to protest the revaluation.
Though most residents saw a moderate increase in value, some, like Carolyn Shook, saw theirs almost double and expressed concern over the potential of higher property taxes as a result. Currently, Swain’s tax rate is at 33 cents per every $100 of property value.
“These tax rates are just too high for someone drawing Social Security,” Shook said.
Swain County residents have protested the property values in mass, submitting more than 3,000 informal appeals out of a total of about 11,000 properties, said county tax assessor Pam Hyde.
“That’s a lot,” Hyde said. “About 10 percent is normal.”
The 30 percent average increase in Swain County property values is much easier to stomach than the new property values handed down during the county’s 2005 revaluation, the first in eight years. Then, values increased more than 140 percent. The sticker shock was so bad that the county switched over to a four-year revaluation cycle. But with the economy much worse this time around, and residents are struggling to understand why their property values don’t reflect that.
“The economy is bad, and a lot of people are tying that to this revaluation, saying it should be bad,” said County Manager Kevin King.
But despite the economy and a decline in overall real estate sales, Swain County and the rest of Western North Carolina have stayed largely immune to plummeting property values that have hit other regions of the country.
“The sales have slowed down from the appraiser point of view, but the ones that are selling, the sale price is high,” said King.
The number of sales has indeed slowed drastically, said Lynn Shore, and independent appraiser who helped conduct Swain County’s revaluation and former appraiser for Cherokee County.
While sales have decreased significantly, property values simply haven’t, said Tracy Madgeburg, an independent appraiser who works in Haywood and Jackson counties.
“Our market has held stable,” Madgeburg said. “It has not had drastic decreases in prices by any means, though things are staying on the market a lot longer, and in the past six months, there haven’t been many buyers.”
The lack of sales has made it harder, though not impossible, for appraisers to do their jobs. Property values are based primarily on comparable sales: appraisers scout out a similar house in a nearby location that has recently sold and use that to estimate the price of another home.
“Sometimes we need to go search all of the county for comparables,” Madgeburg said. “If you’re working on a sale of a very unique property, especially a high-end property, it’s necessary.”
If the property is in a downtown area, said Shore, and there aren’t any comparable sales, appraisers may even trek to the next town over to find a similar property that’s recently been sold.
Madgeburg said many lenders want appraisers to use comparable sales from the last three months, but that can be impossible in a seasonally driven market like the mountains. If nothing can be found, appraisers will sometimes go back as much as a year to compare sales.
Appraisers use complicated formulas to determine property values, and strict guidelines govern both independent and county appraisals.
“What the public thinks is this is something the county conjures up,” Shore said. “When this is a mathematical, uniform agenda that the state has.”
Hyde has the authority to adjust property values during the appeal process if she thinks the value is in fact too high. But she can only do so much, and many walk away unsatisfied.
“If they feel like theirs is outrageously out of line, I can adjust it up and down, but I can’t go as low as they want,” Hyde says. “That’s what all the appeals say, ‘The economy’s gone busted and we need taxes down,’ which I understand. I don’t have a problem with that, but I also have a guideline.”
Ray of hope
The property revaluation leaves the board of county commissioners in a bit of a sticky situation. Commissioners know that realistically, many residents wouldn’t be able to pay their property taxes if the tax rate stayed the same while values go up.
“In this economy, you can’t go up on people’s taxes,” said King.
In 2005, after the last revaluation, the county dropped its property tax rate from 55 to 33 cents per hundred dollars to offset the increase people would otherwise see on their tax bills. The county generated only a small increase to the county’s budget.
County commissioners don’t yet know how much they will lower the tax rate by. The process will be a challenge. State budget cuts have already affected the county, and with the prospect of additional cuts to come, property taxes can be a valuable tool for making up lost revenue. The county is already looking at a deficit in its fund balance, furloughs and layoffs, said King. The county also won’t want to lower taxes until all pending appeals are resolved.
A solution to the county’s dilemma could lie in the state legislature in House Bill 1530. Four years ago, Swain County switched from an eight-year to a four-year revaluation schedule to avoid the sticker shock that accompanied soaring property values in the mountains over a longer time frame. The House bill would allow counties to scrap the results of their property revaluation and in Swain’s case, conduct another one in four years.
But with Swain’s property tax rate far below the state average of 58.6 cents on the dollar, the county may not garner much pity from state officials, King said.
“In Raleigh if you’re less than the state average, they say don’t come talk to us,” King said. “But if we went to 58.6 cents (on the hundred dollar) I don’t think you’d get another board of commissioners to run for office.”
Swain County may have low property taxes, but it’s also in a unique situation due to the number of second homes inflating the market price for property.
“What (the state) doesn’t realize is that we’re caught in between a rock and a hard place because the local people aren’t the second homeowners that have driven the prices up,” King said. “We’re a county of have and have nots.”
The county has been hard at work lobbying representatives and the bill sponsors for support. The bill must reach the Senate by Thursday of this week, or it won’t pass.