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Home values begin to rebound

A recovery in the housing market is good news for many real estate owners, but property taxes, which in most cases never declined during the recession, continue to rise at a higher percentage

After watching the value of their homes plummet during the recession that began in December 2007, many area homeowners finally got some good news in their latest quarterly tax bills.

A Globe review of state Department of Revenue data found that in roughly two-thirds of the cities and towns north of Boston, the average assessed value for single-family homes increased this fiscal year, which began July 1, 2013.

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Overall, the average assessed value for a home in Boston’s northern suburbs is $407,165, up nearly 1 percent from fiscal 2013, when it was $403,347. Meanwhile, the average property tax bill is $5,836, up from $5,664, an increase of 3 percent.

By comparison, assessed values in the region had declined 13.7 percent between fiscal 2007 and 2013, while the average property tax bill ballooned 22.5 percent. Proposition 2½, the state’s tax-limitation law, allows for property taxes to climb even when values fall.

Communities across the Commonwealth typically set their tax rates in December, midway through each fiscal year, so the first two quarterly bills are estimated. The new rates are reflected in the third-quarter bill, which is usually mailed in late December.

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The third-quarter bill also includes an updated assessment of the property’s value, based on the sale prices of comparable properties in the area. By law, the assessed values for fiscal 2014 are based on values as of Jan. 1, 2013. Sales from calendar year 2013 — when the housing market was on the upswing — were not included in calculations.

Homeowners in Medford had the most to celebrate. They saw the largest increase in value, a 5.1 percent uptick for single-family homes to an average of $366,328.

‘Medford is being rediscovered. It’s changing, demographically. We’re getting a lot of young professionals who have been priced out of Cambridge.’

Edward F. O’Neil, Medford chief assessor 
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The boost in value outpaced the increase in the average annual property tax bill, which went up nearly 4.2 percent to $4,488.

“Medford is being rediscovered,” said Edward F. O’Neil, who has been the city’s chief assessor since 2003. “It’s changing, demographically. We’re getting a lot of young professionals who have been priced out of Cambridge.”

In all, homeowners in nine local communities — Billerica, Lynnfield, Manchester-by-the-Sea, Medford, Newbury, Reading, Revere, Swampscott, and Winchester — saw their values appreciate at a pace greater than the increase in their tax bill.

The data reviewed by the Globe does not include information from Chelsea, Everett, Malden, and Somerville because those cities give a tax break to homeowners who live in their properties rather than renting them out.

Despite the modest rebound in the housing market, cities and towns throughout the region are finding themselves in a long-term budget squeeze as climbing costs for pensions, employee and retiree health care, and debt service outpace revenue growth, according to the Massachusetts Taxpayers Foundation, an independent watchdog group.

“Spending on employee and retiree benefits will consume an ever-larger share of municipal budgets for the foreseeable future as municipalities face nearly $45 billion in unfunded liabilities,” Michael J. Widmer, president of the Massachusetts Taxpayers Foundation, said in a prepared statement.

In its 43d annual Municipal Finance Data report, released in January, the Massachusetts Taxpayers Foundation found that spending on pensions, employee and retiree benefits, and debt service grew 23 percent between fiscal years 2007 and 2012, while all other spending grew just 10 percent.

“With modest revenue growth at best, funding for schools, public safety, and other services will be sacrificed in order to pay for the unaffordable obligations taken on by cities and towns over the past decades,” Widmer said.

The Globe review shows property tax bills for single-family homes are up this fiscal year in 51 of the 53 communities that submitted adequate data to the state.

The increases range from $18 in Woburn to $485 in Newburyport. In Lowell, the average tax bill held steady at $3,273. Essex was the only municipality to report a lower average property tax bill.

The owner of the average single-family home, assessed at $485,159, has seen an $80 drop on the annual tax bill this fiscal year over last, in part due to changes implemented as part of the town’s state-mandated triennial revaluation. The average bill is now $7,394.

During the recent revaluation, it was determined “there were certain categories in which sales and other factors indicated that our previous values were high, so adjustments were made to ensure the assessments were equitable,” said Richard S. Cairns, lead assessor in Essex, adding that “the drops were not even across the board.”

On a percentage basis, the region’s biggest tax increases have been in communities where voters approved Proposition 2½ overrides (permanent tax hikes) and debt exclusions (temporary tax increases that last as long as the loans for a particular project) to cover specific expenses, such as building new schools.

In Newburyport, for example, the average tax bill increased 8.3 percent, or $485, this fiscal year.

The increase, the largest in the region both in terms of percentage and dollar amount, can be attributed in large measure to voter approval of several debt exclusions for school construction, a senior center, and a library project.

“Eighty-one cents of our tax rate [per $1] is attributable to debt exclusions,” said city assessor Daniel Raycroft, noting that “city leaders “have been talking about a senior center as long as I’ve been here, and I’ve been here 24 years. This mayor [Donna Holaday] is finally making it happen.”

The tax rate in Newburyport is $14.16 per $1,000 in assessed value — 10 cents less than it could have been under Proposition 2½ — with the owner of an average single-family home valued at $446,524 paying $6,323 in property taxes.

“Unlike many other cities and towns, Newburyport didn’t lose value during the recession,” Raycroft said.

“The housing market is very strong in Newburyport. What I’m hearing from brokers is that inventory is low. People who move here tend to stay here.”

Brenda J. Buote may be reached at brenda.buote@
gmail.com
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