Our friends at Ticor Title sent me the following stats/charts to share with our readers. Much data is contained within these but the sheer magnitude of the changes observed over the previous two and one-half years is worth a look. I feel the most telling is the latest Notices of Default (NOD) numbers (first chart presented below). Look at the increase in NOD from around the time median home prices peaked (July 2005) to now. A six-fold increase! And regular readers of this blog know that future NOD predictions are projected only to increase.
The other three charts essentially present the same data (new home sales vs. re-sales) in different ways. One trend to note here is that which GreenNV has been predicting for a while now; that the number of new home sales will cross over and surpass the number of re-sales soon.
(Click on a chart to enlarge)
Reno Ignoramus
If I read that first graph correctly, it appears that GreenNV’s prediction of a few months ago has proved accurate. 300 NOD in October. 255 sales?
There were more people receiving notice that their house is entering the foreclosure process than people who bought a house.
Can somebody explain how this is an indicator of an improving market?
smarten
RI, it always gets worse before it gets better.
Besides, more NODs doesn’t necessarily translate into more PROPERTIES being in foreclosure than are selling on the MLS. As you know, a single property can have multiple mortgages against it. And multiple mortgages can be in default at any given point in time.
Green NV
Tracking NODs through to default is pretty tough using public records. There are often double and triple filings of NODs on a particular property (1st loan, 2nd, HELOC, HOA). The somewhat arbitrary numbers I track are monthly SFR/Condo sales (Guy’s numbers) versus monthly Trustee’s Deeds. Here is a download link to the current chart: http://www.mediafire.com/?6wwhw9mlncn If you double click on the gray area of the chart, the data will pop up. October 2006 2 TDs on 409 sales, April 2007 34 TD’s on 378 sales, October 2007 87 TDs on 255 sales.
Sales are falling, and if this is a somewhat typical year, will continue to fall off 15% or so in the next few months. TDs are rising at 15-20% per month, and show no signs of slowing (65 so far in November). Could the trend lines cross? I used to think I was joking, but, yeh, they really could. And not too far into the future.
Fun facts to know and tell:
– About 60% of properties receiving a Notice of Sale now result in a Trustee’s Deed (REO). This is trending UP, and has traditionally been less that 20%.
– My observation is less than 25% of the properties going through the NOD, NOS, TD process ever get listed on the MLS.
– An awful lot of short sales are being listed at prices that NO WAY will the lenders accept.
Hey, I’m thankful that I live up here, thankful for a dog who thinks I’m god, and thankful for the community on this board. I wish you all a happy,warm,and safe
Thankgiving.
MikeZ
RE: “If I read that first graph correctly … 300 NOD in October. 255 sales?”
I read it as NOD: 295, sales: 641 (255 new, 386 existing).
Psst, Guy: A slightly larger font for the numbers next time would be nice.
Reno Ignoramus
I know this is off topic. I live in the Caughlin Ranch Juniper Ridge part of town. I got my postcard from the Couty Assessor today. It appears the Assessor thinks the value of the land that my house sits on has gone up in value 36% from last year.
GreenNV
RI, you got off easy! My 2 raw land parcels just below you on Mayberry went up 59% each. And these are not exempt from the annual property tax limit. The land value on my home near Boomtown went up 93%! Gotta wonder how the barn fared?
Washoe taxation formula takes anticipated budget / allowable tax rate, and solves for land value, since improvement values depreciate. All I can say is that the Assessor can expect 3 protests from me, just on principal.
smarten
Sorry RI and GreenNV to hear of your current reassessment notices. What kinds of increases [percentage wise] do you anticipate reassessment is going to translate into when you receive your ad valorem tax bills?
You may recall this was a subject and warning I introduced a couple of months ago and even in Nevada where property taxes are allegedly lower than in California, you’re seeing first hand how it’s turning into a very nasty little by-product of owning real property [valuations are plummeting but assessments are increasing].
Since “Washoe taxation formula takes [its] anticipated budget” into account; that budget keeps increasing; and really, there are few if any checks and balances to prevent government’s wasteful spending of your taxes; it’s a bottomless pit.
I hope local property owners do something more radical than simply “protesting” or filing what ultimately become frustrating and unsuccessful assessment appeals.
GreenNV
Vacant Property 1 – tax increase will be $2.39, from $6.12 to $8.51. The Assessor rates this property as unbuildable, though I will be building a home on it in the Spring.
Vacant Property 2 – tax increase will be $573, from $1459 to $2032. This property will be subdivided into 3 parcels before the tax increase takes effect. I debating if it is better to have the higher assessment going into the subdivision, or to protest.
Primary Residence – Despite of the 93% increase in land value, and overall 41% increase in assessed value for the property, my taxes will increase by the statutory 3%, $89, from $2971 to $3060.
Time bomb on taxes for an owner occupied unit? I hardly think so. The chances of our legislated cap being removed are equal to that of Prop 13 being repealed.
But I’m sure Pulte, Lennar, and the rest had a pretty big shock when the tax notices arrived! Built housing inventory is not covered by the cap, and neither are their land holdings. Likewise, the taxes on exempt (8% cap) and non-exempt rental properties probably took a hit. On the bright side, the higher rents resulting from the tax hikes will help the rent:own calculations some folks here hold so dear.
2sleepy
Ignoramus- I live in Caughlin Ranch too, the appraisal on my house stayed the same, but the land appraisal went up 50%
Rob Saxe
Great post, great blog. I love your site! You guys are doing a great job here. I’ll be back to read it often.
Rob
Rob Saxe
Great post, great blog. I love your site! You guys are doing a great job here. I’ll be back to read it often.
Rob
smarten
GreenNV wrote “on the bright side, the higher rents resulting from the tax hikes will help the rent:own calculations some folks here hold so dear.”
How exactly do you figure increased taxes [or increased anything for that matter (like adjustable mortgage interest)] result in higher rents?
I think most leasing professionals will tell you that residential rents are based upon simple supply/demand principles. Therefore just because an owner’s carrying costs increase, doesn’t necessarily mean he/she/it is able to recoup that increase in the form of higher rent; especially where not warranted by market conditions.
It is true that some leases are triple net [i.e., in addition to rent, the tenant is responsible for a pro-rata share of his/her/its landlord’s real property taxes, insurance and utilities]. But rarely, if ever, have I or for that matter most leasing professionals seen triple net residential leases.
So unless you know something I don’t or meant something different than I read into your statement, I think it may be nothing more than speculation. Is it?
Thanks for the clarification!
smarten
GreenNV. I’m trying to understand your ad valorem tax system [because at some point in time I’d like to become a Nevada property owner] and you seem to be very familiar with it. So with your permission, can I ask some questions?
1. This 3% tax cap you reference. Do I correctly understand it only applies to owner-occupied residential properties?
2. If so, doesn’t the property owner have to enter into some contract with the county and aren’t there some negatives to the property owner?
3. Does the 3% tax cap apply to the total assessed valuation – land and improvements? Or does it only apply the the improvement portion?
4. How does the Assessor know the property owner is an occupant? And how does it know if/when the property owner no longer makes the property his/her principle residence?
5. Does the owner-occupant need to be a natural person in order to avail him/herself of the 3% yearly tax cap [non-natural persons can occupy their properties]?
6. What happens [tax wise] when a principle residence is sold to a new owner who uses it as his principle residence? Is there still a 3% annual maximum increase from the former owner’s taxes? Or do the taxes recalculate based upon current assessed valuation and only thereafter are they capped by 3%?
7. Just curious with your Vacant Property 2. You state the tax increase will be $573, from $1459 to $2032 [39%]. Yet you state your assessed valuation increased 59%. Why won’t your taxes against this property be increasing 59% [$860]?
8. You state your Property 2 will be subdivided into 3 parcels before the tax increase takes effect and you’re debating whether to have the higher assessment go into the subdivision, or to protest. What other option would you have? Are you suggesting that after subdivision the Assessor could come in and assess each parcel independently, potentially shackling you with a combined valuation for all 3 parcels in excess of the current increased valuation?
9. One final question and I hope you won’t find it too personal. With respect to your Property 2, when did you acquire it, and at what acquisition price? The reason I ask is because I’d like to compare your taxes [some years after acquisition] versus a hypothetical identical purchase in California.
Thanks in advance for your answers!
GreenNV
smarten,
I have to agree with you regarding rental rates being supply/demand driven. I was only speculating about future tax “pass throughs” impacting rental rates. That said, supply is pretty tight on the workforce housing level, and rates are going up.
Most of what I know about the property tax situation here I have learned by reading the Assessor’s information. http://www.co.washoe.nv.us/assessor/, click on “Tax Cap Information.” There are also links to the actual legislation enabling the cap. I’ll do my best to answer your questions.
1. The 3% Property tax cap applies to the taxpayers “primary Nevada Residence.” A California resident could have a Nevada second home, and it would qualify for the cap, as long as it isn’t used as a rental property.
2. My recollection is that I had to sign a form stating that my residence qualified for the tax cap. I am not aware of any negative impacts of claiming the exemption.
3. The 3% cap applies to the total assessed value, including both land and improvements.
4. I think the county would have a difficult time telling if the property owner actually qualifies for the tax cap, or if their situation changes. They do check up on you if there is a change in mailing address for tax statements, or if there is a vesting change recorded.
5. By “non-natural” person, do you mean can you take title as family corporation, LLP or trust and still qualify for the tax cap? Generally, yes.
6. Upon sale, the new property tax resets at the Assessor’s full assessed value. Then the 3% annual cap restarts for the new owner.
7. My error on the property tax increase to parcel 2. My tax will increase roughly $866 from $1469 to $2235.
8. When the subdivision is complete, the Assessor will assess each lot individually. Instead of one lot with a taxable value of $200,000, I will have 3 lots each assessed at nearly $200,000 (lot size isn’t as important as just being a buildable lot). If I fight the current reassessment, I may have a better chance of the subdivided lots having a lower assessed value and lower property taxes. However, a higher assessed value will make the asking price for the lots look more reasonable. Real estate games!
9. I bought Property 2 in July 2006 for $234,000. Asking was $395,000. The actual contract date was August 2005 – it was the escrow from hell with quiet title issues, sellers in 2 states, family feuds, bad legal description, unrecorded county land grab to widen a street. In a twist of fate, the property is exactly smack dab in the middle between the Caughlin Ranch house and the famous Barn.
As a major abuser of the public records, I have no problem pointing you towards the property tax records. Fair is fair! Go the the Assessor’s site, under Assessment Data click Real Property, click through the Disclaimer, and enter APN 9-111-01. Click the link for “addition assessment data” for a complete history. Just for jollies, click for the map view!
smarten
Thank you very much GreenNV. Very informative.
I note with interest that you state you bought Property 2 in July 2006 for $234,000. You now state that as a result of the most recent reassessment, you believe your yearly ad valorem taxes will increase to $2,235. This represents about .955% of your original acquisition valuation [what doubles for assessed valuation in California].
Had you purchased this property in California in 2006, your ad valorem taxes for 2006-07 would have been $2,340 [1% of acquisition cost]. If assessed valuation increased by the maximum permissible 2%/year, for 2007-08 I think your ad valorem taxes [please don’t dis me out there if my calculations are off – we all know I flunked math] would be $2,386.
So really, although your ad valorem taxes may have been slightly lower at acquisition than a comparable counterpart in California, by year 2 or 3 there may be no appreciable difference.
Now in future years if you weren’t to subdivide and your assessed valuation increased [or maybe next year if you do subdivide (see below)], your ad valorem taxes would likely exceed their California counterpart’s.
In California I DON’T believe your property would be reassessed after subdivision assuming no change in ownership. Whatever county involved, I believe the assessor would likely divide the then assessed valuation for all three parcels by three for each.
Now let’s take your personal residence. You state “despite [a]…93% increase in land value, and [an] overall 41% increase in assessed value…[your] taxes will [only] increase by the statutory 3%.”
So my questions are: what is the assessed valuation after the overall 41% increase, and in your opinion, what’s your home’s fmv [again, if my questions are too personal, I apologize and please feel free to decline my invitation]? The reason I ask is because if I understand your previous answers correctly, if I were to purchase your home tomorrow I would immediately be taxed on your increased assessed valuation; right? But would that valuation still be lower or essentially the same as fmv [my acquisition valuation]?
If the same, then it seems to me ad valorem taxation is now roughly the same in California and Nevada; at least insofar as primary residences are concerned.
GreenNV
No problem, smarten. The point of this blog is share information, opinions, and open up discussion. Since I occasionally guest author posts here under my name, my public records information is already free game!
I’m not sure if reassessment in CA is determined on a county by county basis. I can vouch that, at least in San Francisco, a subdivision of land would trigger a reassessment and not a redistribution of the previous assessment. The assumption is that the subdivision creates additional taxable value, much in the same way a major addition or remodelling would.
The FMV of my residence is in the $525,000 range. (I was getting unsolicited offers at $625+ a couple years ago – I miss 2005!) The taxable value is adjusting this year from $271,171 to $384,776 (land $115,201 to $222,338, improvements $155,970 to $162,438). With the tax cap, my new property tax will be $3060. A new owner would pay $4189 based on the full new assessment.
As you can see, NV taxable values are not directly tied to FMV. It is a bit of a goofy system, with the land being valued at the Assessors estimate of FMV, and the improvements valued at estimated replacement cost less depreciation. At least that is the stated concept.
Since the tax cap has reduced projected County revenue, replacement value is relatively stable, and we realistically back into assessed value by dividing the budget by the legislatively approved tax rate, the Assessor is jacking up land values.
smarten
Thanks GreenNV. Your explanations help me a lot and clarify how under Nevada’s current 3% cap system, ad valorem taxes are lower than for comparably priced properties in California; at least insofar as primary residences are concerned.
But don’t forget; if we’re fortunate enough to be able to take itemized personal deductions on our income tax returns, Californians actually get some of those higher taxes back in the form of offsets against other ordinary income.
See, the Lord givith and she taketh away.
2sleepy
I did some research on tax increases on land values in SW Reno – I cannot make any sense out of the increases, I used Zillow to locate some addresses, then checked the assessors site:
1800 blk W. Plumb LVF 1.50 was 1.06
Brighton Way LVF 1.50 was 1.06
Blue Horizon Ct. LVF 1.66 was 1.06
Juniper Hill Rd. LVF 1.59 was 1.06
Riverberry LVF 1.59 was 1.06
3000 blk Cashill LVF 1.50 was 1.06
Mountainshyre LVF 1.59 was 1.06
I’m thinking the appraiser printed out a map of SW Reno put it on the wall and threw darts at it, if you got the green dart your LVF increased to 1.50, blue dart 1.59 or red dart 1.66…
I can’t link the difference to proximity to CR common area or view lots – anyone have any idea? I’m protesting my increase just on principle. BTW, when you call te appraisers office they are quick to tell you “but..your tax will only go up 3%”
Tom
The planning involved, as concerns residential property, was likely to seek valuations closer to perceived fair market value, in order to set up a bump in taxation that would be tied to later sales, when the 3% cap is excused. Thus there are automatic built-in tax increases awaiting a triggering transfer. This provides for the creation of future revenue growth by pre-arranging for a tax increase, which is only deferred until a transfer causes an escape from the statutory limitation.
If challenged all the way into the court system, the courts (from my California experience) don’t require Assessors to be exactly precise and individually well-reasoned as to each parcel in comparison to another, just that the reassessments be based on a reasonably fair approach to valuation, and that the system employed not be capricious. Consequently, if it is true that the values have gone up since the prior valuation, than individual parcel differences raised by the protesting owners, questioning valuation differences between parcels, won’t make the valuations used fail judicial scrutiny. Instead, slight differences in parcel valuations support the process used, giving the agency the ability to show that differences were considered and not all properties valued the same even in the same general neighborhood. The reviewing authority will say that because it is true the property went up in value from the prior valuation, and because the system used was `good enough for government work,’ precision and exactness is not to be required– that would be burdensome upon the taxing agencies.
Consequently, it is problematic to get more than a modest adjustment in such a protest, unfortunately. If owners start to challenge such valuations, I hope that the initial protests are thoroughly supported and argued. If this is pursued as a matter of principle, as some have suggested, that is understandable, but if such a protest and appeal is not diligently pursued, it is not beneficial for those following.
Tom
My above comment was intended to refer to the recent posts concerning property tax assessed valuation increases. Apparently I added it beneath a diffent topic, sorry for any confusion.
We are doing too much “multi-tasking” here this morning!
2sleepy
I emailed the assessor’s office protesting the increase, here is the explanation of their methadology:
______________________________________
Good morning
Per state statute, for taxation purposes land is to be valued at full cash value. If an area is not in a scheduled reappraisal area, such as yours, factors studies are done to determine if land is at valued per regulations. This process involves analyzing all sales that occurred in your specific factor district to determine if factors are necessary to bring land within the value range as defined through regulation. When complete, the factor recommendations, along with our 2008 Allocation Study, are forwarded to the Department of Assessment Standards for approval. Although sales from a 36 month period are allowed by regulation, we only used sales from the last 18 months as it was judged to be more reflective of the current market. Also, by regulation, we cannot use any sales after July 1, 2007.
In neighborhoods where there are no vacant land sales, allocation is used for establishing land value. Our 2008 Allocation Study indicated that 30% of the sales price of a home is attributable to land value. The process of deriving a factor involves taking the median sales price of homes in your factor district then multiplying by 30% to arrive at a land value.
This year, all of the sales in your area were analyzed to derive a factor. The sample size, from sales occurring between 1-1-06 to 6-30-07, involved 439 sales. Taking 30% of the median sales price in your factor district indicated an upward adjustment of 50% was necessary to bring the land within the prescribed range of value.
Your property records show that this is your primary residence and you are under the 3% tax cap for your actual tax bill. This means that regardless of the amount of the increase in your taxable land value, your taxes cannot exceed a 3% increase from the previous year.
The appraisal process is confusing as the 3% cap is on the actual taxes, but the law did not change the way taxable land values are established, regardless of the amount of increase.
__________________________________
My concern here is that while it’s just dandy for them to keep saying ‘don’t worry, you will only pay 3% more’ that could be undone during the next legislative session and my taxes could easily go up 36%
I hope this helps bring some understanding to the increase in your taxable value. It really is not just a formula “thrown” at the properties.
Please contact me if you have further questions.
MikeZ
RE: “ad valorem” ad nauseam.
Get a thesaurus!
smarten
2sleepy states “my concern…is that while it’s just dandy for the [Assessor] to keep saying ‘don’t worry, you will only pay 3% more,’ that could be undone during the next legislative session and my taxes could easily go up 36%!”
So my question is what is it you and others like you intend to do other than complain and/or protest?
2sleepy
Smarten, you asked what I (and others)intend to do? For what it’s worth I am filing a “petition for review of assessed valuation” and sending it to the assessor’s office. The form is available at http://www.nevadapropertytaxrevolt.org/pages/Forms.html
smarten
2sleepy, filing a “petition for review of assessed valuation” was not what I had in mind. And it’s futile as Tom points out [i.e., it accomplishes nothing other than annoying the hell out of the pig].
I suggest you take a longer view and support efforts to permanently amend the State’s constitution.
2sleepy
Are you talking about Sharron Angle’s petition? I already support that effort, but if you know of any other group trying to achieve the same thing, please provide info on it
Daniel
Can anyone explain to me in language that I can understand, why we have a property tax. I am sure Marx and Engels could, then again they didn’t like the idea of private property.
smarten
Daniel –
Why do you have a sales tax?
Or a business inventory tax?
Or a vehicle license fee/tax?
If you don’t like a property tax, you’d hate a value added tax which acts like an excise tax on essentially all goods and services. They have this in Hawaii. Get a bill from your lawyer? There’s a tax added onto the total.
It’s really just another means of raising revenue for government.
Don’t know if this helps.
Daniel
They can collect the tax in other ways why property?
It’s punitive: It punishes the elderly. Don’t they argue that the elderly struggle with medical bills and prescriptions. How caring is it to add another two to three hundred dollars a month to their burden. If their property was paid for that would be one less concern for them.
It’s inefficient: Where does the needed revenue come from in a down economy? When people are walking away from their homes who pays then? When old people fail to pay their taxes they lose their homes. What then? Who picks up the cost to house them. One that would not be there if they were still at home.
It’s unfair and unjust: Let’s say an elderly person has a home valued at $300,000.00 in todays market and that they have a tax liability of $30,000.00, do they receive the difference? Maybe it’s just me but it seems unfair to take all of someones wealth and unjust to give it to another for a fraction of the cost. Especially from a government whose politicians pride themselves on looking out for the needy indiviuals in our society.
When I purchased my property my house payments did not go down in relation to my rent. I am sure that this is true for everyone. But just like my rent my house payment was paid out of my labor. I think thats where the revenue that is needed should be taken from, my paycheck. That would be more efficient because it would give them a steady stream of revenue despite the housing market. And it would not be putting out the aged and widowed.
Albert Einstein sayed to keep it simple. But then again with the government nothing can be simple.
Daniel
After some thought I get it. When we purchase something at the store we are having to pay a sales tax plus in increased price in the cost of goods to cover the taxes and fees (taxes by any other name is still a tax). Which is like a mini value added tax. Then we pay our property and income taxes plus our soc. sec. etc. etc. If this were all paid in one lump sum there would be another revolt, tea anyone. So it is spread out enough so that we only grumble. Whereas Hawaii sees it and can realize the actual cost of or governments inefficient management. Yet my response is still the same, all taxes are paid from our labor.