BERLIN — When north-end Worcester County property owners get their reassessment notices in the mail likely next week, most will see their values have continued to decline, but the level of decrease will likely not be as great as once anticipated.
Assessments of real estate values in a north end of Worcester County, including Berlin, Ocean Pines and other areas, were officially completed earlier this month, and new notices are expected to be mailed out by the end of the year. While most in the reassessed area will see their property values decline for the second straight time in the three-year cycle since the ongoing recession began, the average level of decline this time around appears to be around 9 percent, according to Robert Smith, director of the State Department of Assessment and Taxation (SDAT) for Worcester County.
“This year, we’re still seeing a downward trend, but not like it’s been the last three years,” he said. “Properties are selling at their assessed values or even higher than their assessed valued in some cases.”
Each year, about one third of the residential properties in Worcester are reassessed and the new values are used to determine property tax amounts. Because of the sheer volume of accounts in Ocean City, the resort is its own reassessment area every three years. The south end of the county, including Snow Hill and Pocomoke and a vast section of West Ocean City, is another assessment area, and the north end of the county including Berlin and Ocean Pines is a third assessment area.
For about six years during the most recent real estate boom in the county, the assessed values spiked dramatically upward, by as much as 78 percent in some cases, but in each of the last three years since the bottom fell out of the real estate market, the values have steadily declined. For Smith, the dramatic increases of four, five and six years ago were an anomaly, but the steady declines of the last three years are unprecedented.
“In all the years I’ve been here, I never saw a year when they didn’t go up at least a little before this recession,” he said. “In the last three years, they have gone down.”
Last year, residential property values in Ocean City declined by an average of 14 percent. This year, in the north-end of the county, the average decline came in at 9 percent.
Smith said the recent figures suggest the values are stabilizing somewhat and could indicate the market is starting to rebound.
“It’s not enough of a change to say ‘hey, this is over,’ but it is enough of an indicator to believe the market is starting to take a turn for the better,” he said. “It’s probably down an average of about 9 percent and in many cases it’s less than 9 percent. With the last group last year [in Ocean City], the average level of decline was around 14 percent, so you can see how it looks like it’s moving in the right direction.”
Nonetheless, Smith said the rather modest level of decline in the area assessed this year should not be taken as a sign the market is entirely healthy again.
“It’s not enough to claim victory yet, but the values appear to be stabilizing,” he said. “We’re not quite ready to shout that from the top of the mountain though.”
Smith said the number of property sales in terms of traditional arms-length transactions is down from last year, but the figure is a bit of moving target because his office does not include short sales and auctions etc.
“The number of sales is down,” he said. “We went from about 400 sales in 2011 to around 300 this year. That doesn’t include short sales, auctions, and foreclosures. They’re not included in our numbers, but we have to consider them because they affect the market. In the past, they weren’t looked at as much because there were enough arms-length transactions.”
Smith said commercial reassessments have been more stable during the recent decline, largely because the smaller sample size is less subject to wild fluctuations in the market.
“Commercial has traditionally been more stable,” he said. “This year, it looks like the commercial assessments are going down at an average of 7 percent.”
Smith said the reassessment of commercial properties follows a similar schedule as the residential properties with one notable exception. Because of the sheer volume of commercial accounts in Ocean City, the resort is divided into two roughly equal sections with one reassessed at the same time as the resort’s residential properties and the other lumped in with the north-end of the county. The dividing line is roughly 25th Street.
Even at a modest average of decline of 9 percent, local governments will still have to contend with declining revenues and increased demands for services at budget time, just as they have for the last three years. Last year, many area jurisdictions were forced to raise the property tax rate for the first time in several years.
“They’re going to have a tough job again,” said Smith. “They’re going to have to deal with many of the same issues such as hiring freezes, furloughs, selling equipment or closing programs.”