Market shows no signs of stopping

May 22—Nez Perce County homeowners can expect some eye-popping increases in their assessed property values this year, based on what officials are calling "the most aggressive seller's market any of us have ever seen."

Final numbers aren't in yet, but certain classes of residential properties will likely see increases of 20% or more. Some individual homes may jump three times that amount.

"I've seen markets rise and fall, but I've never seen the kind of sustained growth (in home prices) we've had the last few years," said Nez Perce County Assessor Dan Anderson, who has served in that position since 1988. "It's unprecedented. I remember when I first became assessor, the county had three sales over $125,000 and we wondered when it was going to stop. Today, you couldn't buy a garage for $125,000."

That surge in market prices is driving up assessed valuations — the amount used to calculate a homeowner's property tax bill.

Anderson is quick to note that higher property assessments don't necessarily equate to higher property taxes. Depending on what happens with taxing district budgets and the overall tax base, individual homeowners may not see any increase in the amount they owe.

Nevertheless, he still wants to give people some advance warning about the 2022 assessment notices, which will be mailed out the first week of June.

"Residential properties are where we have the most sales, so they're going to be the most affected," Anderson said.

An assessment is an estimate of a property's current market value.

By state law, county assessors are required to physically inspect a property once every five years. That lets them keep track of any changes or improvements that have been made.

However, property assessments are also updated every year based on comparable sales. That means if the market for a certain property type is really hot, everyone who owns that kind of home is likely to see their assessment go up, even if they haven't made any improvements.

For example, Jeff Freeland, senior appraiser in the Assessor's Office, noted that sale prices for Class 4 homes in Lewiston increased 21% in 2021.

A Class 4 home — which has a main level and a basement — is the most abundant residential property type in Nez Perce County, he said. Over the past three years, a total of 544 Class 4 homes have sold within the city limits. That's one of every six Class 4 homes in town.

Prices for Class 4 homes in the Lewiston Orchards are up about 18% over the past year, Freeland said. Those located downtown are up about 25%.

Chief Deputy Assessor Brad Bovey said his office does a lot of statistical analysis to try to make sure assessments are based on apples-to-apples comparisons of home sales.

Sales of Class 4 homes in downtown Lewiston, for example, wouldn't be used to determine comparable sales values for Class 4 homes in the Lewiston Orchards. Similarly, a single-level home with a full basement wouldn't be compared to a single-level home without a basement.

The whole goal, Bovey said, is to come up with an accurate assessment of what each property is actually worth in the current market.

"And you can imagine, when we have a year like this, we analyze things to death," he said.

Bovey has personal experience with the impact today's booming real estate market is having on assessed values.

"I have a Class 6 single-level home on a half-acre," he said. "We built it four years ago. Last year, my assessment increased $25,000. This year it's up $224,000. That's a 61% increase."

And there's no indication the market is letting up. Over the past month, 96 single-family homes have sold within Lewiston; two-thirds of them sold for more than $400,000. Another 18 homes sold outside of the city limits; none of them went for less than $500,000 (see sidebar).

"We've been thinking the last five years that the market will plateau, but it hasn't," Freeland said. "We aren't seeing a slowdown, so we follow the law and do our job."

State law requires that property assessments be set at 90% to 100% of the market value. Anderson's policy is to peg them at 97%. He could drop that to 90% and potentially save homeowners a little bit at tax time, but in a market like this, he said, that doesn't do anyone any favors.

"I had a friend who did exactly that for two years, and now he's having to double the values (to meet the statutory requirements)," Anderson said. "I'll not do that. You might think I'm doing you a favor, but it's a huge disservice in a market like this, because at some point it catches up with you."

If his office were to ignore the 90% to 100% requirement altogether, he said, the State Tax Commission could come in and raise everyone's assessment to 100% — without recourse to appeal.

Even with his 97% policy, though, assessments aren't keeping pace with market prices.

Anderson gets reports every day showing recent home sales. He pointed to one where the assessment jumped from $293,000 in 2021 to $355,000 this year.

"It just sold for $427,000," he said.

Another property was assessed at $186,000 last year and $283,000 this year — a 52% increase.

"It just sold for $300,000," Anderson said. "I could go on and on. This is what I see on a daily basis."

Similar activity is taking place in the commercial realm.

"Commercial ownership transfers have increased 30% over the past two years," Anderson said. "They're selling for an average of 16% over assessed value."

In the past year, he said, the total assessed value of commercial property in Nez Perce County is up about $200 million. New construction accounted for less than 10% of that.

"And that still pales in comparison to what we're seeing with residential," Anderson said.

How all this affects a specific homeowner's property tax bill, though, is a more complex question.

Nez Perce County Clerk Patty Weeks noted that assessed value is just one of three variables needed to determine someone's tax liability. The others are local government budgets and what's happening with the overall tax base, and those figures won't be available until later this year.

"We don't have all the pieces to the puzzle yet," Weeks said.

The annual property tax levy for any given taxing jurisdiction is determined by dividing its budget — the amount of money it needs to raise from property taxes — by the jurisdiction's property tax base.

For example, Nez Perce County's net tax base was about $4.07 billion in 2021. That's the combined assessed value of all property classes, minus any exemptions, such as the residential homestead exemption.

The county commissioners approved a $19.3 million property tax budget. That amount was divided by $4.07 billion to produce a 2021 levy rate of 0.00476, or 0.476%.

As new construction takes place and as assessed values increase, the county's overall tax base will increase apace. Assuming the base goes up at a faster rate than the budget, the 2022 property tax levy will be less than 0.476%.

That number will then be multiplied by the net assessed value to determine the tax hit for any given property. Only then will homeowners know if they owe more money this year than they did last year.

"It's like baking a cake," Anderson said. "You have the flour and eggs and sugar, but it isn't until you mix them together and bake them that you know how the cake will taste."

Nez Perce County typically sets its budget and levy rate in September. Other taxing jurisdictions follow their own schedules. The dates of their public budget hearings are included on the assessed value notifications.

Weeks said her office and the Assessor's Office are also happy to walk people through the process and help them understand what's going on with their assessment and why.

"We try to make it easy," Anderson said. "Most of the time you don't even need an appointment."

Spence may be contacted at bspence@lmtribune.com or (208) 791-9168.