Earlier this week I received the latest annual assessment on my condo from Arlington County. Whoa! My assessment went up by 27 percent from last year, which itself was an increase of 20 percent over the previous year; in Arlington County, condo values have increased at a higher rate the past two years than have single family homes [update: single family homes increased by an average of 17 percent]. Granted, I benefitted from the significantly higher appraisal when I refinanced last fall, but I'm dreading my tax bill later this year.
I bought my condo in 1997. By 1999 the assessment had fallen 7 percent, but in 2000 had increased to just shy of the 1997 assessment. In the Arlington housing boom since then, however, the value has dramatically shot up to an assessed value 83% higher than the 1997 value. And on the market the condos in my building are going for even higher than the County assessments. I've had cold calls from realtors with interested buyers for my unit; of course, if I sold it I'd just have to pay the same premium to buy anything new, so the increase in value is only theoretical, while the additional tax expense is real.
I'm just really lucky I bought when I did. With federal salaries increasing only by low single-digit percentages each year, while home prices are rising 20 to 25 percent annually or even more, I wouldn't easily be able to afford my modest 1,300-square-foot condo now.
It's incredible how the housing market continues to boom. When I refinanced my townhouse condo last year, I was shocked to discover that it was worth more than DOUBLE what I paid in 1998. It was very tempting to wrest a huge chunk of cash out of it, but I was worried about a future burst to this bubble. I only took out what I needed. Yet, when my assessment arrived, it went up drastically - nearly 30 percent. Isn't real estate both wonderful and scary at the same time? It's worrisome that prices are so high, as I simply would not be able to afford my house if I were to try to buy it today. The disconnect between the housing market and the rest of the economy is a disaster waiting to happen... or has it already happened?