First of two articles
At first glance, it looks like nothing more than Economics 101. When demand is high and supply is low, prices go up.
Yet Maryland's huge rise in residential property values, led by Montgomery County, is fueled by a more complex mix of economic and social conditions, ranging from the proliferation of condominiums to the war on terrorism.
Construction worker Julio Ramos at a large "in-fill" house under construction near smaller dwellings in the Wyngate neighborhood in Bethesda.
(Andrea Bruce Woodall -- The Washington Post)
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The results dropped with a thud in early January into mailboxes of thousands of Maryland homeowners, especially in Bethesda, Chevy Chase, Olney, Potomac and Wheaton in Montgomery County, where average property values grew by an astonishing 65 percent over three years ago, when those homes were last assessed.
While the spike was greatest this year in Montgomery, residents across the state learned from terse assessment notices that their home values have gone way up. Such revaluations are always a "good news, bad news" proposition for homeowners, increasing the value of what is probably their most important investment while also signaling higher property tax bills.
In St. Mary's County, assessments rose, on average, 37 percent; in Frederick County, 56 percent; in Calvert, 50 percent; and in Prince George's, 40 percent. Howard County rose 49 percent, and Anne Arundel was up nearly 48 percent.
About a third of each jurisdiction's houses are reassessed each year, so next January probably will bring another round of substantial increases, when the next group of properties is revalued.
Commercial properties are reassessed at the same time but make up a small percentage of the total.
"It's probably the highest increase across the state that I can remember, and I have been here 30 years," said Bill Stansbury, who heads Maryland's team of about 250 state assessors who set the values of homes by studying their exteriors (they don't go inside) and poring over sales records. They pass their findings on to counties and cities that use the data to figure out how much to tax property owners.
Economists, real estate agents and other experts cite the interplay of several national and regional factors in the steep rise in Washington area home assessments.
Despite concerns after the Sept. 11, 2001, terrorist attacks that housing values in the region might plummet, investors who traditionally looked to Wall Street have increasingly entered the real estate market. The region, while remaining a high-profile terror target, has benefited from that shift.
Combine that with a burgeoning new homeland security industry, which has poured millions into local companies and spawned many new ones. Add on the already vibrant regional biotechnology and biodefense industries and other white-collar professions nurtured by their proximity to the federal government. And mix with low-interest home loans and population growth. The result is a local economy with strong job growth -- especially in relatively high-paying jobs -- and a heightened demand for housing.
"The state economy has done extremely well through the recession," said Mahlon Straszheim, head of the Economics Department at the University of Maryland in College Park. "The economy is extremely strong, and there is relatively little unemployment," he said.
In Maryland, other factors also affect local housing markets. Newcomers are streaming into Calvert, Charles and St. Mary's counties, searching for bigger, cheaper houses that also offer an easier commute to Southern Maryland's growing defense industry.
