The Big Stretch

As Property Tax Assessments Rise, Owners Experience Sticker Shock -- Again

Just as Sara and Erik Franklin were getting over the price of houses inside the Beltway, something arrived in the mail at their North Arlington home that gave them a new dose of sticker shock.

Although the couple had a fixed-rate mortgage on their first home, the letter from their lender informed them that the monthly payment had gone up by about $100.

"I almost had a heart attack," said Sara Franklin, 34. "I said, what is this? Why did my payment go up? I called them up. I was livid."

The letter was her introduction to a downside of the thriving real estate market: Assessments go up. So do property taxes.

The Franklins paid $320,000 for their 72-year-old Cape Cod in 2000, about 15 percent more than they had hoped to spend. But the house is worth a lot more now. According to the Arlington County Department of Real Estate Assessments, the value has almost tripled in six years. Consequently, the Franklins' annual property tax, which they pay along with their mortgage, rose to $5,052 last year from $2,395 in 2000. "I was kind of naive. It took me a while to put the two things together," she said.

The Franklins, who have two young children, are hardly the only ones stretching to pay larger-than-expected tax bills. As local governments mail out assessments after another booming real estate year, many people are experiencing the double-barreled sticker shock of pricier homes and higher property taxes.

In Arlington County, for example, which sent 2006 property assessment notices last month, the average home value went up about 18 percent from the year before. In Maryland, which assesses a third of properties every year, home values went up by an average of 67 percent from three years earlier.

Those in other jurisdictions can expect significant increases, too, because the real estate market broke numerous records in 2005, despite the cool-off in the latter part of the year.

Higher assessments, of course, are a measure of the handsome nest eggs homeowners have built up in recent years. But more immediately, soaring values mean extra money out of pocket for those who don't plan on cashing in anytime soon. And that, after years of double-digit gains in housing prices, has altered the way many homeowners live and spend their money -- from young couples who scrutinize prices at the shopping mall to retirees who share their homes with their children.

The Franklins say they can afford the increase, although it has certainly pinched them in other areas. Sara, a part-time events and wedding planner, thinks twice before she buys a new bag or a pair of shoes. And Erik, 33, a sales engineer for a software company, limits their visits to the neighborhood steakhouse. That's for special occasions now.

And although they are "bursting at the seams" in their 1,800-square-foot house, Erik said they have put off plans for an addition to accommodate a family sitting room for fear of even higher property taxes. The house "has been a great investment," Sara said. Still, "I wish it would kind of level out a little bit."

Assessments, unlike appraisals, are estimates of property values based on clusters of similar homes. Local governments base property taxes on these valuations. A huge increase in assessments need not automatically lead to a big jump in property taxes, but it frequently does.