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If you were to try and illustrate the 2015 Portland real estate market, it would look like a Matt Zaffino weather map in July-- Red hot. The continuation of historically low interest rates, tight inventory (1.6 months as of June 2015) and high demand (thanks California) all contribute to increasing home prices in the metro-area (up 10.3% year-over-year). Great news if you're a seller. If you're a buyer however, the competition remains fierce.
So how does this current housing climate affect property taxes? Well, if you want to talk property taxes in Oregon there are three essential terms that you need to understand. Real Market Value (RMV), Maximum Assessed Value (MAV) and Assessed Value (AV).
RMV- According to the Oregon Department of Revenue, a property's RMV is "the amount in cash that could reasonably be expected to be paid by an informed buyer to an informed seller each acting without compulsion in an arm's length transaction.'' Simply put, it's what the county thinks your property is worth.
MAV- Is the taxable value limit established by Measure 50, calculated as 90% of a property's 1995-1996 (yes, you read that right) RMV with annual increases in value capped at 3% per year. Major improvements to an existing structure, new construction or the subdivision of a property are examples of 'specific property events' that would increase the MAV by more than 3%.
AV- The lesser of the property's RMV or MAV. Your property tax bill is calculated based on this AV.
All that being said, it's possible that your tax bill will only be increasing by 3% this year, even though the value of your property (RMV) may be rising by significantly more than that! This is because your property taxes are based on the lower of the RMV or MAV, the latter of which is likely to be lagging behind current values.
Conversely, when home prices were falling during the recession, some people in Oregon actually experienced increasing tax bills. Although a property's RMV was likely to have been in a sharp decline during this time, the MAV was possibly still trying to play catch-up, a consequence of locking property tax rates to 1995.
So, what's the bottom line? A healthy rise in your home's value does not necessarily mean a big jump in your tax bill!
Still curious to learn more? Reach out to us today to continue the discussion. Our team of professionals would love to provide further insight into this topic.
*OregonLive (2015, July). Portland-area housing market heats up in June with more sales, higher prices. Retrieved August 18th, 2015, from: http://www.oregonlive.com/front-porch/index.ssf/2015/07/portland_area_housing_market_h.html#incart_story_package