Fueled by unprecedented gains in home values, Washington State’s red hot real estate market has led to “unprecedented” increases in home values that will drive up next year’s property tax bills, according to the King County assessor’s office.
The Sammamish Plateau topped the list with a 52% increase from the previous year. That’s double the still eye-popping 26% increase in Federal Way. Other Eastside cities also saw staggering price increases; areas such as Redmond (43% on average), Woodinville (44%) and Kirkland (44.5%).
While not as extreme as on the Eastside, in Seattle proper, values are up 19% in Rainier Beach and 20% in Magnolia, according to the assessor’s office, which released a sample of data Thursday but is still finalizing values in other areas. The increases are significant, even for the overheated Seattle-area market.
The local market has taken off since early in the pandemic, spurred by a combination of few houses for sale, a flood of buyers taking advantage of low mortgage-interest rates, and a continuing influx of highly paid workers with stock options. That has driven up home prices across the region and worsened housing affordability. The median sale price for a single-family house in King County hit nearly $1 million last month.
Area-wide prices for single family home sales (excluding condos) in King County also increased, climbing nearly 20% from a year ago, from $830,000 to $995,000.
The value increases are likely to increase property taxes — but not quite yet.
This year’s property tax bills are based on last year’s assessed values, and these new values will determine next year’s taxes. The assessor’s office will mail out valuation notices starting this week.
The county hasn’t yet determined next year’s property tax bills, but the hottest local housing markets are likely to see “a double-digit increase,” said King County Assessor John Wilson. Property taxes won’t increase at the same rate as property values because of the way local taxes are calculated.
The latest MLS report showed a mix of positive and negative numbers.
Member-brokers added 11,681 new listings of single-family homes and condos during April, the highest number since last July when 12,916 listings were added, prompting some upbeat comments: “Did you hear that? It’s the sound of happy buyers in all areas other than King County celebrating last month’s jump in active listings as it means they now have more homes to choose from,” proclaimed Matthew Gardner, chief economist at Windermere Real Estate.
While it may seem unusual, rising property values don’t always have a huge effect on property tax bills. Instead, local levies are usually the biggest cause of higher property taxes.
The assessor’s office essentially determines how much property tax revenue is owed to various public agencies. The total amount the county generates can only increase by about 1% each year, except for voter-approved tax increases such as school and parks levies. Then, to reach that total amount, the assessor determines how much to charge each property owner, based on the value of the property.
- The Puget Sound housing market has shifted down several levels
- Not all homes are selling within the first week on market
- Multiple offers will not be as commonplace as they’ve been in the last two years
- The latest MLS report showed a mix of positive and negative numbers.
- New listings (11,681) surpassed the number of pending sales
- This is evidence that interest rates are having a cooling effect.
When values climb dramatically faster in some areas than others, property owners can see spikes in their bills as the county adjusts the proportional share of total taxes.
That’s what will happen next year, Wilson said.
“It isn’t a direct ‘my value went up 30% so my taxes will go up 30%,’ but when you hit this magnitude it has some impact,” he said. “We don’t want to kid the public.”
The county’s high assessments on the Eastside roughly echo home sales data from the Northwest Multiple Listing Service, which The Seattle Times maps each month.
With mortgage rates on the uptick, the market has recently started to show signs of cooling off. But county assessments are based on estimated values as of Jan. 1.
For many homeowners, rising home values have brought higher net worth and, if they want to sell, a chance to cash out. At the same time, higher property taxes can also strain lower-income homeowners who bought long before values climbed or tenants whose landlords cite property taxes to justify rent hikes.
King County offers property tax reductions for certain seniors and people with disabilities, but that program has been overwhelmed with applications, forcing people to wait months for a decision.