S&P/Case-Shiller released its November 2012 Home Price Index this morning. Home prices in the 20-City Composite, which includes Portland, rose 5.5% in the twelve months ending in November 2012. Portland rose 6.7% over the same twelve months.

Two overlooked points:

1. Whereas the November to November numbers are strong, more impressive is the change from the low point. Portland home prices were 10.2% higher in November 2012 than eight months earlier in March 2012.
2. We have opined for some time to friends and clients that we thought the Portland market was excessively discounted. Put bluntly, houses were just too cheap. The recent appreciation is more of a “correction.” So is there more correction left? We think so. Assuming a historical growth rate in home prices of 4.0%*, Portland and U.S. home prices are still 15% below the long term trend line.

Many factors affect the housing market. We’ll review 2012 and forecast 2013 in the days ahead.

*Robert Shiller, co-creator of the CS Index, charted in Irrational Exuberance (titled after the famous term coined by former Fed Chairman Alan Greenspan) the growth of U.S. home prices since 1890 at a little under 4% per year. Other sources have supported that conclusion.

Property taxes were due yesterday, and many Portland homeowners wonder why their taxes haven’t decreased over five years like their home values have. Here is our simplification of a complex topic:

Property taxes are based on the property’s assessed value (AV) multiplied by the applicable millage rate.

Millage rates vary by taxing district and are limited by Measure 5 (passed in 1990), with exceptions.

Assessed value is the lesser of:

• Real Market Value (RMV), which is the market value on January 1st preceding the July to June tax year, or

• Maximum Assessed Value (MAV), which is the taxable value limit of each property determined under Measure 50.

• Measure 50 amended the Oregon constitution to set the 1997-98 property tax year assessed values at the January 1, 1995 real market value less 10%. Since then the MAV has increased three percent each year, no more, no less. One of the arguments made at the time was that a three percent growth rate provided stability and predictability to the property tax system.

Portland Real Market Values (RMV) ) for the 2012-2013 tax year, as estimated by the Case-Shiller Index of median home sale prices, are still well above Maximum Assessed Values (MAV).

In other words, the Maximum Assessed Value of most homes in Portland is still well below the Real Market Value. For most homeowners, there is nothing to appeal.

So who should appeal their property taxes?

• You think the real market value on January 1, 2012 was less than the assessed value (which is usually the MAV). A bargain purchase, such as from a relative or a distressed owner, will be evaluated at its fair market value, not necessarily what you paid for it.

• You disagree with the county’s valuation of new construction, remodeling, or other exceptions. Since these are not usually identified on the property tax statement, you will need to contact the county assessor to find out the value placed on any improvements you made. It makes sense to appeal an over-valued RMV for last year’s improvements because it affects both the property RMV and the MAV. You cannot appeal the MAV later.

• You think the Assessor’s Office made a calculation error in setting the assessed valuation.

How the valuation appeal process works
The Board of Property Tax Appeals only considers assessed valuations. It can not determine the amount of tax to be assessed, nor can it consider financial hardship as a basis for changing an assessment. Appeals will only be heard for current year values, which is why the only way to affect the MAV on improvements is to appeal the RMV of those improvements in the year assessed.

Appeals must be filed between the time property tax bills are mailed and December 31st. More information is available at the Board of Property Tax Appeals web site.

If you miss the deadline or seek to appeal a prior year’s value, you may still be able to file an appeal with the Magistrate Division of the Oregon Tax Court.

As mentioned, a number of fine points have been omitted for simplicity. Consult appropriate professionals if you have concerns.