With just a few months to go before the county’s next tax revaluation, some of Alamance County’s leaders seem to be ruing their decision to hasten this mass reassessment of property from its original implementation date in 2025.
The county’s board of commissioners ultimately made no move to reverse its earlier decision on Monday when its members formally received the proposed rule book for next year’s countywide reappraisal. Even so, some of the commissioners confessed their reluctance to proceed with the reval right now due to growing indications that the local real estate market may be teetering on the brink of decline.
The prospect of an impending shift in the market was also very much on the mind of the county’s tax administrator Jeremy Akins as he presented the proposed “schedule of values” to the commissioners on Monday. Akins acknowledged that this 381-page document, which is intended to serve as a pricing guide for the upcoming reval, was compiled at what appears to be at a high point in the real estate market.
“I definitely think that we have a decline coming,” he conceded when he appeared before the commissioners on Monday. “As of right now, it hasn’t hit on price. But it has hit on volume…Market time is extending. Market transactions are dropping, and we’re getting more sales that are below listing, although it’s still a minority of sales at this point.”
Akins went on to predict that the sale prices of homes may very well slide downward in the coming year. Yet, he assured the commissioners that his proposed schedule of values has been carefully calibrated to capture home values as of January 1 – the anticipated target date of the forthcoming reval.
During his hour-long presentation to the commissioners, Akins delved deep into the schedule’s assumptions to demonstrate just how accurate he expects the results of the revaluation to be. He stressed that, at the end of the day, this document strives to reflect the actual state of the real estate market – as seen through a prism of real-world data such as the sale prices of homes, the cost of construction, and the incomes of area property owners.
“The accuracy of the valuation model is measured in real world performance,” he went on to add, “and this model has produced very good results so far.”
Akins told the commissioners that of all these data points, home prices will be particularly vital to the revaluation’s final results. He added that, in order to obtain a reasonably large sample of sales figures, he and his colleagues scoured real estate transactions from January of 2020 until August of 2022. Akins acknowledged that the demand for housing increased substantially during these 32 months, which prompted him to develop three different statistical models to ascertain the effect on individual sale prices.
Akins told the commissioners that he initially took all of the sales, grouped them by the age of the homes, and weighted those figures to account for depreciation. He added that the resulting numbers revealed a growth rate of 58 percent for the 32-month period. He then focused his attention on homes built within the last 10 years and calculated a more modest increase of 54 percent. Finally, he obtained statistics from Zillow for eight communities within Alamance County and weighted those averages based on the number of sales within each of the submarkets. Akins told the commissioners that this third approach also generated a 32-month increase of 58 percent.
Akins said that he graphed the growth trends which these models produced and found them to be relatively close to each other. He then consolidated these results into a single line, using whichever one of the three growth trends happened to be in the middle at any particular point.
Akins told the commissioners that he also made some modest predictions in order to account for home sales through the end of the current calendar year. Akins said that, in the final analysis, he wound up with a three-year growth rate of 55.75 percent – which he conceded would be even higher if he considered the increase since the last countywide revaluation in 2017.
“When I’m reviewing the market, I’m looking at sales as old as 2020 and making adjustments,” he added. “But the change from the last revaluation in January of 2017 [is] preliminarily 75 to 80 percent, and I’ve never heard of anything like that before.”
This surge in local home prices, combined with the likelihood of a downturn sometime next year, generated a great deal of angst for the county’s governing board. Some of the commissioners even flirted with the idea of a delay in the revaluation so that area residents wouldn’t be locked into tax values assessed the height of the market.
“When is the last day that we can pull the rip cord and say we’re going to wait?” inquired commissioner Bill Lashley as he considered the prospect of an imminent market adjustment.
Akins conceded that the commissioners have until the end of December to scuttle their plans for a revaluation in 2023. He recalled that, under state law, the county is only obligated to conduct a revaluation once every eight years – a pattern which Alamance County had followed until the spring of 2021, when Akins convinced the commissioners to advance the next reval by two years in preparation for an eventual transition to a four-year revaluation cycle.
Akins proceeded to remind the commissioners of the reasons why they had agreed to shorten the revaluation timetable at his behest. He noted, for instance, that the county currently has large a discrepancy between sales prices and tax values, which has prompted the state to slash the tax rate for utility companies that own property in Alamance County. He added that this state-implemented reduction, which will remain in place until the next revaluation, is costing the county something on the order of $400,000 a year.
Akins conceded that a revaluation at the height of the real estate market could set off an avalanche of appeals once property owners get their new tax values in the mail. He added, however, that he and his staff will be able to address many of these objections, and he expressed confidence that the county’s board of equalization and review is well equipped to handle the rest. Akins also assured the commissioner that, the average taxpayer wouldn’t see much, if any, change in their tax bill as long as the commissioners set a “revenue-neutral” tax rate after the reval.
Akins went on to warn the commissioners about the risk they would run if they postpone the revaluation in hope of waiting out any impending turn in the economy.
“We could push back one year if we wanted to,” he added, “and if we choose to wait, we can write [the assessments] down probably a little bit. But there’s no guarantee, and we would’ve lost our options at that point. So what happens, if next year it flat lines, and we’re out another $400,000 on utilities?”
In either case, Akins urged the commissions to at least hold a public hearing on the schedule of values during their next regularly-scheduled meeting on November 7. He noted that, in the past, feedback from the general public has convinced him to revise the schedule of values. He added that the commissioners allow a couple of weeks for these comments to surface before they render their own decision on November 21. Even then, Akins said that the county must give the public five weeks to appeal the newly-approved schedule before its final implementation on December 26.
In the end, the commissioners voted 5-to-0 to hold the state-mandated hearing on November 7, and they tentatively agreed to follow the tax administrator’s suggested timetable for the schedule’s approval. Yet, some such as Lashley were also emphatic that Akins should take the lead in selling the timing of the upcoming reval to the general public.
“Knowing that this number is going to be so large and that it’s going to take people by surprise…is there any way we can have this conversation again?” Lashley asked the county’s tax administrator. “The numbers you have are legit…and right now we’re okay,” he added. “But next December 31 , we will not be okay…we’re going to have a recession, and we should understand as officials that these numbers are going to look a lot worse than they do right now.”