As hot real estate market moderates, county approves earlier revaluation

When Asheville Realtor Randall Blankenship travels to conferences across the United States, people immediately respond to the city printed on his name tag.

“Asheville is a buzzword,” he says. “People know it as well as Chicago or New York or San Francisco.”

But like an airplane leveling off after a rapid ascent, local Realtors believe the strong upward climb in property values in the Asheville housing market could be giving way to a more relaxed rate of growth.

“People still have this anecdotal belief that, ‘Oh, the market is just crazy,’” says Steve Heiselman, a Realtor with Town and Mountain Realty. “Well, it’s not anywhere near as crazy as it was, and it’s been kind of steady for the last two years as far as appreciation.”

Even though the market isn’t as hot as it has been in the recent past, local market surveyors say the county is still experiencing healthy growth, and in response to a persistent increase in property values, Buncombe County has moved its planned 2025 property revaluation up to 2021.

While property values are still increasing, local Realtors say they’re not increasing at the rate that they have in the past.

“I think that is a trend we’re going to see continue as the appreciation rates are cooling a little bit,” says Beverly-Hanks & Associates President Neal Hanks. “But I don’t think they’re going to go negative.”

Talking about a revaluation

The results of Buncombe County’s last revaluation were approved in 2017 and produced an approximately $6.8 million, or 28 percent, increase in the value of the county’s property base.

Although the reappraisal laid the groundwork for a 7-cent decrease in the overall property tax rate, the approved figure ended up being 2.6 cents higher than the revenue-neutral rate, which would have kept the county’s tax revenue in line with the previous year.

Those changes worked out to a higher tax bill for many property owners. A house with a tax value of $300,000 before the most recent revaluation, for example, would have been worth $384,000 if its value increased by the countywide average of 28 percent. The home’s county tax bill at the tax rate in effect (60.4 cents) before the revaluation would have been $1,812, while its bill at the 2017 rate (53.9 cents) and higher value would have been $2,069.76 — a 14.2 percent tax increase.

The county gets the vast majority of its funding from property tax revenue. In the adopted fiscal year 2019 budget, about 62 percent of the county’s general fund revenue, or $197 million, comes from property taxes.

Even though the state only requires revaluations to occur at a minimum of every eight years, Buncombe County Tax Assessor Keith Miller says the county has been consistently performing revaluations on a four-year cycle. This is common, he says, for a county of Buncombe’s size. “That’s about what it takes to be able keep up with the appreciation in the local market,” he says.

The N.C. Department of Revenue, the state agency in charge of overseeing county appraisals, sends a sales ratio study to Buncombe County at the beginning of every year that shows how updated property values compare to the assessed value tabulated by the county during the last revaluation.

In 2017, the county’s assessed value was at about 99 percent of the actual value of properties in the county. In 2018, that number dipped to 92 percent. An internal sales ratio study for the third quarter shows the county has a sales ratio of about 86 percent, just short of the 85 percent threshold that would trigger a state-mandated revaluation. County staff asked commissioners to advance Buncombe County’s reappraisal to 2021 to get ahead of that trend.

Miller says this decrease in the sales ratio also creates another problem: inequity. Depending on the rate of appreciation on a homeowner’s house, residents could be paying taxes based on an assessed value that no longer represents the updated value of their home. This change in value oftentimes happens at different rates. “What a reappraisal does is it corrects those inequities in the market to bring everybody back to a 100 percent market value,” Miller says.

When Miller presented the proposal to the Buncombe County Board of Commissioners on Dec. 4, members of the board sounded receptive to the date change.

The last time Buncombe County waited more than four years for a reappraisal was in the stretch between the 2006 appraisal and 2013, a decision motivated by a desire to bypass the 2008 recession.

“If we go longer than [four years] then … it would be too much a jolt to the system,” said board Chair Brownie Newman. “We don’t want to do it too frequently, but we also don’t want to do it too infrequently, so four years feels right to me.”

Commissioner Joe Belcher said during the meeting that the county was on a longer cycle during his first year as a commissioner.

“The adjustment was quite large,” he said, “so I think there’s equity in four-year cycles.”

Commissioners ultimately approved the schedule change during their meeting on Jan. 2.

‘Past its hottest point’

Multiple listing service data compiled for all types of residential properties in Asheville shows that the median closed price has been on a steady increase in the Asheville area since 2011, when the market hit its nadir after the housing bubble burst in 2008.

From 2011-2018, the median closed price of residential properties in Asheville has increased 57 percent, but Heiselman says the city’s housing market is about two years past its hottest point.

Home prices increased 10.4 percent from 2015-2016. The rate of increase then moderated somewhat, to 8.3 percent the following year, and then again through early December 2018 to 7.3 percent.

“It’s just not sustainable to have appreciation rates as high as they were,” Heiselman says.

Buoyed by new confidence in the economy following the 2008 recession, Heiselman believes Asheville became more and more desirable for wannabe-homeowners around the beginning of the new decade. As demand accelerated, some people had difficulty finding affordable homes and stopped looking in Asheville. “It just sort of tempered itself,” he says.

Factors at play

At the moment, David Bluth, the owner of the BLUEBLAZE Real Estate Group, is seeing a gradual increase in housing inventory, but demand is still strong enough to sustain healthy growth in the market for homes between $250,000 and $500,000. Bluth believes demand for homes in the range of $1 million to $2.5 million, however, could diminish. “There’s just not much inventory turn in that market,” he says.

Bluth is also sensing less movement in the investment market as increases in prices and interest rates make it difficult to eke out a profit renting properties to residents. He foresees an increase in rental options, which could help drive down the cost to renters.

Bluth thinks the moderation of Asheville property values could be tied to changes in the area’s feeder markets.

“Florida is one of our big feeder markets and as Florida has slowed down, and Floridians have struggled a little bit with their house sales, then they tend not to purchase here,” Bluth says. He believes volatility in the stock market also has an impact on many homebuyers, a good portion of whom are retirees or are purchasing a second home.

As the stock market stumbles, investment portfolios become more erratic, which makes it difficult for retirees to make the financial commitment for a home. “A huge part of our market is retirees,” Bluth says. “So if the retirees don’t feel good … they’re not going to buy a second home.”

According to the U.S. Census Bureau, 21 percent of homeowners in the Asheville MSA in 2017 were 44 or younger. Of the area’s approximately 129,300 owner-occupied housing units, 59 percent had a household income of $50,000 or more.

High expectations

Blankenship, who works as a Realtor for Coldwell Banker King and represents Asheville on the board of directors for Carolina Multiple Listing Services, says buyers aren’t feeling as pressured as they have in the past to leap into a major housing purchase.

“Folks are smart,” Blankenship says. “They’re not going to overpay, but they’re willing to pay fair market value.”

The housing industry is changing, he says. Buyers are realizing that they don’t have to settle for a home that doesn’t meet their expectations, so they’re waiting until the house they want appears on the market.

People who move here, he says, come with the intent of staying for a long time, meaning they’re more deliberate about their decisions than buyers in other markets.

Although they’ve become more meticulous, some buyers do still have trouble finding a suitable house that’s also affordable. Bluth says the buyers he’s working with have high expectations about the kinds of amenities that will be present in a home in their price range. “They can’t find a house they want, basically, even at that price point,” he says.

Bluth encourages his clients to negotiate with forethought about how much the value of their home will change in the years after the purchase. “You don’t want to overpay in this environment,” he says.

Editor’s note: The print version of this story was published before the Buncombe County Board of Commissioners voted on Jan. 2 to advance the county’s next revaluation to 2021. The online version of this article has been updated to reflect that decision.