As I write this, the latest news is that many of the Indiana Property taxes, particularly Marion County property taxes, are in for a decline. According to the latest information I got, based on a phone call to the Marion County Assessor’s office (317- 327-4907) , most of the county property tax rates declined since the 2007 estimate. In our case, that means that most assessed value (and taxes) went down for homes – and homeowner property taxes. Our home’s assessed value for Indiana property taxes fell about 8%. But that doesn’t mean we’ll necessarily pay less for Indiana property taxes on our property. Read on to find out why.
On the face of it, it would appear to be good news that we might get a refund or credit on future property taxes. If you happen to be someone who could be affected, you can check your status for your township right here: www.indygov.org/eGov/County/Assessors/home.htm
This will give you a fair idea of the odds that you’ll be paying less. Those in Indiana, particularly Indianapolis, have gone through a fair bit of drama, seeing their Marion County property taxes in 2007 soar to double or triple the amount they paid the year before. All we had to do was open our bill to see the sad reality before our eyes. We were lucky compared to one friend whose property taxes doubled – for two years in a row . The sticker shock was enough to get people to wake up and start screaming like crazy, post signs in their yard saying things like “This home for sale due to high property taxes” (a strange sales strategy) and more.
If you don’t live in Indiana, you might wonder what on earth any of this could have to do with you. Isn’t it a good thing to pay lower property taxes and maybe even get a refund, especially during a recession?
Not necessarily. When property taxes are cut, consumers and homeowners often feel the pinch elsewhere – particularly during a recession. Schools still need funding and so do plenty of other services covered by home property taxes. Because lower property taxes often create a shortfall, potential negatives include:
1. Higher sales and income taxes, now in discussion.
2. Government employees getting fired and losing their jobs and less government services. Information about the reality of this has been researched by many, including a Purdue economist. That info can be seen here: news.uns.purdue.edu/x/2008a/080109DeBoerIndiana.html
3. People in the general job market could face higher levels of unemployment. There is a ripple effect when the money isn’t there.
4. If you go to the library to save money on buying books, you may be in for a shock as the budget to buy books may well be cut and there could be less librarians around to answer your questions, especially at state libraries.
5. Municipal services are cut, potholes bloom faster than spring bulbs and they get fixed slower than it takes a snail to get…well, nearly anywhere. It could take years for some roads to see improvement, while frustrated drivers pay high gas prices and watch their tires get shredded on the decomposing streets. Those lower property taxes come with a major trade-off, one that affects all of us.
But there is more for homeowners to consider than the above scenarios. For instance:
We live in the same home we did in 2007 but its “assessed value” was high even while home sales were down. Now its assessed value is lower . Plenty of homes are selling for less, from what I can see by going to open houses and Indiana homes for sale. Based on current home prices i the area, our home may still be slightly overpriced for the market. Selling a home is tough these days – not just in Indiana but in many areas of the country.
What about any connection between homeowners insurance and state property taxes during a recession?
Glad you asked. Even if your home’s assessed value goes down, along with property taxes, you may end up paying the same – or more – for your home insurance premiums. You might end opt to do so.
You may still want to pay for property taxes based on the old assessment – or even a slightly higher assessment. Why? Because you want your insurance to pay most (if not all) of the replacement value of your home. While there may be a correlation between a recession and lower costs for home building or replacing your home, don’t count on it. Do your research and know how much your home would cost to replace. Make sure you have appropriate insurance, especially during a recession, unless you were really looking to move into an apartment at a lower rental price than your mortgage payment, don’t care a whit about home equity, etc.
Also, be prepared for your insurance company to contest your homeowners’ insurance if your property taxes drop. If something happens to your “insured” home, see if they’ll pay for past replacement value or the new, lower replacement value. After all, if you can’t sell your home for its insured value, how much is it really worth? By the way, median Indiana home prices in our area were $220,000 in 2003 and are an alarming $160,000 now and yet our home is appraised for far more than that. Hmmmm….something seems a bit off, especially when I do comps (comparison of similar home sales in our area).
To get an idea of how much sale have fallen in your zip code, check out this site: city-data.com
You can find your city, get your zip code and see recent home sale and the average home price in your area as well as number of sales. You’ll either smile – or wince. I winced. Wow, had the average price in home values gone down!
Meanwhile, our homeowners insurance has soared. Yes, we’ve shopped around. Apparently, many homeowners insurance companies have no trouble charging for insurance but they do have issues with paying for homes that have gone down in value. Unfortunately, they don’t usually go back and refund the money people spent paying for premiums that were for a home that was valued (usually by the insurance company) at a high price. You may be able to get lower premiums by arguing that your home is worth less but research the current replacement cost for your home before you do that.
Depending on where you live, your property taxes could still soar in a recession.
Doesn’t make much sense, does it? But as recently as April 2008, property tax increases occurred across the country. Spring Valley property taxes (in New York) went up about 10%. In other areas, there were also increases in property taxes. No wonder people are deserting their homes, suffering foreclosures or even having to give up homes because they can’t pay homeowners association fees. For info on property tax increases across the country, you can check here:
Bottom line – don’t expect your property taxes to go down if there is a recession. Even the county assessor’s office staff predicts that we could actually owe more rather than get a refund. I don’t understand the complicated math about how property value could fall but we could owe more in taxes but I’m sure there is something I’m missing, something hidden in all that math. At this point, it simply isn’t clear how many people will owe more and who will owe less in Indiana property taxes. So I’m still waiting for some information.
Just remember that anything your Municipal Government pays for – well, it usually comes from property taxes, as much as 40%, according to the Census Bureau.
As for us, we bought our house with hopes that it would increase in value over time, one reason we decided to buy a home rather than rent an apartment or home. These days, it feels more and more like we are renters and not homeowners. And the home we have? It is a depreciating asset, until we get that tax break we’re told we’ll get if and when we sell, assuming there will be any buyers around at that point.