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The Forgotten Impact of the Booming Housing Market
Always remember: the government will gets its share of the economic pie any way it can.
Over the past several months, there has been article after article (links) either praising or deriding the skyrocketing cost of housing.
- Buying is “beyond crazy and frustrating.”
- First-time buyers are “squeezed out of the market.”
- Home prices are “detached from reality.”
But the one thing that you haven’t read about all that much is the increase in the housing appraisals, which also increases a homeowner’s tax liability.
How Property Tax Works
There are two different values of a house.
- Appraised value
- Assessed value
The appraised value is an educated guess as to the fair market value (i.e. the price a home will sell for), given the current market, comparable nearby houses, condition of the house, etc.
Additionally, when taking out a mortgage, the appraised value needs to meet or exceed the value of the loan. Otherwise, the bank would be making a loan that was worth more than the underlying asset, and it would probably be cancelled.
