The value of property in Brunswick and Carteret counties has plunged more than 25 percent, or $12 billion, since the peak of the speculation-fueled coastal real estate bubble, according to new county property tax valuations.
The new tax values offer one of the clearest snapshots of the boom-and-bust cycle that hit coastal North Carolina and other once-hot real estate markets in the country. Brunswick and Carteret by coincidence last adjusted values near the peak of the boom, using 2006 market information for values that took effect in 2007.
Condominiums or building lots that had been on the market for $300,000 may be worth less than $200,000. Once million-dollar homes may now be well down into six figures. Ironically, perhaps, real estate agents say lower values could help sales by convincing would-be sellers to drop asking prices to realistic levels based on the current market rather than the peak of the boom.
"When they're paying taxes on property valued at $1 million and you're telling them it's only worth $500,000, sometimes you have a hard time convincing them who's right," said Amy Hahn of Pine Knoll Shores Realty, who is president of the Carteret County Association of Realtors.
Startling decline
The depth of the plunges is startling: more than 20 percent of Carteret's tax base and 30 percent of Brunswick's simply vanished. A dip in an entire county tax base of any kind, let alone the drop of nearly $4 billion in Carteret and more than $8 billion in Brunswick, may be unprecedented in state history.
"Talking to old timers in assessors' offices around the state, we haven't heard of an overall drop in property values between revaluations, at least in recent memory," said Chris McLaughlin of the UNC School of Government.
The drops, of course, follow the huge increases of the boom, indicating that the bubble was almost certainly a wild distortion of reality, say officials in both counties and academics who study property taxes.
In Carteret, for example, property has increased in value about 10 percent a year on average over the past decade, even after accounting for the recent bust, said county Tax Administrator Carl Tilghman.
"I think most people would consider that a pretty good investment," Tilghman said.
The new valuations are preliminary, and will change some after appeals by some property owners. Generally, the biggest drops in Carteret were on the barrier island, Bogue Banks. In particular, Tilghman said, condominiums led the plunge, with many falling in value 30 to 35 percent.
In Brunswick, it was mainly waterfront and near-waterfront property that dropped the most, said Tom Davis, the county tax administrator. Land in those areas fell 35 percent to 40 percent in many cases.
Don and Loretta Acree took a more modest hit than many on Bogue Banks when their sound front home was revalued from $1.3 million to $1.15 million, probably because they're in an established, heavily wooded neighborhood in Pine Knoll Shores.
Still, Don Acree said, when he got his revaluation recently it made him reconsider the list price of the 3,800-square-foot house, which they bought in 1987 and have been trying to sell for about two years so they can downsize. He adjusted it to just under the new tax value.
"I wanted to get it where it might be more reasonable," he said. "In today's market we're not expecting to wake up and have people lined up at the door, but we're putting it out there at a reasonable price and hoping for the best."
County leaders in both places are expected to set higher tax rates at or close to "revenue neutral," which means they would generate the same amount of revenue as the previous year. That means the average tax bill would be the same.
But owners of vacation property near the water - where values fell the most - would likely get lower bills. Many year-round residents on the mainland, whose property values weren't as inflated in 2007 and didn't have as far to fall, would pay more.
The opposite happened in 2007. A hefty part of the tax burden shifted that year to vacation property, which in many cases had increased in value by 50 percent or more. People who lived elsewhere paid much more of the county taxes. In Brunswick, for example, 60 percent of the property owners aren't residents, Davis said.
This time, though, those taking the hits on their bills are more likely to be residents, and voters.
County commissioners in Carteret talked a little about postponing the revaluation, said board Chairman Douglas Harris. After Tilghman assured them, though, that an accurate revaluation was possible despite a low number of recent sales to help determine market value, it was only right to go ahead with it, even if that meant taking a political hit, he said.
It would be bad public policy, Harris said, to adjust the revaluation cycle to benefit one group over another.
"My feeling was, and still is, that it was important for us to go ahead with it so that the people could maintain confidence in the integrity of our taxing system," he said.
Over time, the ups and downs of the cycle make for a fair system, he said.
Revaluation's effect
Faculty and students at the UNC School of Government are finishing a study of the effects of revaluation in Onslow County, which revalued property in 2006 and 2010. They wanted to gauge the effects of revaluations in bad economies so they can offer county leaders, even inland, good advice on what to expect, said Karl Smith, an assistant professor of public economics.
Among other things, the preliminary results seem to show that the tax burden shifts substantially onto African-Americans. They're still analyzing the effects on different income groups.
Realtors have been hoping for a couple of years that the market had hit bottom. It's unclear whether the bubble has completely deflated. In Brunswick, Davis said, the market may not have flattened out yet. Recent sales showed that it was still declining, though at a slower rate than it had been.
In Carteret, sales on the mainland still seem to be down, said Hahn, the real estate agent, but on Bogue Banks - where the values dropped so much - sales seem to be improving. In January, 19 homes and two lots were sold there, up from nine homes and one lot sold during the same month in 2010.
"I think people are finally deciding things are about as low as they're going to get," she said.
