Thousands of Washington Metro homeowners will soon receive their property tax assessment notices from their local jurisdictions. According to Renae Merle at the Washington Post, many homeowners will see their property tax assessments fall as assessments reflect recent declines in the the housing market. However, the decline can differ by neighborhood and sometimes lags behind the recent deterioration of home values in the region. Further, for some homeowners, just because the local government decides their home is worth less, tax bills will not necessarily drop. Cash-strapped localities may increase the tax rate to make up for budget shortfalls, and that increase may offset a decrease in the assessed value of the home.

So, unless your local government cuts your property tax rate, most homeowners will not see a decrease in their tax bill, at least not immediately. “For the majority of homeowners, their taxes are not going to come down,” said Hank Sikorski, the Maryland state supervisor of assessments.

Finally, homeowners should keep in mind that the government’s assessment of their homes for tax purposes does not necessarily reflect the actual market value, or amount a buyer would pay to purchase your home. Government assessors do not appraise individual houses. Instead, they may look at hundreds of homes in an neighborhood that are close to one another and have similar characteristics. Local tax assessors sometimes survey neighborhoods and track permits for renovations to determine neighborhood values.

To better determine your present market value and potential sales price, you should speak with a REALTOR who can prepare a comparative market analysis of homes in your area and who can analyze local market trends — very important factors in understanding home prices.

FHA-insured loans have grown in popularity since the collapse of the mortgage market in 2008, because borrowers need not maintain stellar credit scores or save up for a large downpayment to qualify. In the high-priced Washington, DC metropolitan market, qualified buyers can purchase a home with just a 3.5% downpayment, as opposed to the minimum 10% downpayment for most conventional loans…a potential difference of $48,000 money required for downpayment (and not including closing costs). As a result, FHA-insured loans now comprise 30% of all home purchases – perhaps more in the high-priced DC market.

Until February 1, 2010 FHA had an approval process in place which allowed buyers to buy homes in condominium complexes which were not FHA approved. This process, called the spot approval process, was used with such frequency that few condominium complexes have been added to the list in the last 10 years. For example, a recent search of FHA approved buildings in four upper northwest Washington zip codes (20007, 20008, 20015 and 20016) found just eight FHA approved condominiums. The new HRAP/DELRAP process is a far more difficult – and expense – process for buyers and lenders alike, requiring a mountain of paperwork be submitted to FHA, with long lead times projected for approval.

If you are a condo buyer, your options will be severely limited in the short term. Furthermore, if you purchase a home in a non-FHA approved complex, you could find it more difficult to sell down the road.

If you are a seller, check to see if your condo is FHA approved. If so, your sales prospects have improved dramatically. If not, you should start to work with your condominium association to work through the FHA approval process, a process which could take 60-90 days. Without FHA approval, your could lose more than 30% of your prospective buyers – a significant blow to your sales prospects. Many buyers cannot afford to bring a 10% downpayment plus 2-3% in closing costs to purchase a property. We urge all owners in non-approved buildings to work with their associations to seek FHA approval, as property values for all owners could be significantly impacted.

We are convinced FHA’s new policy will slow sales and decrease property values in certain segments of the condominium market. We will find non-approved condos more difficult to sell. Furthermore, with fewer choices, many first-time homebuyers will walk away from the market. We hope FHA will revise this program, but with FHA moving to tighten their loan standards, we are not optimistic a rule change will come soon.

The Federal Reserve announced last week that in October it will start scaling back its bond purchases. Charles Tobias, a local real estate attorney and columnist, says this move means the Fed will stop manipulating interest rates and that rates will likely climb higher in October.

I agree. Today’s interest rates, close to all historical lows, simply cannot stay at sub-6 percent levels for much longer. I believe investors will start to worry more about inflation and the U.S. Treasury will have to issue new supplies of U.S. Treasuries — at higher yields — to offset the looming budget deficits.

So, I recommend you homeowners refinance now to lock-in low interest rates. I also recommend you homebuyers not try to time the price “bottom” and buy before what’s really important — your monthly mortgage payment — buys you less home for your more dollars.

The progressive Montgomery County Council is hard at work. In late April, the Montgomery County Council passed Bill No. 31-07, sponsored by Roger Berliner and Mark Elrich, requiring that, effective January 1, 2009, all buyers perform a home energy audit prior to the purchase of a home. Further, all sellers will be required to provide at least 12 months of electric, gas and water bills for the prior 12 months.

I applaud our representatives in considering how we can slow climate change and improve our energy efficiency. However, with this bill, the Montgomery County Council continues to show that its legislation is passed with little thought of the practical effect of the laws and its unintended consequences.

For the buyer, who already bears significant purchase costs of up to 3% of the purchase price of a home, why require additional costs? Certainly, with escalating energy costs, homeowners are already incented to seek ways to improve energy efficiency.

However, I find the nonsensical nature of the utility bill requirement the most troubling of all. What information does 12 months of utility bills provide to a buyer? Utility bills vary substantially. Two homes which are exactly the same will have vastly different utility bills if two people live in the home versus four. Two homes which are exactly the same will have vastly different utility bills if one set of homeowners like it warmer in the winter and cooler in the summer. Research indicates that elderly people use more energy than younger persons. Utility bills cannot logically provide a representation of the energy efficiency of a house, only the relative energy usage of the homeowners. Further, the bills may actually mislead a purchaser into believing a home is more energy efficient than another, when in fact its owners may simply use less energy.

Further, such legislation may pose a risk for the elderly. If the elderly anticipate a sale, they may attempt to lower their air conditioning and heating usage, which may put these temperature-sensitive populations at greater health risk.

Lastly, our area utility companies, like PEPCO, can require up to one week to simply change service from one owner to the new one. Can we expect our utility companies to provide timely information to sellers wishing to sell their home?

Unfortunately, we are all too busy with our daily lives to concern ourselves with local laws until they affect our daily lives. The local press trumpeted the 7 “green” laws which the Montgomery County Council passed in April. I wish the Montgomery County Council, and Roger Berliner and Mark Elrich in particular, gave more thought to writing quality “green” legislation than quantity.

In order to keep you abreast of real estate happenings local and global, I’ll report and comment on important issues. I will try to inform you in as brief a way as possible, without any agent spin.

Fannie Mae and Freddie Mac, quasi-government organizations that insure mortgage loans, agreed last Friday to buy more jumbo loans from major lenders. Jumbo loans are loans made over $417,000. By buying more jumbo loans, it should be easier for borrowers to get these larger mortgages.

Proponents say it will reduce homeownership costs for families in high-cost areas. Opponents say that Fannie Mae and Freddie Mac, already having trouble with accounting scandals, will end up taking on too much risk.

So what’s the bottom line? Allowing Fannie Mae and Freddie Mac to buy jumbo loans is the best option in a no-win scenario. The purpose of Fannie Mae and Freddie Mac are to provide money, stability and affordability to mortgage markets. Right now, with lenders taking losses and approving fewer loans, with the market certainly unstable, and with rates for jumbo loans up to 2 percentage points higher than conforming loans, expanding Fannie Mae and Freddie Mac’s limits allow these organizations to do what they are supposed to do. If people who should be able to buy homes can’t buy homes because they can’t afford them, the housing market will become more unstable. What’s the upside to that? The downside should be clear – a longer, deeper recession.

Perhaps housing prices will continue to fall regardless of this move. Certainly, there are other factors at play. But if Fannie Mae and Freddie Mac take on too much risk and ultimately require a government bailout, it will mean that the economy is in a very bad way, and this move will be the least of our worries.

Locally, Fairfax County yesterday joined Montgomery County in proposing property tax increases. It’s amazing to me that our political leaders believe that raising property taxes in the midst of an unstable real estate market is a good idea. Economics 101. Increased property taxes means homes are less affordable. Homes that are less affordable don’t get bought. If homes don’t get bought, home prices go down. If home prices go down, property taxe revenues will go down, and we’re right back where we started. Of course, we haven’t even factored in people are having trouble with their mortgage payments as it is, so raising property taxes will hurt the people who can least afford it.

It’s time for Linda Smith and Isiah “Ike” Leggett and the Fairfax and Montgomery County Councils to balance their budgets the way the rest of us do – by cutting spending, not raising taxes.

J.P. Montalvan