Why Real Estate Taxes Won’t Kill Real Estate in Montgomery County

Montgomery County real estate taxes are going up.

Montgomery County real estate

The Board of Supervisors voted to raise the real estate tax to $.87 per $100 of assessed value, retroactive back to January 1st of this year.  It doesn’t stave off losing some positions within the school system, but apparently it’s all the Supervisors could stomach.

The increase is expected to help fund debt service on new high schools for Blacksburg and Auburn and the renovation of Auburn Middle School, among other needs. Earlier this month, county schools Superintendent Brenda Blackburn warned of possible staffing cuts and school consolidation if the county did not boost the district’s budget. Even with the 12-cent increase, Blackburn has said the school system will still have a $5 million shortfall, and some cuts will be necessary.

In my opinion, an increase was necessary.  I know that goes against what others in the real estate field say, but we had operated far too long with low real estate taxes – and at $.87 (per $100) they’re STILL low.  But they were never going to be $.20+ higher, it brings much needed funds into the cofffers, and despite what other real estate agents will tell you, it’s not going to kill the real estate market in Montgomery County.  No way.
Since Jan 1 2010, the median sales price in Montgomery County (according to the New River Valley MLS) has been $187000.  Taxes on that $187000 for someone in the County would be $1402.50 a year, or $116 per month.  At the new rate, taxes on that same $187000 will rise to $1626.90 a year, or $135 per month.  A difference of $20 per month isn’t going to keep most people from buying a home.  But dig deeper …
Even if $20 DID make a difference for someone, interest rates have fallen drastically since 2010.  Mortgage-X.com reports
that on April 23 2010, the average mortgage on a 30-year conventional loan was 5.06% nationwide; on April 20 2012, that rate had fallen to an average of 3.90%.  Using the median sales price of $187000 again – and let’s say a downpayment of 10% – the difference between the Principal and Interest payment on the April 2010 loan ($910) and the April 2012 loan ($794) is a grand total of $116 per month a borrower will save by financing at today’s lower rate.
So what will keep people from buying homes in Montgomery County, a much-needed real estate tax increase, or rising interest rates?
I say it’s interest rates, every single time, which is why interest rates are more important to watch than real estate tax rates.  Interest rates change every day, and multiple times per day, while real estate taxes adjust at the minimum every four years.

2 thoughts on “Why Real Estate Taxes Won’t Kill Real Estate in Montgomery County

  1. Jeremy Post author

    Oh sure, there’s definitely a discrepancy between Blacksburg real estate taxes and the surrounding region. And as sellers continued to get higher and higher prices for their homes, the County (and Town) continued to assess higher and higher, as well, creating what you’re describing with taxes being difficult to manage on a fixed income. I certainly can’t speak for your situation, but I happen to think Blacksburg is a great place to be whether you live in or out of Town limits; I get what you’re saying though. Maybe a more specific approach to the post could be that higher real estate taxes won’t kill the real estate market, although it could have an impact on those wishing to live on retirement income?

    Thanks for reading, Charles!

  2. Charles Hagedorn

    Ok, real estate taxes are still lower than northern Virginia at least, but compared to all of SW Virginia, they are very high. I see why so many of my colleagues at VT move out of town when they retire, they can’t afford to live here on a fixed income. We live in a modest home, and our real estate taxes are over $3,000 a year. That’s too high for us, we’ll be leaving town when we retire in another few years as well. Blacksburg is a great place to retire to, as long as you don’t actually live IN Blacksburg.

Leave a Reply

Your email address will not be published. Required fields are marked *