This morning on my way to the office, I made the decision to stop for fuel as the needle on the gas gauge illuminated a bright yellow warning, “Don, let’s not be stupid about things…” So, I casually filled the tank until I decided $50.00 was my limit. Well, that did not quite get us to the “F” but close enough for the weekend. Just under $5.00/gallon currently, which I know doesn’t seem too bad if you are reading this from either coast or living in a bigger city, but for Kansas Citians, this is a BIG DEAL.
Watching the Dow drop 1,000 points this week; the Federal Reserve increasing rates an additional 75 basis points; utility costs rising and the overall cost of living on the rise, I am concerned when the real estate market, both residential and commercial, will be negatively impacted. Not IF, but WHEN…
In the property tax world, valuations continually lag what is transacting in the current markets.
Assessors must value property on a particular lien date, in many cases January 1. When the pandemic initially hit in March of 2020, the pushback from most counties came in the form of, ”As of January 1, we were not in a Pandemic”, and even more challenging, several states assess properties every other year, so the valuation date may have been January 1, 2019.
Interest rates remained historically low during 2020 and 2021, creating opportunities to purchase/invest in real estate and take advantage of the low interest rates being offered. Investors were willing to accept lower yields on their investments as the cost to borrow was so inexpensive.
We have now witnessed in the past 2-3 months how quickly things can change.
How will all of these real estate acquisitions which have transacted over the past 24 months affect the value of real estate from a property tax perspective? Will jurisdictions push to keep values high based upon sales the past two years? Will they factor in rent concessions which took place in 2020/21 in order to keep existing tenants in place? Will residential, multi-family, warehouse and distribution type properties continue to soar in value, or will we see a softening in the market place over the next 6 months? What about the sectors that have been slower to recover? Hospitality, retail, office, sit down restaurants, theaters… Certainly reasonable questions, but the answers may be a little more challenging.
Approaching my 37th year in the property tax world, I have witnessed and participated in the highs and lows of the real estate market. I can assure you we will be ready to assist owners and property managers with their valuation needs. We anticipate the 2023 – 2026 could be bumpy ride for owners of commercial, industrial and residential real estate. Let us help make the ride a little smoother.
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