- The Washington Times - Friday, May 25, 2001

Lukie Tannenbaum well remembers April 27, the day her letter arrived. "I opened the envelope and just couldn't believe it," says Mrs. Tannenbaum, who with her husband, Ira, has owned a home in the District's Cleveland Park neighborhood since 1978. "Our property taxes had gone up 50 percent" over last year, based on a new assessment.

That scene is being repeated frequently in the Washington area, homeowners say. The roaring market for homes means high prices, and high prices mean higher taxes.

"The fact that they have jumped so much seems almost offensive," Mrs. Tannenbaum says. "I don't know how they arrived at that figure. Nothing in my immediate neighborhood has sold in the last few years."

Back in 1978, when the Tannenbaums were looking for a larger home to accommodate their three growing children, Cleveland Park seemed ideal.

"There was a whole lot of neighborliness then," says Mrs. Tannenbaum, who formerly taught at a school in the neighborhood and now teaches at Georgetown Day School. "Everybody knew everybody."

Actually, Cleveland Park is not all that different today, Mrs. Tannenbaum says, which is one reason the neighborhood remains so attractive for many people. Plus, it is shaded by big trees, houses have wide porches, and residents get a sense of a world far removed from the city's center.

"Every time you turn around, there's a block party," Mrs. Tannenbaum says. The Tannenbaums paid about "$180,000-$185,000" in 1978 when they bought their house on the edge of the historic district.

Today, the neighborliness Mrs. Tannenbaum craved comes at a higher price. Her home would sell now for $750,000.

The pinch does not come at the same time for everyone. Thanks to a staggered assessment system and the fact that homes are assessed just once every three years, some Washington area homeowners won't have to pay right away. They can just look forward to increased property values and higher property taxes to come.

After a sluggish period in the early 1990s, the Washington-area real estate market is hotter than ever. In 1990, the median price of an existing home in the Metropolitan Statistical Area (MSA), which includes the District, Maryland, Virginia and part of West Virginia, was $150,500. Ten years later, the median price had risen to $182,600.

Home prices in the Washington region have always been higher than the national average, according to Kevin Thorpe, an economist with the National Association of Realtors. In 1990, the national median price of a single-family home was $92,000, compared with $139,000 in 2000.

"Of course, the increase is larger when you are working with smaller numbers to begin with," Mr. Thorpe says. "By 1990, the numbers in the Washington area were already up."

Prices stayed up in the Washington area compared to the rest of the country throughout the recession years of the early 1990s, Mr. Thorpe says. Actual increases in home value, however, were considered moderate until prices picked up again in 1996.

"Since then, the numbers are pretty impressive," Mr. Thorpe says. "Between 1997 and 1998, for example, the median price of a single-family home in the D.C. MSA jumped from $166,300 to $172,100."

Why the current hot market and resultant home appreciation? For one thing, despite the higher prices, homes are more affordable now than they were 10 years ago. Lower interest rates can mean a significantly lower payment than in 1990. Plus, incomes are higher.

In the District, the market has sizzled, with the prices of homes in some neighborhoods nearly doubling in the past three years, according to Roby Thompson of Long & Foster's Connecticut Avenue office. Inventories are down, as well, making the market even more competitive.

"There's a lack of inventory across the board, from $50,000 homes to million-dollar homes," he says.

Washington definitely is a seller's market still, despite the recent downturn in the economy, says Harold Sanders of Pardoe ERA on Capitol Hill.

"It is inaccurate to say that the market has softened recently," he says. "I have lots of people who want to buy something, and I have nothing for them to look at."

So from Georgetown to Capitol Hill to Southwest, prices continue to rise.

"On Capitol Hill, prices have jumped significantly," Mr. Thompson says. "I'd say in the last nine months, prices have increased 30 to 40 percent."

The same thing is true for other Washington neighborhoods. In Dupont Circle and Adams Morgan, for example, a one-bedroom condominium that would have sold in the $75,000-to-$80,000 range in early 1998 easily brings between $150,00 and $170,000, Mr. Thompson says.

In Southwest Washington, where Mr. Sanders lives, prices have doubled during the past three years.

Such dramatic rises in home values can be problematic for homeowners. In addition to increased property taxes, owners hoping to trade up can be in for a shock.

"It's kind of a Catch-22 situation," Mr. Thompson says. "You can sell high, but you have to buy high. Of course, if you are moving to Ohio, it's a great world."

Those who find themselves priced out of the market may opt to renovate instead. Money magazine recommends that homeowners have their houses reappraised every six or seven years for insurance purposes, particularly if renovations have added significant value to a home.

In the Maryland and Virginia suburbs, housing prices continue to be strong, Mr. Thompson says, although not quite reaching the vigor of the District's market.

"In Virginia, things move quickly, but the market is nowhere near as strong as D.C.," he says. "In D.C., just about every house has multiple contracts."

Prices in the most desirable suburban communities are appreciating more than 5 percent a year. For example, the average price of a home sold in Montgomery County in 1999 was $238,328, an increase of 5.4 percent since the year before.

Comparable homes in neighborhoods farther out, in Chantilly in Fairfax County, for example, can go for to 20 to 30 percent less.

The result: For the first time in recent memory, life in the city has some added appeal.

"The mayor has instilled a lot of confidence about living in the city again," Mr. Thompson says. "I deal with a lot of people who are moving back to Washington."

Plus, city homeowners don't have to deal with the commute, which grows increasingly onerous as sprawl expands.

Is it enough to make homeowners pay more to get less house?

Apparently, it is. On Capitol Hill, Mr. Sanders says, homes that would have languished at any price in 1996 or 1997 are snapped up immediately. "Most of them sell the first weekend we're open," he says. "If a house has been on the market for a week, people start to wonder what's wrong with it."

In what was considered a somewhat seedy, crime-ridden area 10 to 15 years ago, home prices now start at $300,000 and go up. This is several blocks away from the shadow of the Capitol, the locus of the highest-priced homes.

Certain Northwest neighborhoods have been especially hard hit by home value appreciation. One Woodley Park homeowner even called the city after receiving his property tax notice, demanding to know whether gold had been found on his land, city officials report.

Some have complained that District assessments have been "haphazard," Mr. Thompson says.

"You can have a house assessed at $400,000 right next door to one assessed at $160,000, and they are identical houses," he says. Part of the reason, he adds, is attributable to the staggered assessments.

"Assessors can't keep up with the market," he says, but at times, he isn't sure if "there was any rhyme or reason" to the assessments.

Homes held by one owner for a long time tend to have lower assessments compared to homes that change hands more frequently, he says.

District homeowners dissatisfied with their assessments can initiate a three-stage appeal process by filling out an appeal request form attached to the assessment notice or by sending a letter asking for an appeal. Requests are due by April 1. New owners may petition for administrative review within 60 days of a property transfer.

Owners are entitled to a copy of the assessor's worksheet and a list of sales in the area around their property. Fees may be charged for additional information, such as data regarding other properties.

"Most people don't take time to appeal," Mr. Thompson says. "It's a difficult process."

Despite recent assessment increases, Mr. Thompson says, "generally, assessments are significantly lower than selling prices." Yet the specter of an assessment spike is ever present, especially as home prices have taken off in the past few years.

For the young professionals and cosmopolitan urbanites deemed essential to Washington's renewal, certain neighborhoods are simply out of reach.

"It's kind of a tossup," confides one prospective homeowner, toddlers in tow, who had hoped to find a modest home in American University Park. "We can just about manage it right now, but if the property taxes go up like I've been hearing, we're sunk. We'll probably have to look elsewhere."

"Elsewhere," for a number of prospective homeowners, is the same neighborhoods that would have been off-limits just 10 years ago.

"The boundaries are definitely being pushed," Mr. Thompson says.

Sometimes, the influx of new residents can threaten to overwhelm established neighborhoods. Longtime residents such as the Tannenbaums try to take the changes in stride, remembering their own early days in the neighborhood.

"I still love it," Mrs. Tannenbaum says. "The neighborliness brought us here. And now, it's keeping us here."

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