Chesterfield's Ashley Forest subdivision
Following one of the busiest years on record in Chesterfield’s red-hot housing market, 2022 real estate assessments increased by an average of 12% countywide.
That’s three to four times higher than in a typical year. The situation isn’t unique to Chesterfield, though.
Melvin Bloomfield, director of the county’s Department of Real Estate Assessments, noted it’s a reflection of surging prices for new and existing homes across the region, state and nation.
“It’s happening from sea to shining sea,” he said. “You can throw a dart at a map and call up the folks who live there, and they’ll all tell you the same story.”
According to data from the Central Virginia Multiple Listing Service (CVMLS), the median home price in Chesterfield increased at a higher rate than any of the Richmond region’s other three large jurisdictions last year – rising 13.9% to $326,000.
Chesterfield also outpaced Henrico and Hanover counties and the city of Richmond in residential sales, with 7,762 units sold in 2021.
Unlike the housing bubble of the early 2000s, which was fueled artificially by subprime mortgages and other questionable lending practices, Bloomfield said the current residential real estate market is mostly a product of supply and demand.
“It’s Economics 101,” he added. “If you have 100 buyers fighting for one property, guess what? The price is going to go up. That’s the free market.”
Under Virginia law and the Code of Chesterfield, the Department of Real Estate Assessments is required to assess all real estate in the county on an annual basis. Such assessments are effective Jan. 1 and must represent 100% of a property’s fair market value.
One of the primary methods the department uses to assess residential real estate is by compiling home sales data and applying the sale price of each unit to comparable properties in similar neighborhoods.
It also tracks county building permits and certificates of occupancy; if you renovate your home extensively enough to require a county inspection, the value of such improvements will be reflected in your assessment.
That contributes to rising assessments during a pandemic in which travel has been restricted by health and safety concerns. Many homeowners have put in backyard pools and patios for “staycations” and sought additional square footage to accommodate working from home.
Chesterfield's RounTrey subdivision
Because of the COVID-related paradigm shift toward teleworking, more people now have the freedom to relocate to lower-cost areas, where they can afford to purchase a house for what they were previously paying in rent.
Interest rates were at historic lows in 2021, further fueling the rise in sale prices by enabling potential homebuyers to qualify for “more house” than they otherwise could afford.
Then there are inflation and supply chain disruptions, both of which have driven up the cost of lumber and other materials used in residential construction.
“Anything under $500,000, those [homes] weren’t staying on the market at all. You hear stories about properties selling for tens of thousands of dollars above asking price, selling less than 24 hours after listing, buyers agreeing to waive inspections,” Bloomfield said. “New construction starts are up, but people can’t build them fast enough [to meet demand].
Real estate assessors “don’t create the market,” he added. “We just reflect where it has gone.”
Mindful of the looming impact of rising assessments on Chesterfield homeowners, the Board of Supervisors last December approved the advertisement of the county’s maximum 2022 real estate tax rate at 93 cents per $100 of assessed value.
Real estate tax bills are calculated by taking a property’s assessed value and multiplying it by the tax rate, and paid in two installments -- the first half in early June and the remaining balance in early December.
Under state law, Chesterfield is now prohibited from setting the rate any higher than 93 cents this year. That means all property owners in the county are assured of receiving at least a 2-cent reduction from the previous 95-cent rate, and the board could opt to drop it further now that it has final data from the Jan. 1 revaluations.
The initial 2-cent cut “was to send a very strong and clear message to the community that we understand this market has moved. We’re not going to stand pat on that, we’re going to move the rate down,” said Matt Harris, deputy county administrator for finance and administration.
“[The supervisors] are also hearing from multiple constituents about needs in the community. There are people who want to make their case for further investment in programs and services. We want to give them a chance to do that through a fair and open budget process.”
Taxes on real estate provide about half of Chesterfield’s annual revenue, which funds police, fire, schools, libraries, parks and a variety of other public services.
At 93 cents per $100 of assessed value, the real estate tax rate would be the lowest it has been since at least the 1970s.