Why does my property assessment go up every year?

Housing prices have rising steadily since the 1960s, but exploded since the COVID pandemic began in 2020.  The Federal Reserve Bank of St. Louis charts this growth on its website.  Go to https://fred.stlouisfed.org/series/MSPUS to look at the whole country and to https://fred.stlouisfed.org/series/MSPNE to look at the northeastern states.

Since Massachusetts state laws (and corresponding Massachusetts Department of Revenue regulations) require yearly assessments to reflect “full and fair market value,” rising annual home sales prices translate into rising annual assessments.  And, while they happen less frequently, falling home prices also translate into lower annual assessments.  Who enacted these laws and why? They result from Massachusetts voters passing a ballot initiative back in November, 1980 that today is commonly called “Proposition 2 ½.”

The Massachusetts Department of Revenue reported last month that the average value statewide for a single-family home for the current Fiscal Year 2025 is $700,615 and the average single-family tax bill is now $7,732.

The statewide median (the midpoint, at which half are higher and half are lower) single-family tax bill amount rose from $5,362 in Fiscal Year 2020 to $6,457 in the current Fiscal Year 2025– a 20% increase over the past six years.  In Middlesex County, the median is now $9,311 – 20% higher than the state average of $7,732. (And, yes, the DOR is mixing “average” and “median” in its comparison, so it is not an “apples to apples” comparison.)

A report issued last month by Governor Maura Healey’s Unlocking Housing Production Commission noted that “Over the past five years, the median sales price for a home in the Commonwealth has increased by more than 50%.”

A second question people should be asking is, “Will my property valuation ever go down?  The answer is “Yes,” but just when is the great unknown.

At some point (such as during the “great recession” of the early 2000s), sale prices for homes will decrease for a sustained period of time – and that trend will be reflected in lower property assessments.  But, the impact of a decreasing home sales market does not affect property assessments immediately.

Bear in mind that the Department of Revenue’s required time periods for assessors to focus on when analyzing property sales lag the actual calendar for 12-18 months.  For example, sales between July 1, 2022 and December 31, 2023 were used to determine the current fiscal year’s assessments.  That lag means your property assessment will not reflect declining sales prices until 12 to 24 months after they began to happen.  The opposite occurs is a rising market – assessments do not start to rise until 12 to 24 months after the real estate market begins to go up again.

While the ongoing analysis of the real estate market in Holliston foretells rising and falling property assessments, other things contribute to them rising and falling, as well.

For example, building an addition to your house or renovating your kitchen or bathroom almost certainly will increase the assessment for your home.  Having a fire destroy part of your home will decrease its value.  So, too, will depreciation – as your home ages over the years, it becomes “dated” and its value decreases.

In addition to homes, land values can change, too.  A vacant piece of land becomes more valuable when it is subdivided for development and becomes a “house lot.”  So, too, does developing farm land into residential or other uses.  Zoning land for multi-family, commercial or industrial uses evokes the appraisal concept of “highest and best use” and increases land values.  On the other hand, chemically contaminated land loses value because clean-up costs have to be factored into making it useable again.

So, where is the real estate market going?  To quote a January 10, 2025 story in Forbes.com, “As 2025 begins, the housing market remains as unpredictable as ever.”