The Maryland Homestead Tax Credit

Did you know that Maryland has a property tax credit that may limit the amount your property taxes increase each year. It is called The Maryland Homestead Tax Credit. The credit limits how much your property assessment increases, thereby limiting your actual tax. My Homestead application was accepted in 2010, but there were no credits until the 2023 thorough 2025 assessments after the covid boom when home prices increased about 30%. We have saved $1,008 since 2023.

We are currently experiencing a very low inventory environment, setting up another boom when ideal conditions recover. I don’t know when that will be, but I expect it to happen. Be sure you have applied for your Maryland Homestead Tax Credit.

Curious about how many people benefit from this credit, I decided to take matters into my own hands. I conducted a little experiment and investigated the records for the homes in the Loch Haven neighborhood in Southern Frederick County, MD. Based on my findings, it seems that about two-thirds of homeowners in this area are taking advantage of the Homestead Tax Credit. While this isn’t an

official statistic, it may give an indication of how widely this program is utilized in the region. If you haven’t explored this credit yet, you might be missing out on an opportunity to save money on your property taxes!

Overview of the Maryland Homestead Tax Credit

The Maryland Homestead Tax Credit is designed to help homeowners manage the financial impact of increasing property assessments. By capping the amount that property assessments can rise each year, it can provide savings on property taxes, making homeownership more affordable for Maryland residents. This credit applies to owner-occupied residential properties and is intended to protect homeowners from dramatic spikes in their property tax bills.

Eligibility Criteria for the Tax Credit

• To qualify for the Maryland Homestead Tax Credit, homeowners must meet several criteria:
• The Property must be the homeowner's principal residence.
• The homeowner must have lived in the property for at least one year.
• The property must be used for residential purposes only.
• The homeowner must apply for the credit by submitting Homestead Tax Credit Eligibility Application (HST)

Applying for the Maryland Homestead Tax Credit involves a straightforward process:

• Homeowners must complete and submit the Homestead Tax Credit Eligibility Application (HST). 
• The application must be submitted by May 1 of the year prior to the year in which the credit is sought.
• Once approved, the credit will be applied to the homeowner's property tax bill automatically each year.

Benefits of the Homestead Tax Credit for Homeowners

The Homestead Tax Credit offers several benefits for Maryland homeowners, including:

• Protection against significant increases in property tax bills due to rising property assessments.
• Stabilization of annual property tax payments, making budgeting easier.
• Potential savings of hundreds or even thousands of dollars annually.

Common Misconceptions About the Tax Credit

Despite its clear benefits, there are several misconceptions about the Maryland Homestead Tax Credit:

Misconception	Reality
The credit lowers the property assessment value.	The credit does not lower the assessment value but caps the amount it can increase each year.
The credit applies only to new homeowners.	Long-term homeowners who meet the eligibility criteria can apply for and benefit from the credit.
The application process is complicated.	The application process is straightforward and can be completed online.

 

Impact on Property Taxes and Home Value

The Homestead Tax Credit can have a significant impact on both property taxes and home value:

·       By capping assessment increases, the credit helps homeowners manage their property tax bills more effectively.

·       While the credit does not directly affect home values, it can make properties a little more affordable and attractive to potential buyers. Homes are assessed every three years, so the lower assessment continues to apply.

Examples of savings:

o   A homeowner with a property assessed at $300,000, with a capped assessment increase of 2%, would save approximately $240 annually if the tax rate is 4%.

o   For a property assessed at $500,000, with a capped assessment increase of 5%, the homeowner could see a saving of around $1,000 annually, assuming a tax rate of 4%.

o   If the tax rate is 3% and a property is assessed at $400,000 with a capped increase of 4%, the savings would be approximately $480 annually.

Capped assessments vary by county or incorporated municipalities. Here is a sample:

• Maryland is capped at 10%
• Frederick County is capped at 5%, except in Walkersville capped at 10% and Mt. Airy 3%.
• Montgomery County is capped at 10%, except in Kensington is 5%
• You can find the full table here.

Frequently Asked Questions

Question	Response
Can I apply for the Homestead Tax Credit if I own multiple properties?	No, the credit applies only to your principal residence.
What happens if I move to a new home?	You will need to apply for the credit again for your new residence.
How will I know if my application is approved?	You will receive confirmation from the Maryland Department of Assessments and Taxation.

 

Resources for Further Information and Assistance

Homeowners can access more information and assistance regarding the Homestead Tax Credit through various resources:

Homestead Tax Credit Eligibility Application (HST)  

• Maryland Department of Assessments and Taxation (SDAT) website. Use this website to view your assessments and status of your application as well as online guides and FAQs. The status is in the lower left corner of the form.
• Tax bill Online Bill Inquiries and Payment Services. Use this website to review your tax bill and payments.
• The Maryland Homestead Tax Credit is a valuable tool for homeowners seeking to manage their property tax obligations. By understanding and applying for this credit, homeowners can enjoy financial benefits and the security of stable tax payments.

Thank you for reading this article. I would love to meet you and talk about real estate, and perhaps your future plans. If you know anyone else considering a move, I’d be grateful for your referral. I promise to take great care of them.

 

 

2025 Real Estate Market Predictions for Southern Frederick County

As we enter the new year, it's time to forecast the real estate market for 2025. While predictions often change within months, evaluating recent trends and combining national and local insights can provide a
useful outlook for Southern Frederick County, Maryland (SFC).

My Prediction

Southern Frederick Md. Local Area for Prediction

For early 2025, I anticipate minimal changes from 2024. Inventory levels, consumer debt, and interest rates are likely to remain stable, keeping home prices relatively unchanged. If mortgage rates decrease by a point, pent-up demand could lead to a strong first half of the year. However, significant positive changes may not occur until late 2025 or 2026, as the new administration's policies take effect. These changes, whether through legislation or executive orders, will take time to impact the economy, if they help at all.

Key Factors

1. Mortgage Rates: Predictions suggest rates will stay above 6.5% in 2025. For market gains, rates need to drop below 5.75%. For more details, see my post on Decoding Mortgage Rates.
2. Low Housing Inventory: Inventory in SFC has decreased by 42% since 2020, with no signs of improvement. Telecommuting trends may reverse, potentially affecting inventory levels. The new administration's policies will also limit telecommuting significantly, impacting the market. For more details, see my post on Understanding Low Housing Inventory
3.  Consumer Debt: Credit card debt has surged 32% since May 2021, exceeding $1 trillion.

   

   Consumer Debt

   Delinquency rates are also skyrocketing. Debt affects mortgage qualifications as lenders use the debt-to-income ratio to set borrowing limits. Rising delinquency rates show this problem is not getting better soon. The government is considering temporary limits on credit card interest rates to reduce consumer debt, but that is wishful thinking for now.
4. New Administration Policies: The new administration’s policies are starting to be implemented, with the aim to boost the U.S. economy. Key areas include:
• Housing: A few new federal employees may seek housing in SFC, potentially affecting the market. However, most of them will reside in Montgomery County and Northern Virginia.

o   Deportations of undocumented immigrants could significantly impact the housing market. While precise figures for Frederick County are unavailable, the potential effects are noteworthy. Forced deportations may increase the availability of rental properties, easing that segment of the market. However, properties owned by undocumented individuals could present challenges. Although I am not a lawyer, it is likely that these individuals would retain ownership but must continue making mortgage payments to avoid foreclosure. The resolution of these issues will be interesting to observe.

Self-deportation might result in a more orderly process, allowing individuals to manage their exit more effectively.

• Economic Improvements: Policies on tax cuts, energy independence, deregulation, and government efficiency have the potential to impact the market, though their effects will take time to materialize.

 

Actions to Consider

Timing the market is challenging and not recommended. If you are planning on selling and/or buying soon, contact me now at 301-873-2106. We can get the ball rolling.

If you're planning a move, start preparing now. Buyers should focus on reducing debt, improving credit scores, saving for a down payment. You also need to decide where you want to live. Contact me, I can help with that.

 Sellers should declutter, make minor repairs, and plan their next steps for their future. For more ideas, please see these previous posts: Benefits and Roadblocks When Decluttering, Overcoming the Difficulties of Decluttering, Strategies for Showcasing Your Home for Sale and Transform Your Home from “Just Another Listing”.

I am available to help you act when you think the time is right. If you'd like to discuss your situation, call or text me at 301-873-2106 or email me at BReynolds@LNF.com. I'm here to help with your real estate needs, even if your purchase or sale is in the future. Your referrals are always appreciated.

Let's get started. Contact me at 301-873-2106 or email me at BReynolds@LNF.com.

Bob’s 2024 Residential Real Estate Market Prediction

 

Executive Summary

Most observers seem to agree that we will continue to have low inventory and moderately high mortgage rates. As a result, most of the year will be a seller’s market much like last fall, where there are one or two offers with negotiations. However in the second quarter there may be higher activity in the second quarter with multiple offers and sellers more in the driver’s seat.

 

Introduction

As we start a new year we would do well to try and understand what the market will be like over the next twelve months. Like everyone else, my crystal ball is pretty cloudy, but we can take some educated guesses. Most everyone agrees that there is a lot of pent-up demand. There are many interested buyers, but there are two significant obstacles for them, and therefore the market.

It is important to note that Real Estate is hyper local. This prediction is primarily for southern Frederick County and Northern Montgomery County. Down county in Rockville, Bethesda and Chevy Chase may be completely different.

Low Inventory

The first issue is availability of properties to buy. We have been experiencing historically low inventory for the last five plus years and it was particularly low in 2023. Inventory was trending lower before the pandemic, and of course was exacerbated by the pandemic. Here are some of the reasons behind the lack of inventory:

o   Remote work – with the maturation of cell phones, internet tools, cloud computing and storage, people can work from wherever they are thereby reducing the need to relocation for a new job.   

o   Low locked in mortgage rates – many people refinanced their mortgages, often to less than 3% making them reluctant to take on a new mortgage at a higher rate.

o   Ageing in place – It is much easier for the baby boomer generation to age in place than in the past. As of 2021 they owned 44.1% of all real estate in the U.S. keeping many homes out of the market.

o   Lack of new home construction – Since the great recession in 2007/2008, new home construction has not kept up with demand. Exacerbating this problem are materials supply chain issues, labor shortages and increases in the material cost.

o   Governmental policies - The U.S. has failed to keep up with the housing demands of a continually increasing population. These policies may include:

·       Zoning and permits for new home construction.

·       Limiting the types of housing

Unfortunately, low inventory becomes a cyclical issue. When people feel like they cannot find a place to buy or rent, they don’t want to sell their home and be homeless.

Interest Rates

The second issue is interest rates. Interest rates have skyrocketed over the last two years, going from 2.66% at the end of 2021 to a max of 7.79% in late October 2023 and finally back down to 6.6% at the time of this writing on 1/15/2024. These higher rates have made it very difficult for buyers, particularly younger buyers, to qualify for a loan for the home they want. They will wait for the interest rate to come down to be able to afford the right home.

For most observers, the robustness of the market hinges on interest rates. Many see interest rates going down this year, however not as much as we would like. The thought is that the rates will be reduced modestly in the first quarter, and then loosened some as the year goes on. The consensus seems to be the year will close with interest rates just above 6%, and even lower in 2025.

While this is good news, unfortunately, we live in an extremely volatile world today where world events can impact those rates. Globally, there are several wars that can impact our economy. The war around Israel/Iran region is threating to grow substantially. Ukraine is begging for more support against Russia. China is flexing their muscles in a threateningly way too. We also have an increasingly bitter political division within our own country with a presidential election where the results will probably be contested with much turmoil.

On that last point, presidential elections also tend to have a suppressive effect on the Real Estate market. This is because the prospect of a new president tends to create uncertainty about the future economy, and homebuyers become more cautious as a result. People feel more comfortable with one of the largest financial transactions of their lives when they know the result.

What is coming in the next year?

So, what does all this mean for the market over the next year. By traditional measurements, it will be a seller’s market for the first quarter a lot like the last quarter. However, it will probably feel like a normal market where there are one or two offers with negotiations between buyers and sellers. Spring will probably be a stronger seller’s market quite possibly with multiple offers returning. The balance of the year will probably be more like the first quarter unless interest rates fall below 6%. All in all, it is probably a good year to sell if you know where you are moving to. 

If you are considering selling your home, whether in the next six months or the next few years, I would be happy to help you. If you are still on the fence, please use me as a sounding board; You will not get pressure from me to move, just what I hope is a helpful conversation.

Finally, if you found this article helpful and you know of someone who is planning to buy or sell, I would appreciate your referral. Call/text me at 301-873-2106 or email me at BReynolds@LNF.com. We will get you taken care of.