Home values in the Twin Cities metro area are leaping back to life after years of steep drops and stagnation.
Carver County is seeing its first double-digit jumps in years. In Anoka County, home values are up as much as 20 percent. Ramsey County just had its “most positive year for residential in eight or nine years,” Assessor Stephen Baker said.
And in Hennepin County the headline is a $10 billion gain in value, 10 times as great as the year before and with $2 billion in new construction.
The sharp increases, documented in property tax statements mailed this spring, mark the end of an extraordinary period for home values in the Twin Cities, said Herb Tousley, director of the Shenehon Center for Real Estate at the University of St. Thomas.
“The drops in recent years were so fast, and so far, that most of us in our lifetimes had never seen such a thing,” he said. “Now, though no one likes to pay more taxes, the house is going up in value and there’s a good side to that.”
How and when higher values will translate into bigger tax bills may be the least predictable result of the recovery, experts agree. It depends on a host of forces, some pushing bills higher and others holding them down.
But it stands to reason that a trend already in place — a rising willingness to invest in remodeling and expansion — will strengthen still more.
Savage, for instance, saw a doubling in the value of home additions and alterations in 2013, to $5.2 million, from just $2.6 million in 2009. At the other end of the metro, Coon Rapids saw a near-doubling in one year, to more than $1 million, in the value of new additions to homes.
“Improvements are up,” said Greg Brady, the chief building official in Coon Rapids, “and we think investors are buying fix-ups and selling or renting into an improving market. There’s been virtually no updating in some of the homes of the World War II generation — they look just like when they bought them.”
Effects felt in City Hall
The renewed activity means cities like Apple Valley are rehiring building inspectors after years of layoffs and gaining millions more from building fees.
City halls in growing suburbs, meanwhile, find themselves fully functioning again, in ways not seen for years.
In the worst years of the housing bust, mayors spoke in head-shaking tones of “getting home in daylight” after evening meetings with practically nothing on the agenda.
In 2009 and 2010, Prior Lake canceled more than half of its Planning Commission meetings; there was nothing to plan. Today the vast majority of its meetings are back on the schedule.
The strongest surges are happening in the cities that were hit hardest, Anoka County Assessor Michael Sutherland said. In his county, that means cities like Anoka and Columbia Heights.
Ramsey County saw “dramatic increases” in suburban Maplewood and Shoreview and in the St. Paul neighborhoods of Como and Payne-Phalen.
The latter has long been known for blight and decay, but prospective buyer Peter Hansen, a former Duluthian touring a home the other day that looks out across a vast lawn to Lake Phalen, said he senses a comeback.
“I like Payne Avenue,” he said. “It feels like a real city, with some real history.”
In Hennepin County, Assessor Jim Atchison said Minneapolis is seeing increases in its property tax base that easily rival any of those put up by nearby suburbs.
“Apartments countywide are up $1.6 billion, or 18 percent,” he said, “and about half of that, $800 million, is new construction, with $600 million in Minneapolis alone. And that’s just apartments, not condos.”
Jumps in the value of existing homes in Hennepin County range from 14 percent to 17 percent in older suburbs such as Hopkins, Brooklyn Center and Robbinsdale, to 20 percent or more in such Lake Minnetonka outposts as Excelsior and Tonka Beach.
The setting of basic values is the starting gun for a process that ends each year in the mailing of property tax bills. And that will vary some by jurisdiction.
Officials in Anoka County say their residential bounceback is so much stronger than the commercial sector’s that homeowners are liable to find themselves shouldering more of the cost of local government.
Not all good news
In Hennepin County, though, new commercial construction — notably in Minneapolis, Bloomington, Edina and St. Louis Park — could help keep a lid on home taxes.
“The headline to me is $2 billion in new construction,” Atchison said. “Even though commercial is up 3 percent and residential 9 percent,” he said, commercial is taxed much more heavily, “although it isn’t a third of the tax base.”
The darker side to the picture, reports online real estate tracker Zillow, is the large number of homeowners still underwater on their mortgages.
Overall the Twin Cities area is no worse than the nation (18.6 percent, a shade under the national average), but it contains some extremely high figures. Exurban Isanti County, for instance, stands at 34 percent of mortgages with negative equity, and Sherburne is at 27 percent, the same range as for some stressed city and suburban neighborhoods closer in.
Even so, officials say, it’s notable that home values are also rebounding in cities offering some of the lowest price homes.
In Dakota County, for instance, median home values jumped between 12 and 14 percent in modestly priced South St. Paul and the posh enclave of Sunfish Lake, where the average value rose by nearly $90,000.
“Things are hot in this metro for homes fairly close in, that are selling for less than $200,000,” Stillwater real estate agent Melissa Pugh said. “Young people these days with their student loans find it very hard to jump into houses costing a lot more than that.”