Realtor Bruce Erickson, right, worked with appraiser Kevin Meeks on the value of two houses on the market.
GLEN STUBBE • email@example.com,
Housing market values rise, but boost varies greatly
- Article by: David Peterson
- Star Tribune
- September 8, 2013 - 8:05 AM
After plunging for years across the metro area, home values are finally beginning to climb again — a turnabout that could spell the end of an ugly cycle for the finances of local cities and counties.
In Hennepin County alone, 15 cities are seeing gains in the tax value of residential property for purposes of the budgets and taxes that will be set starting this month. That’s up from just two cities the previous year, with every sign that many others will join the upturn next year.
In Savage, City Administrator Barry Stock wrote his City Council a quick note recently when county officials sent word that the city’s tax capacity has risen by 5 percent.
It “finally puts an end to four years of consistent decline,” Stock wrote. Even if tax revenues rise this year, he added, Savage could end up with a “drop in our 2014 overall tax rate” — a sensitive subject amid a city election year.
A closer look at the data, however, shows that not everyone suffered equally during the recession’s plunge, and not everyone is recovering at the same pace.
Inner-ring suburbs such as Brooklyn Center and Robbinsdale had the floor drop out from under home values. Cities like Edina, said Hennepin County assessor Jim Atchison, “never really crashed.”
The timing of the rebound could produce a welcome break for taxpayers in cities like Brooklyn Center or West St. Paul: Since their home values didn’t spring back until just recently, they will get a discount on property taxes for another year.
“We are historians,” said Nancy Wojcik, Brooklyn Center’s assessor. “We follow the market, well behind it. In this city, you won’t see the recovery we’re having today on tax payments until 2015.”
Still, the turnaround there is palpable from data gathered by Realtors, which promises an easing of tax and budget tensions within the foreseeable future. In Brooklyn Center, the Realtors association reports, home values are up 40 percent so far this year.
And single-family homes are only part of the tax picture.
Apartment buildings are “red-hot,” said St. Louis Park assessor Cory Bultema. “Class A and B apartment buildings have really gone up a lot — so much so that I wonder if it’s running well past any sort of logic.”
Farmland values have also risen strongly, and many Twin Cities suburbs from Shakopee to Rosemount to Woodbury still have thousands of acres of farmland within their borders.
$1 billion lost
The recovery, if it continues, will put an end to a slide the likes of which most experts say they’ve never seen.
Eden Prairie’s total market value, for example, slid by more than $1 billion, from $9.6 billion to $8.5 billion between 2010 and 2013 — with the result that its tax rate jumped from 28 percent to 34 percent.
“I’ve never seen values drop that way, and the pages and pages of foreclosures in the paper,” said Stephen Behrenbrinker, St. Cloud’s recently retired assessor and a leading statewide figure in his field. “With less funding from the state, with people demanding more services, it was a nasty cycle.”
The plunge in construction after 2007 also slashed municipal revenue from building permits, Behrenbrinker noted.
“A lot of cities live off that growth, and those fees,” he said. “You start laying people off, or there are no raises for several years — it’s very ugly for those units of government.”
As the recovery begins to show up in tax assessments, there remain some wide differences.
“Residential is so determined [by] location and style, location and style,” said Atchison. “Are you in Brooklyn Center or Edina? Is it a rambler, a split, a condo?”
In Scott County, net tax capacity is up in the northern, more populous suburbs, while it continues to slide in some of the more remote exurbs.
Even so, the overall drop last year in home values of 8.2 percent was the worst in recent memory, while the turnaround this year — though modest at 2.6 percent — is the first increase on the bottom line since 2007-2008.
The speckled nature of the recovery, as opposed to a time when everybody’s values seemed to drift upward perpetually, can be seen even from one city neighborhood to the next.
In Minneapolis’ East Calhoun neighborhood, for instance, detached homes are up $60,000 over the past 12 months, to $510,000, said appraiser Kevin Meeks. But condos have dropped steeply in both of the past two years, from $216,000 to just $122,000.
“The market is all over the board,” said Bruce Erickson, of Coldwell Banker Burnett, who is working with Meeks on a pair of properties on the near south side. “And it’s hard to deal with expectations when people are hearing on the radio the market is up 20 percent. … On average perhaps, but in a given case, you can’t be sure.”
Tale of two houses
As if to illustrate the point, on Thursday Atchison and Meeks toured two wildly different properties just three minutes apart in south Minneapolis — each in its own way grappling with the nature of the recovery.
On Aldrich Avenue, an over-exuberant listing price last spring has resulted in a lot of frustration for the sellers. Buyers just won’t bite despite what may be the most adorable “note from the sellers” ever written. “My 8-year-old daughter cried when we left her house and still asks if we can go back,” the seller wrote. “She intends to buy it back when she is old enough.”
Said Erickson: “We first went on [the market] at the end of March, and it’s been on and off the market a bit since then. The seller now lives in Seattle, it’s essentially a vacant home now, except for a few things of mine I’ve brought in.”
On Pillsbury Avenue, meanwhile, in a mansion big enough for a small convention, the pair were awaiting signs of the kind of big run-ups in value that would justify a healthy price — one that will allow their art-collecting seller to recoup at least part of the immense investment to restore the structure from a time when it was a shambling shadow of its once grand self.
“It’s an up market, and I’m slam-bangin’ busy,” Erickson said, “but it still really isn’t the old days, when everyone’s values always seemed to rise.”
St. Louis Park assessor Bultema agreed.
“You see some of the percentages and you go, ‘Holy cow!’ ” Bultema said. “But keep in mind, Brooklyn Center came down really hard. So while the recent change can look hugely impressive, where they’re at now is still pretty low.”
David Peterson • 952-746-3285
© 2013 Star Tribune