May 20, 2010

Falling home assessments drop city's value about $150 million in 2010

The city's housing and commercial real estate is worth about $150 million less this spring after a reassessment dropped the value of homes by an average of 4.4 percent. 

Real estate assessments fell this year because foreclosures are up and home sales are down, said City Assessor Ray Anderson. The city had 335 qualified sales last year compared to an average of 1,100-1,200 sales in recent years. It recorded 405 foreclosures in 2009 compared to an average of 30-40 homes per year in the 1990s. 

The lack of sales and girth of foreclosures created a large supply of available homes, which forced prices down as buyers waited for the best deals. 

"If you don't have many buyers, you have a larger supply," Anderson said. "It's basic Economics 101. If you have a big supply, you get a buyer's market." 

"This is the slowest I've ever seen the market," Anderson added, noting he was a real estate agent in the 1980s before becoming an assessor. 

Racine's housing and commercial properties are worth a combined $3.75 billion, according to Anderson. The number doesn't include manufacturing properties, which is determined by the state, or the value of assessed personal property in the city, Anderson said. 

The drop in assessments wasn't a surprise. Based on the recession and the housing slump, city officials had projected the decline last year.

While housing values dropped, the city's commercial properties held the line, Anderson said. Assessments on commercial buildings fell 0.3 percent this year. The city had 23 commercial sales last year, and most of those properties held their value.

City assessments are important because they're the primary source of revenue for local governments. Declining values mean the city, Racine Unified, Racine County and Gateway will have to increase their property tax rates to bring in the same amount of money as they did in 2009, or cut spending to match the decline in property values.

City Administrator Tom Friedel said the public should evaluate local governments based on spending, not tax rates. If government spending is flat than people's tax bills will be flat, he said, even if the actual property tax rate increases, he said.

The city's 2010 budget is a good example, Friedel said. City unions agreed to forgo pay raises this year and city officials found a way to cut about $683,000 in spending. The city's property tax rate increased less than 1 percent last year.

Another example is you can actually have a decrease in the property tax rate and an increase in city spending, which happens when assessments increase at a rate greater than the decline in the property tax rate.

Friedel said government spending is a better measure because it more accurately reflects the decisions elected officials make.

Anderson said his office pays no attention to the political decisions to be made based on property assessments.

"We call it as we see it," Anderson said. "We're not influenced by that at all."

He added the declining assessments led some residents to call and complain that their assessment was too high. The complaint is a little misguided because a property's assessed value is not the same as its market value. The assessed value has little influence on how much a property actually sells for. Arguing for a higher assessment essentially means you're arguing for a higher property tax bill.

There are exceptions, Anderson said. People trying to refinance their home may benefit from a higher assessment, and some home owners may be forced to pay a PMI (private mortgage insurance) if the assessment drops too low, he said.

But other complaints were emotional, Anderson said.

"For most people, a house is their biggest asset," he said. "They get upset when they see its value go down."


  1. It is interesting how the city's assessments shot up when home prices shot up but they are slow to come down to reality now. In this market I would love to get what the city says my house is worth.

  2. This will not stop the City from raising home values so The Mayor can play developer, after all he has such a great track record

  3. "The complaint is a little misguided because a property's assessed value is not the same as its market value. The assessed value has little influence on how much a property actually sells for."

    On the contrary, the assessed value is supposed to be indicative of market value by definition. The problem is that the assessed value is based on previous year's sales, so the assessed value lags the market value by 1-2 years.

    Also, the assessed value is a factor in the consideration of sales for many sellers/buyers. If not, why is it quoted so often by sellers and agents in their listings? It is a consideration, but certainly not the sole influencing factor by any means.

  4. I beg to differ. The assessed value is supposed to be very close to market value. The state law enacted afew years ago forced municipalites very close to market value. Once they fall into the mid 90% of market value they are out of compliance. The past three years of hyper foreclosures have forced market therefore assessed value down far more than the city did with recent notices.

  5. The assessor is incompetant.

  6. Taxes are based upon property assessments and yet taxes increase when assessment increase or decline.....the politicians just "adjust" the mill rate to cover their spending!

  7. Like many apparatchiks, the assessor is blowing smoke at the sheep.

  8. It's George Bush's fault!

  9. I have been walking in the Pearl/Racine/11th St areas. Where the hell is the city? Or is it OK for this area to be one huge slum because its many African American?

  10. Why don't you ask the residents there why they don't clean up their neighborhood?

  11. 1:27 - It is what people make it. Don't blame the city - take responsibility for your own actions,life and neighborhood. Start with removing hood from the word.

  12. Anon 3:27 has it exactly right, except for the fact that the socialist liberals in this community don't want people being responsible for themselves, that would make them less dependent on government, lessen the impact of their excuse to blame everything on society and more likely to turn them into responsible, independent thinking conservative Republicans. Heaven forbid, they might even attend a TEA party.