A house for sale in Grosse Pointe Farms in 2012. (David Coates / The Detroit News)
Metro Detroit’s revival from years of falling home values is slowly gaining steam, with residential property values rising last year in all three counties for the first time in six years, according to newly released estimates.
Oakland County saw the greatest rise in assessed values, last year, 8.38 percent, followed by Macomb County at 4.78 percent and Wayne County at 1.46 percent. In 2012, Wayne County values slid 1.4 percent.
“In the Detroit metropolitan area, prices are up 52 percent since the end of 2009, but that’s after having fallen 60 percent,” said PNC Bank economist Kurt Rankin. “Even the bounce-back only has Detroit’s home prices back to levels last seen in the mid-1990s.”
Rankin says PNC Bank forecasts slow growth in property values through the rest of the year.
“While it’s slowing, growth will remain in positive territory,” said Rankin. “We are probably seeing the peak.”
The jump in property tax assessments indicates that it’s a good time to sell a home, says Realtor John Burt, who owns Real Living John Burt Realty in Oxford.
“We’ve seen pretty large increases in pricing. We’re looking anywhere from 20 to 30 percent increases across the board for Oakland County,” said Burt. “But there is a shortage of property, and when there’s fewer homes, the price is going to go up.”
In Wayne County, overall values rose half a percent, which included a 1.26 percent drop in commercial property tax values and a 1.78 percent drop in industrial property tax values.
Assessments had been plummeting in Wayne County since the housing crisis hit in earnest in 2008. This year marks the first time since 2007 that overall property assessments have risen in all three counties. Still, taxable value assessments are expected to be off by around $12 billion — 25 percent — from 2007 when the numbers are finalized in May.
“While improving property values are great news for homeowners, there’s no question that property tax revenue continues to be substantially below 2008 levels and it’s going to be a long road back,” Wayne County Executive Robert Ficano said in a statement. “We’re hoping this year the governor and Legislature will take a serious look at how municipal services are funded. The state has benefited from a recovering economy and is operating with a surplus, while many communities throughout the state are barely surviving.”
Assessments varied widely by community, especially in Wayne County. Residential values in Detroit and the older communities nearest the city continued to fall: Ecorse, Highland Park, Inkster and River Rouge each fell by more than 17 percent. Detroit fell by nearly 15 percent.
The biggest gains in residential values came in Northville and Northville Township. Values rose more than 12 percent in the city and nearly 9 percent in the township.
“I’m not surprised,” said Northville Mayor Christopher Johnson. “It demonstrates that Northville is a great place to live and work and it shows that the community is still a desirable place to be.”
Between 2006 and 2012, Oakland County saw about a 50 percent drop in home prices, says Burt. “Now we’re coming back, but we’re not yet back to the level we were at in 2006,” he said.
The drop and subsequent rebound in values has paid off for some buyers.
Oxford resident Brian Kady bought a bank-owned house on Clear Lake two years ago that was three miles from his home. He spent less than $100,000 on the house, which he fixed up himself with the intention to sell when the market got better.
Last August, he sold the two-bedroom, 1,200-square-foot cottage for $186,000.
“I had no idea we’d be able to sell it this quickly and for as much as we sold it for,” said Kady, who is a sales manager for an auto supplier. “I bought it at the lowest point. This area, it’s definitely coming back.”
Although property assessments may be rising for many communities, that doesn’t mean municipal finances will recover anytime soon, said Eastpointe City Manager Steve Duchane.
Proposal A, a 1994 state law, ties property taxes to inflation while limiting the amount that a community can recapture in taxable value in a given year. This year, property value increases are capped at 1.6 percent by the state. For example, if a community’s property value improves 10 percent, it would be taxed as if it rose just 1.6 percent.
Therefore, says Duchane, “a community cannot recover (tax revenue) as quickly as it can fall.”
Eastpointe‘s residential values fell 3.75 percent, the most in Macomb County. That’s better, however, than the 8.12 percent loss in 2012.
Duchane says Eastpointe has lost nearly half of its property value since 2008, with the typical homeowner paying $407 less in annual taxes since then.
He says as long as state law limits cities’ recovery, the money Eastpointe has to provide services will never return to what it was six years ago. “It’s like switching cabins on the Titanic,” said Duchane. “It really doesn’t do much except maybe offer a better view of the sinking.”
In Oakland County, the large jump in residential values helps offset a drop of about half a percentage point in commercial and industrial values, plus a $1.5 million loss from the phaseout of the personal property tax, said Dave Hieber, head of the county’s equalization division.
Steve Mellen, head of Macomb County’s equalization office, says industrial values fell about 1 percent, but he expects them to rebound too. Commercial values rose about 3.5 percent.
“Commercial and industrial dropped after residential so we’d expect them to rise later,” said Mellen. “I can see this is the bottom and commercial and industrial are going up.”