Home values are on the rise this year across Metro Detroit, with the biggest gains seen in many inner-ring suburbs hit hardest by the 2008 recession such as Harper Woods, Center Line and Ecorse.
Communities in the tri-county area with the biggest gains are Hamtramck with a 26.4% increase, Highland Park rising 23.5% and Detroit increasing 23%, according to preliminary 2019-20 county assessment data.
Officials say the larger increases in smaller and less wealthy communities in part reflects a demand for cheaper homes.
Harper Woods (17.8%), Center Line (17.4%), Ecorse (17%), Inkster (16.9%), Melvindale (16.6%), Redford Township (15.3%) and Oak Park (15.1%) round out the Top 10 communities with the largest 2020 residential growth, according to the county equalization departments in Wayne, Oakland and Macomb.
Overall, Wayne County saw the largest residential average increase at 8.7% in the tri-county area, followed by 7.5% by Macomb County and 6% in Oakland County.
"We are seeing the biggest increases in some of the communities that dropped the most during the Great Recession," said David Hieber, Oakland County's equalization officer.
Hieber said cities with affordable housing and walkable downtowns are seeing the largest increases.
Existing homeowners' tax bills won't jump significantly because state law caps yearly increases at the rate of inflation or 5%. But those buying homes will likely pay more in taxes because the cap is lifted when a property is sold.
Residents have gotten or will soon get notice in the mail of changes in their home values from their local communities. This is the time that residents are allowed to file appeals of those values to their cities and the state.
Center Line resident Pamela Porter bought her three-bedroom brick ranch in 1995 for $85,125. In January, she sold it for $124,000 in just a few days to the first person who looked at it.
“I never expected the house to sell so fast, especially in wintertime. I was pleasantly surprised,” said Porter, 63, who plans to relocate to Florida with her husband, Lee Porter, 71.
“I see some younger people moving in. You get a lot here for your tax dollar.”
While Center Line's increase was one of the biggest, its home values haven't recovered from the recession. Assessed values in 2019 were still only 66% of what they were in 2007, according to county data.
Similarly, Hamtramck's home values are still 80% of 2007's and Oak Park's are 74%.
Countywide, home values in Oakland have surpassed 2007's numbers, but Wayne and Macomb county 2019 values were still less than what they were before the recession.
Last month, Detroit announced a 20% increase in the 2020 data, the largest overall increase in at least two decades. Wayne County Equalization data reports Detroit's increase slightly higher at 23%.
Hamtramck Mayor Karen Majewski credits her city's climbing values in part to Detroit’s revitalization.
“It spills over into Hamtramck. As people look for viable neighborhoods that are close to the amenities of the city of Detroit and have their own amenities as well, Hamtramck is a logical choice for them,” she said. “It’s more economical than some of the places in Detroit.”
But the 2.1-square-mile city is also a draw on its own for its walkability and sense of community.
“It has a housing stock that’s viable and attractive and affordable and a neighborhood that has the amenities and services that people are looking for,” she said. “It really is a small town.”
The city, Majewski said, has rebounded from the recession that hit it hard and resulted in a state takeover. Hamtramck exited emergency management in December 2014, marking the second time in 14 years the city had come out of financial crisis through the guidance of an emergency manager.
Oak Park has transformed its look and infrastructure in recent years and is attracting young families, said City Manager Erik Turngate.
Turngate noted a beautification project that includes a new overpass sign at Interstate 696 and Coolidge, a freeway that has about 200,000 drivers daily, as well as MoGo bike stations and a redesign on Nine Mile with pocket parks.
Other areas, such as Royal Oak, downtown Detroit and Birmingham have priced out younger home purchasers, he said.
Claire Williamson and her fiancé, David Welch, both 33, moved to Oak Park in late 2017. The two relocated from downriver and selected the city because it was close to nightlife and activities in Ferndale, Royal Oak and Berkley they enjoy.
“We were looking in Ferndale for the longest time, but prices were really high for what we could afford,” she said.
The couple bought their 1,100-square-foot, 1952 ranch for $125,000, and it’s close to the city’s Nine Mile improvement project that wrapped up in the fall.
“The mentality and why more people are coming here is because the houses are more affordable, schools are good and you get a lot for your money and are close to Ferndale, Royal Oak and Berkley,” she said.
In Pontiac, where home values rose 15%, Mayor Deirdre Waterman said the city has seen consistent increases in home values for the last four years.
The city has rebounded from the financial crisis it faced after the Great Recession, and Waterman credits improving values to numerous initiatives to boost Pontiac’s image and the quality of life for residents.
Among them are public safety improvements to curb violent crime, incentives for home rehab projects and a blight removal campaign that targeted about 1,000 properties. The city hoped to eradicate its blight in a decade. But instead, with the help of federal funding, has finished in five years, she said.
The city also is attracting new business, including Amazon. The retail giant is building a $250 million distribution and fulfillment center at the former Silverdome site that’s expected to bring 1,500 jobs.
“This has become a desirable and attractive place to live now,” said Waterman, adding the average home for sale in the city spends just three days on the market.
While the increases are positive for property owners, they don’t amount to much for municipalities, said Brian Parthum, an economist for the Southeast Michigan Council of Governments. Communities, he said, remain limited by the way property is taxed under Proposal A, which went into effect in the mid-1990s.
“We are seeing assessment gains year after year,” Parthum said. “The biggest concern though for local governments is that despite the positive gains in assessments, they are still capped through Proposal A by whatever the inflation rate is.
"The vast majority of properties, although they may see gains in their assessed values, they are going to have much smaller gains in their taxable values, which is what taxes are based on.”
City assessors generally determine a home’s worth through sales studies: the analysis of comparable sales in the same area. That worth is called an assessed value. State law requires that assessments not exceed 50% of a property’s market value.
The majority of a property tax bill is based on a version of that number called the taxable value, which is capped yearly at the rate of inflation or 5%. The cap is only lifted when a property is sold, causing the taxable value to revert to the assessed value. The cap was put in place by 1994 legislation to protect Michigan taxpayers from rapidly increasing taxes when the real estate market is booming.
“For communities, it means that they are still working with the same size budget that they had five to six years ago when the market had hit bottom,” Parthum said. “They just have not had that revenue growth that property owners might think they are having, because their assessments are going up."