PROPERTY VALUES CONTINUE TO FALL

That was the front page headline in the Oakland Press this morning. The accompanying story was as much about how hard it has been for the assessors to keep up with falling property values in our area as anything. The statistics that they quoted I the article were actually a little worse than I thought they would be. They said that local property values fell 12 % countywide in 2010, which they indicated was about the same as the year before.

The author made the point in the article that since property values were still higher than recent sales figure would indicate for homes in the area that everyone should probably appeal the just released new assessments for 2011. I'm sure the various appeals boards will appreciate that piece of advice. The article pointed out that assessors are now using a one year sales cycle for assessment data, verses the traditional two-year cycle that they used to use. Still, value are dropping so fast that using a full year's worth of sales data skews the values too high.

This article points out something that my own data confirms, but I was curious to see how this actually plays out in the little patch of the county that I cover. The assessed value is normally stated as the State Equalized Value (SEV), which is supposed to represent ½ of the value of the home. We have another possible number associated with a property and that is the Taxable Value, which through an anomaly of our state laws can be different (usually lower) than the SEV. Recent changes in assessed values have tended to eliminate those differences.

If one knows what their assessed value is (their SEV) they can in theory double that number and should arrive at an approximation of the market value - at least that's the theory. Before the big real estate meltdown we were in a positive appreciation mode, which meant that the SEV was lagging behind the appreciated value a bit. It was fairly consistent that one could multiple the SEV time 2 or maybe as high as 2.2 and arrive at a market value. During those long gone "good ole days" that was a fairly accurate way to guess at what a house might sell for.

But, as I said, those days are long gone. As I look back over the data that I collected for 2010 for the six market areas that I was tracking in 2010, the following average SEV multipliers resulted from sales in each area -

Milford - 1.5850

Commerce - 1.5693

Highland - 1.4104

White Lake - 1.3924

Lyon/South Lyon - 1.6733

Brighton - 1.4881

Now, I will be the first to admit that these averages are skewed to the low side by the fact that over 50% of all sales in those six areas were distressed sales. Whether the local assessors (and appraisers for that matter) use the data from those sales is not clear or consistent. To be fairer, I went back and reran the averages for each area and took out the distressed sales. I'm not sure that this makes all that much sense either, but it might make the non-distressed seller (or potential seller) feel better about the numbers. Anyway the averages without distressed homes included were a bit higher, as expected. See below -

Milford - 1.6620

Commerce - 1.7105

Highland - 1.5239

White Lake - 1.5664

Lyon/South Lyon - 1.7276

Brighton - 1.6570

What this is still saying is that the assessments are running way behind the market. A house with an assessed SEV of $100,000, which should then equate to a $200,000 market price is instead for an average of $166, 200 in Milford and $171,105 in Commerce. The assessed value would appear to still be about 20% too high in Milford. The assessed values appear to be further off the mark in White Lake and Highland and as bit closer to reality in Commerce and Lyon. Brighton is about where Milford is in terms of assessed value vs. the market value. My data does support the article's recommendation to appeal property assessments again this year. The assessors are just not keeping up with the drop in market values.

There are other interesting things to be seen from the data and from the data with the distressed sales scrubbed out. I'll cover some of those in a future post. Remeber that you can see all of the statistics for last year and this year at my Web site - www.movetomilford.com