The 2013 countywide reappraisal resulted in a historic drop in property values, but improving real estate metrics are providing a glimmer of hope for the local economy.
That was the message industry professionals heard Thursday, July 25, at real estate information company Chandler Reports’ 2013 Mid-Year Master Your Market seminar at the Memphis Marriott East.
The 2013 Shelby County reappraisal has touched every property owner and forced city and county governments to raise taxes to just produce the same amount of revenue before the overall tax base dropped.
For the first time in recorded history Shelby County property values – including those in the city of Memphis and all of its suburban municipalities – dropped, by 3.9 percent.
(Daily News File/Lance Murphey)
“I’ve never seen this before and I don’t think many people have,” said Greg Moody, director of reappraisal for Shelby County Assessor of Property Cheyenne Johnson.
To determine a property’s value, the assessor’s staff looks at the property’s use, its physical characteristics and recent market conditions. Those conditions are studied by looking at actual comparable property sales that occurred from 2010 to 2012, capturing the downturn in the local housing market.
Moody presented another startling figure. The median value of Shelby County homes dropped 15 percent from $111,200 in 2012 to $94,600 in 2013. Memphis saw the steepest drop in median value, falling 18 percent from $81,200 in 2012 to $66,200 in 2013.
The total value of assessed residential properties fell from $10.4 billion in 2012 to $9.3 billion as of April 2013, a 10 percent decrease.
The total value of assessed commercial properties increased from $4.3 billion in 2012 to $4.6 million as of April 2013, a 6.3 percent increase.
Moody said he thought moving to a two-year reappraisal process, instead of the current four-year cycle, could be a better system. That’s important because since a property’s value determines its tax bill, if official property values aren’t updated regularly some people would be paying too much in property taxes while others would be paying too little.
“I think that is the future, to go into shorter reappraisal cycles,” Moody said.
The housing market is showing signs of steady improvement.
Through the first half of 2013, Shelby County netted 7,606 homes sales, up 9 percent from 7,000 home sales through the first half of 2012. Total sales volume tipped the scales at $1 billion, up 20 percent form $839 million last year. The average year-to-date sales price in Shelby County was $132,153, up 10 percent from $119,948.
Of 33 ZIP codes in Shelby County, 22 had an increase in overall sales activity and the recorded mid-year sales and average sales prices were the highest recorded since 2008.
Shelby County netted 4,226 home sales in the most recent quarter, an 11 percent bump from 3,821 in the second quarter of 2012. Total sales volume in the second quarter was $597.1 million, up 21 percent from $494.1 million in the second quarter of last year.
The average sales price was $141,303, up 9 percent from $129,316 in the second quarter of last year.
Bank sales are coming down. There were 1,634 bank sales with an average price of $73,991 through the first half of 2013, down from 1,999 and $66,990 in the same period in 2012. The 2013 mid-year numbers recorded the lowest number of bank sales and the highest average bank sale price in eight years.
After years of increases, foreclosures are beginning to ebb.
There were 1,971 foreclosures in the first half of 2013, down 15 percent from 2,307 over the same period in 2012. Every Shelby County municipality saw foreclosures fall, with Memphis experiencing a 13 percent drop.
Some of that can be attributed to stricter lending practices following the housing crash and recession.
Through the first half of 2013, only 11 adjustable rate loans were made for new purchases, up from six over the same period last year but far below the 1,906 made in the first half of 2006. The number of sales with two loans at the time of sale was 153, up from 124 over the same period last year but far below the peak of 2,594 in the first half of 2006.
But there is pressure from Wall Street to loosen lending practices that were made stricter after the housing bubble burst.
“That’s one of the things we’re looking at closely,” said Eric Barnes, publisher of The Daily News. “Are we making the same mistakes again?”
Homebuilders are beginning to see the light at the end of what has been a very dark tunnel, but challenges remain.
Year to date, Shelby County homebuilders have filed 474 permits, a slight increase from 469 permits filed for the same period in 2012 but the most since 543 in 2008.
For the first time since 2006 a homebuilder, Regency Homebuilders LLC, cracked the top five in top residential sales.
“We’re slowly climbing our way out of a bad market but we still have a ways to go,” said Don Caylor of Summerset Homes Inc. and 2013 president of the Memphis Area Home Builders Association. “The last six years have not been kind to the housing industry but we’ve begun the slow climb out of the trough.”
Caylor said the market has improved since it was decimated by the housing downturn and recession, but a host of issues – including regulatory issues like seismic standards, rising material costs, a shrinking number of lots, increased labor costs and stricter lending practices – will continue to present challenges for local builders.
Caylor said the seismic requirements in the 2012 International Residential Code could dramatically increase building costs, which he said could make it harder for people to buy homes.
MAHBA is asking state legislators to approve legislations allowing local governments to implement building code amendments that are less strict than the ones required by the state.
“One of the reasons we’re here is to fight legislative battles,” Caylor said. “They want us to build houses the way they do in San Francisco. You’re talking about extreme costs.”