After a relentless recession, Madison real estate values rose a solid 3.5 percent for this year’s tax assessments, including the first increase in the value of the average single-family home in six years.
That average home saw an increase in value of 3 percent, to $237,678. Although a sign of strength, it’s well below the peak of $274,974 in 2008.
Overall, 2014 residential assessments increased 3.2 percent, and commercial property — which includes apartment buildings with more than four units, hotels, stores and offices — jumped 4 percent.
“Real estate values are recovering in a very significant way in Madison,” Mayor Paul Soglin said. “We can expect to see more recovery in future years. It’s because of the strength of the people of Madison. This is a desirable place.”
The city will lead the state’s recovery, the mayor said, sharing data that show construction job growth jumped 20.3 percent in the metro area compared to 3.9 percent in the state from 2010 through 2013.
“All of the cranes out there don’t lie,” he said.
“It’s good news for the state,” said Todd Berry, president of the Wisconsin Taxpayers Alliance. “It suggests values statewide will finally go up.”
New values, based on 2013 sales and other data in effect for 2014, don’t reflect economic changes since the start of the year or the full value of many projects underway, city Assessor Mark Hanson said.
An especially bright spot is $392 million in new construction — a 76 percent rise over the previous year and the most since 2007. The construction includes high-profile projects like The Edgewater hotel redevelopment nearing completion on Lake Mendota, the recently completed Constellation apartments in the 700 block of East Washington Avenue, and a host of other projects.
The building boom is critical for the city, which has increasing costs but is under state revenue limits that restrict increases in tax collections to the growth in net new construction of buildings, additions and remodeling minus the value of properties that have been demolished.
Mailings began Friday
The city began mailing new assessments on Friday. The values will serve as the basis of tax collections by the city, school districts, Dane County and Madison Area Technical College. The new values raise or reduce the wealth of property owners and can shift the burden among taxpayers. But it’s too early to know what new values mean for individual tax bills, which will become clear in the fall when entities set budgets and tax rates for 2015.
“You can’t just look at assessments and forecast what tax bills are going to be,” Hanson said.
Last year, an anemic 1 percent increase in net new construction left a potential multimillion-dollar gap that was eventually closed through a combination of measures for the 2014 budget.
The new construction will enable the city to raise more taxes, Berry said.
It’s too early to tell how the new values will affect the 2015 budget and tax bills, Soglin said.
The city has been struggling with the recession for several years. For 2010, the city was staggered by a 3.1 percent drop in real estate values over the previous year, the first decrease in at least 35 years. The value fell 0.3 percent for 2011, 1.6 percent for 2012, and rose a modest but encouraging 0.9 percent for 2013.
The new values continue a trend that’s gradually shifting the share of taxes from residential to commercial property owners, officials said. Since 2007, the share of city taxes paid by commercial owners has increased from 31 percent to just over 35 percent, Soglin said.
Revaluations of residential properties — single-family homes, condos and apartments with up to three units, rose $288 million, the first increase for that category since 2007.
The value of single-family homes rose in 104 of 110 areas defined by the city assessor’s office, fell in four and stayed the same in two. The values rose 5 percent or more in 16 areas, including a high of 8.8 percent in South Madison, and Sunset Village and University Heights on the Near West Side.
“We’re seeing bidding wars again,” said Jo Ann Terasa, assistant assessor for residential property, adding that homes are selling more quickly. “We’re back to days and weeks opposed to months and years.”
Average values fell slightly in a few places: 1.5 percent in Holiday Bluff near the airport on the North Side, and less than 1 percent in Orton Park on the Near East Side, Door Creek/Reston on the Far East Side and Woodward on the Lake Mendota shoreline north of Maple Bluff.
The most expensive average homes, $872,600, were on the lakefront in Spring Harbor, and the least expensive, $128,400, in Fair Oaks/Worthington Park on the East Side.
The adjusted home values are based on sales between Jan. 1 and Dec. 31, 2013.
The 4.0 percent increase in commercial properties was powered by new construction of apartments, Hanson said. There are 22 large apartment projects — 13 Downtown — going up or just finished, he said.
The condo market, however, remained sluggish, with increases in revaluations and construction lagging behind other property types, Hanson said. The strength of apartments versus condos seems to tie to the trend of young professionals being more attracted to renting than owning, he said.
There was moderate growth in the value of hotels, offices, stores and other non-residential commercial properties, Hanson said.
Manufacturing assessments are done by the state and won’t be ready until June 1.