Slow Michigan Housing Market Still Leads to Bump in Property Taxes

The Michigan housing market is flat or in decline throughout the state, so Dorothy Roush wants to know how Garfield Township’s assessor determined that her home’s value jumped almost $12,000.

Then there’s Ray Reamer of East Bay Township, who saw his assessment jump by $41,300.

“I don’t know where they come up with these figures,” he said.

Homeowners such as Roush and Reamer began receiving assessment notices last week. Many were surprised to see both a hefty tax increase based on the rate of inflation and double-digit increases in their property assessments.

“Values of homes nationwide have dropped 30 percent in the last two years, and if that’s true, how can our [property taxes] go up,” Roush said.

Home values in the Grand Traverse region were relatively stable in 2006, with variations anywhere from a five-percent reduction to a three-percent increase, though most were around zero, said Robert Reamer, president of IRR-Residential Veri-Tech Appraisal.

That’s better than the rest of the state.

“Southeast Michigan is struggling much worse with its values,” Robert Reamer said. “I haven’t seen the numbers but some appraisers said they have segments that have lost 25 to 30 percent of their value.”

Figures from the Traverse Area Association of Realtors show average Michigan home prices dropped about 1.5 percent in 2006, while the state as a whole dropped about 2.3 percent.

But area property tax assessors can’t use most of the sales information from 2006, according to state law.

Assessors use sales studies to determine a percentage increase or decrease in property values by neighborhood. State law sets the study period at two years, running from April 1, 2004, through March 31, 2006, for current figures.

“So even though it currently may be a flat market, 2007 assessments are based on a trailing, two-year study that includes some big sales from 2004,” said Peninsula Township Assessor Sally Akerley. “So any flatness or dips won’t materialize until future studies.”

Traverse City Assessor Deb Chavez said assessed values almost always lag behind sale prices. When home values shoot up the gap widens, and when they drop, assessments catch up. Such a set-up doesn’t do Michigan mortgage holders many favors.

Overall, Chavez raised home values 4 percent in Traverse City, but some neighborhoods saw large increases while others stayed flat. She did not lower assessments for any neighborhoods.

“Values are still increasing in Traverse City but the rate of increase is coming down,” she said. “We are one of the few areas in the state that stays strong. I’m glad I own property here.”

In some rural areas, assessors said some assessments are starting to drop. As they do, an increase in home mortgages throughout the state should take place.

“We did find a run of assessments that definitely decreased but it wasn’t across the board or anything,” said Dawn Plude, assessor for Acme and Paradise townships. “Now what those people don’t understand is how their assessments went down and their taxes still went up.”

Grand Traverse County Equalization Director Laurie Spencer said even when assessments drop, property taxes increase because assessments haven’t been used in calculating taxes since 1994, when Proposal A went into effect. At that point, the assessed value became the taxable value, which is capped by inflation. The cap doesn’t come off until the property is sold.

The longer a person owns the property, the wider the gap between the taxable value and the assessment, so reductions in assessed value doesn’t stop a tax increase.

SOURCE: The Record-Eagle