The Region’s SEV Slide
REGION – As equalized property values continue to slide, taxable values are also declining.
While many will be happy to see the figure that sets their property taxes going down, it also means they might see fewer police on roads that are in increasingly bad repair.
Counties reported their yearly findings to the state in May. All counties in northwest Michigan showed a drop in SEV, but while Grand Traverse, Kalkaska and Benzie counties enjoyed a parallel decrease in taxable values, Leelanau's taxable values increased by 2 percent – even though its assessed values dropped by 2.7 percent.
How? Credit a boom in agricultural properties in the north end of the county, says equalization manager Pam Zientek.
"We have a lot of vineyards coming into the area," she says, and notes that while the county is still seeing home foreclosures, its lakefront properties are holding their value better than many residential properties in the area.
"We are just very fortunate in Leelanau County," Zientek says. "This is the place where people want to be."
As a result of the taxable values bucking the trend, Leelanau residents are not seeing the cuts in local government services like some of their neighboring counties.
Benzie County has laid off employees in anticipation of decreased tax revenues, says equalization director Thomas Longanbach, who notes that the majority of the budget cuts have been in the sheriff's department.
Grand Traverse County experienced a dramatic difference in the rate of decrease between market and taxable values.
State Equalized Value dropped by more than $1 billion in the past year, meaning actual values dropped by more than $2 billion, since the SEV is set at half of the perceived market value.
Meanwhile, taxable values dropped by about one-tenth that much.
SEVs and taxable values became separate entities in the 1990s, when Michigan voters approved Proposal A, aimed at keeping skyrocketing property taxes down. Home and land values were also rising rapidly at the time.
The proposal was intended to keep property taxes from rising faster than inflation. However, when market values drop, it doesn't necessarily mean taxes will go down as quickly.
Kim Pontius, executive vice president of Traverse Area Association of Realtors, says the real estate market throughout the area is actually better than the SEV figures indicate.
"SEVs always lag behind the market by about a year," he says. County assessments may be as much as a year old when the figures are compiled.
The real estate market saw a strong fourth quarter last year, and was tending to be strong in the first two months of this year. However, things slowed down in March so the first quarter of 2011 will be about equal to that of 2010, Pontius adds.
"We're holding our own," he says. "We're not seeing a massive increase or a massive decline."
He's not surprised that Leelanau is faring better than other area counties.
"Leelanau's always been a stronger market," he says. "You get your younger retirees, between about 55 and 62, looking for a more rural place, and they seem to land in Leelanau County."
Pontius is cautiously optimistic about real estate markets in the future. He points to some issues being bandied about in Washington, D.C. – such as talk of discontinuing the mortgage interest tax deduction and requiring home buyers to put down 20 percent of the purchase cost before taking out a loan – that are making the industry nervous and possibly influencing some home buyers to hesitate.
Pontius says 5 to 10 percent down would be more reasonable, and adds that people who post that much have proven to be a low foreclosure risk.
"I think most people would agree that trying to muster 20 percent is a difficult proposition for most folks," Pontius says. BN