Real Estate

Plunging home values mean falling taxes in Stanislaus

Four homes for sale on a single block on Novi drive in Riverbank epitomized the state of the housing industry last fall. Homeowners finally are finding a benefit in the plunging values - tax officials say property assessments will drop for about 25 percent of Stanislaus County. Alison Yin/The Modesto Bee
Four homes for sale on a single block on Novi drive in Riverbank epitomized the state of the housing industry last fall. Homeowners finally are finding a benefit in the plunging values - tax officials say property assessments will drop for about 25 percent of Stanislaus County. Alison Yin/The Modesto Bee Modesto Bee

Northern San Joaquin Valley home values have declined so much that more than a quarter of homeowners can expect to pay less property tax next year.

About 37,000 Stanislaus County homes will be reviewed. Their assessed values are expected to drop 10 percent to 40 percent, Assessor Doug Harms said Monday.

Every home purchased since Jan. 1, 2004, will be evaluated, and Harms predicted that most will have their assessments reduced by $25,000 to $50,000.

Some home values have fallen far more than that. Harms said new Modesto and Patterson houses purchased during 2005 have declined the most, especially midsized homes of 1,600 to 2,500 square feet. He said those likely have lost 40 percent of their value.

Lowered assessments mean lower property taxes. That's good news for taxpayers but bad news for government budgets.

"It looks like it's going to reduce the county's assessment roll by about $1.4 billion," Harms said. That's about 3 percent of the county's $43 billion residential property tax roll.

Homeowners pay about 1 percent of their home's assessed value in property taxes each year.

Example: A home that sold in 2005 for $300,000 but now is worth $250,000 could have property taxes lowered $500 per year. So $1.4 billion in lowered assessments would result in about $14 million in lower revenues.

Harms expects increases in commercial, industrial and farm assessments, plus tax increases for homes sold before 2004. That should bring next year's property tax revenues even with this year. By comparison, the previous two years' revenues increased about 25 percent.

Reserves help cushion blow

Because property tax revenues are expected to be flat, Stanislaus County's budget will be flat, said Rick Robinson, the county's chief executive officer.

"It's a cause for concern but not for panic," Robinson said. County officials knew the years of rapidly rising property tax revenues wouldn't last. "So we haven't allowed spending to keep pace with revenue increases ... and we increased reserves."

Robinson said discretionary spending will be tight, however, especially for public safety and for the general government serv-ices funded by property taxes.

That includes staffing in the assessor's office. Harms said his staff is too small to keep up with the flood of reassessments, noting that 10,000 of them were requested last year.

"We average about 10 assessments per day, but we'd have to work about 500 per day (to do them all) this year. We just can't do that," Harms said. So for the first time, Stanislaus County is going to trust computers to calculate "trend line" property values that will vary by city, home size and purchase date.

That means properties won't be reassessed individually but rather in community groups of like-sized homes.

Harms likened that technique to "carpet bombing." He said his staff will try to "pull out the innocent victims" whose home values are dramatically different from those of their neighbors.

San Joaquin County did something similar last year, but it averaged home value losses on a countywide basis rather than by city. That resulted in the value of 22,000 homes being reduced and the assessment roll dropping about $1 billion.

Assessors will be more aggressive in lowering San Joaquin County home values this year.

"We're reviewing (home purchases) back to 2002," said Ken Blakemore, San Joaquin's assistant assessor. That's about 50,000 homes that may see their taxes lowered. "We wanted to make sure we got them all."

Blakemore said assessments will drop more in some communities than others, with reductions ranging from 10 percent to 40 percent.

Merced County also is hustling to lower assessments, but it's doing it manually. Assessor Kent Christensen said 20,000 homes or more will be reviewed. That's about half of the county's homes.

"We're pretty much going to look at every neighborhood," said Christensen.

During the housing market boom years, Christensen said, there was a "feeding frenzy" that rapidly drove up prices.

"So much out-of-town money came in from investors buying homes," Christensen said. "There were houses built two or three years ago that have never been lived in because investors (thought they were going to resell them quickly for a profit)."

But housing prices fell, instead.

Christensen said Merced County last year lowered the assessed value of 6,500 homes by an average of more than $50,000. That reduced the tax roll by $350 million. He estimated that most of the homes purchased since 2003 have lost value.

Not first time for falling values

This isn't the first time Northern San Joaquin Valley assessors have lowered home values. They did it during the mid-'90s recession when home prices slumped.

Harms warned homeowners not to be overly optimistic about how much the reassessments will save them this time. That's because the lowered assessments only will reduce basic property taxes, not the annual per-house cost of Mello-Roos or community service fees or voter-approved bonds (such as for schools, hospitals and fire districts).

The lowered assessments won't affect the property taxes due April 10, which are based on last year's home values.

Bee staff writer J.N. Sbranti can be reached at jnsbranti@modbee.com or 578-2196.

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