Wisconsin Property Values Decline - Again

 Michael Theo  |    October 05, 2011

It will likely surprise no one that property values in Wisconsin declined in 2011 for the third year in a row, according to a new report by the state Department of Revenue (DOR). But diagnosing the differences between property types and location provides some interesting details about Wisconsin’s real estate market and its impact on the state and local economies.

According to a detailed analysis of the DOR numbers by the respected Wisconsin Taxpayers Alliance (WTA), the value of all taxable property in Wisconsin fell 1.8 percent to a total of $487 billion. By comparison, in 2008, the total property value was $514 billion, 5.4 percent higher than today.

Looking just at real property, (ie: minus personal property,) values dropped 1.7 percent since last year from a total of $484 billion to $475.5 billion. Personal property values (ie: minus real property,) fell 1.1 percent from $11.9 billion to $11.4 billion.

Home values constitute for about 71 percent of the total equalized value in the state and thus drive the statewide numbers. The DOR reports that the value of existing homes dropped 2.3 percent, after falling 2.3 percent and 3.9 percent in the preceding two years, according to the WTA analysis. New construction of residential homes was only 0.6 percent of the total residential values, down from an average of 2.5 percent between 1989 and 2007, demonstrating continued weakness in the home building industry. Combined, all residential real property in the state fell 1.6 percent, from $353.1 billion to $347.5 billion.

Other forms of property didn’t fare much better, with a 2.3 percent decline in commercial property values, a 3.4 percent decline in agricultural property, a 2.6 percent decline in agricultural forest property and a 5.4 percent decline in forest property values. However manufacturing property actually maintained its value and undeveloped land actually increased in value 1.2 percent.

Watching new construction carefully

Local officials are watching one statistic very carefully: the value of new construction in their communities. Since 2005, state law has placed a cap on all municipal and county levies, limiting increases to the greater of net new construction value or a specified percentage ranging from 2.0 to 3.86 percent. In the new state budget, approved in August, that cap is now zero, making new construction the only way local governments can increase their tax levy short of voters approving an increase by referendum.

According to the WTA analysis, 16 of Wisconsin’s 72 counties saw their equalized value increase, albeit just slightly in most cases. The largest increase came in one of the smallest counties, Pepin, with an increase of 3.1 percent. 21 counties saw their values decrease by more than 2 percent, led by Juneau and Polk, where values dropped more than 6 percent. Counties that saw new construction values increase were Monroe, Jackson, Trempealeau and LaCrosse, which all had value increases around 1 percent. Milwaukee and Racine, two of the state’s largest counties, were among the slowest for new construction rates.

Unlike counties, some municipalities will be facing property tax freezes as a result of the new law and no new construction. According to the WTA analysis, 10 cities, 54 villages and 58 towns have had no new construction value increases or even decreases. Razing buildings can result in a negative new construction number. Another 661 municipalities will have allowable levy increases of less than 0.5 percent.

This is bad news for local governments however is good news for property taxpayers. In the past, local tax levies could be increased to make up for the decrease in property values, helping local government revenues but hurting property owner pocketbooks. Hopefully everyone wins soon when Wisconsin real estate markets rebound.

Michael Theo is President & CEO of the WRA.

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