Real-estate market stays depressed

Property appraiser sees possible uptick in late 2009

By Al Everson
BEACON STAFF WRITER

posted Jan 17, 2009 - 9:49:18am

If you liked the drop in Volusia County property values last year, you will probably like 2009.

As he begins his fifth term as the county's property appraiser, surveying micro and macro trends as he sets property values for tax purposes, Morgan Gilreath foresees no quick reversal in the trend.

"We all know that the real-estate market was down in 2008, and it has not rebounded," Gilreath said. "Our challenge is going to be to analyze what sales did occur and the foreclosures out there. We're in difficult economic times, and that translates through the real-estate market."

Based on his own experience and the observations and insight of others in the appraisal and economics fields, Gilreath said "a possible upswing" may come in the second half of this year, perhaps in the third or fourth quarters. However, another contraction in the tax base cannot be ruled out.

"New construction will probably not offset the decline," Gilreath said.

The taxable value of real estate in Volusia County dropped 10 percent last year, as an exuberant real-estate market went bust in a hurry, fraught with mortgage defaults, foreclosures and a severe curtailment of home construction.

The tax base fell from $40.7 billion in 2007 to $36.6 billion in 2008, sending local governments scurrying to patch deficits in their budgets.

The $4 billion loss of value stood in stark contrast to the marked increases of prior years, which reflected a robust real-estate market with eager buyers and willing sellers, as well as entrepreneurs zealous to develop new neighborhoods and to open or expand commercial centers.

For Florida, especially, the decline in property values was new.

"These are things going on that we haven't seen before," Gilreath said, describing the devaluation. "If the national economy goes out the back door, then the real-estate economy is not going to blossom in that atmosphere."

Figures on building permits compiled by the county's Department of Economic Development illustrate the point: For the third quarter (July through September) of 2008, the county and the 16 cities combined issued a total of 306 building permits, with a new-construction value of $74.5 million. For the same quarter of the year before, the county and cities had issued 518 building permits, with a combined value of $144.7 million.

"We do go out and look at everything that sells, anything that has a building permit on it," Gilreath said.

The Property Appraiser's Office has traditionally used selling prices to determine property values for tax purposes, but now a seemingly inordinate number of home repossessions must be factored in, he explained.

"Market evidence of value was only sales, bona fide sales," Gilreath said. "For the last two years, that paradigm has shifted to include foreclosures."

He continued, "Foreclosures are more common, and they may come to be the rule rather than the exception. What we do not want to do is to over-assess anyone's property in this depressed market."

Concern about appraising property above its actual worth is especially poignant for commercial landlords, Gilreath said.

"There are areas of the county where commercial activity is more favorable than in others, but business in general is suffering," he said.

Commercial landlords can help themselves by giving the property appraiser income information, Gilreath noted.

"We're encouraging them to bring us income, and we'll look at the business. I would implore business owners to contact us regarding the income the building generates."

In a time when the property values are going south, Gilreath cautioned property owners to monitor the governments and agencies levying ad valorem taxes.

"Volusia County taxpayers need to pay attention. The property taxes people pay are based on spending," he said. "What has not gone down is the spending of local governments."

Gilreath noted his office tries to set the value of property "fairly and equitably," but does not set tax rates, also known as millages. Elected officials in county government, the cities, the School Board, and other special taxing districts set those rates.

"I get blamed for it, but I don't determine the taxes for anyone," he added.

If there is "a bright spot" in the current situation, Gilreath ventured, it is a sort of return of yesteryear's prices for buyers.

"Real-estate prices are now down in the 2002 and 2003 range," he said. "The national economy may drive the values down further."

Before being elected property appraiser in 1992, Gilreath served as the deputy appraiser under Robert Hartman.

There are more than 332,000 parcels of real property in Volusia County, and Gilreath said his office does its best to keep up with the status of all of them.

"That number changes daily," he said, referring to the platting of new lots for home sites or commercial development.

— al@beacononlinenews.com

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