Real estate report shows glimmer of hope

At first glance, the county’s latest annual real estate reassessment report may seem to contain nothing but bad news: The total assessed value of county real estate was down in 2011 for the third year in a row. The value of residential property was down for the fourth straight year and by more than $1 billion for the third consecutive year, while median home values and average sale prices were lower once again.

But while the report hardly reflects a real estate market launched into a solid turnaround, it shows that some market segments are getting worse a bit more slowly and posting actual improvements in some cases.

Most notably, existing commercial and industrial properties increased in value last year to the tune of $87.5 million after falling by $63 million in 2010, according to figures from the Chesterfield Department of Real Estate Assessments. Meanwhile, new commercial/industrial construction added $80.7 million to the county’s real estate value last year – on top of $72.1 million a year earlier.

Greg Creswell, a commercial broker with Grubb & Ellis-Harrison & Bates and immediate past chairman of the Chesterfield Business Council, said that while the commercial real estate market appears to have firmed up some, “whether we’re at the bottom or near the bottom” of the decline remains to be seen.

“I think most of us feel that we are there,” he said.

Chesterfield’s ability to lure new businesses such as Amazon.com helps underpin commercial real estate, Creswell noted. “I understand they were looking at upwards of 100 locations” before choosing Chesterfield, he said.

But because of a still-sluggish overall economy, he said, “I don’t see any immediate jumps in the near future” but rather a “slow but steady increase” on the commercial side.

On the residential side, in Chesterfield as elsewhere around the country, the declines of recent years represent at least in part a return to more normal conditions from the overheated market of the early to mid-2000s.

As of January 2009, the total assessed value of residential real estate in the county amounted to $26.4 billion, more than double the $12.4 billion reported in 2002. The subsequent deflation to date has cut the total value of the county’s residential real estate by $3.2 billion, or 12 percent, returning the aggregate value of Chesterfield’s homes to about the same level as in 2007.

But even the residential numbers showed small signs of potential strength. While the average sale price of new homes last year fell to $317,568 from $317,985 in 2010, it was still modestly higher than the $317,042 reported in 2009.

In 2011, the median assessed value of the county’s homes posted a 4.3 percent decline to $186,700 from $195,000 the previous year. (The median value is the midway point – half of all homes are valued higher and half are valued lower.)

Because the assessment of a home’s value is based in part on actual sale prices of comparable homes in the same or comparable neighborhoods, recent sale prices have an impact on assessments. The assessor’s office excludes foreclosure sales from those calculations, but in the real estate marketplace, low-priced sales of foreclosed homes do affect prices.

For that reason, it’s at least slightly encouraging that the number of foreclosures in the county fell last year by about 14 percent to 989 from 1,149 in 2010.

Apart from the question of whether the real estate market is ready to embark on a rebound, the overall loss of value during the past few years has presented a challenge to county government because property tax revenue has declined in tandem. About 45 percent of the county’s general fund – which pays for services such as schools, roads, police and fire departments, libraries and parks and recreation – comes from real estate taxes.

And not only have property values fallen in recent years, but so has the county’s property tax rate, which was cut from $1.04 per $100 of assessed value in 2006 to 97 cents in 2007 and 95 cents in 2008, where it remains today.

In a release that accompanied the reassessment report, Budget Director Allan Carmody suggested that county officials were prepared for the decline. “The changes in assessed value reported for 2011 are fully in line with the county’s budgeted assumptions and are therefore not anticipated to have any detrimental impact to any program or service offering,” he said.