High demand pushes Madison home values to new record
With a healthy economy and high demand for housing, Madison, Wis., set a record for the value of the average single-family home and saw strong growth in commercial values, especially big apartment buildings with 50 or more units.
New property assessments show a healthy 7.4% rise in real estate values, including the fifth straight increase in the value of the average single-family home, which jumped 5.8% for the second straight year to $284,868.
"We've had healthy growth again this year," city assessor Mark Hanson said. "We're definitely several years past the assessments of the recession."
Mayor Paul Soglin said, "The numbers reflect solid economic growth and the fact that Madison is a great place to live."
But Soglin added, "I do have some concerns, however, and it has to do with our housing shortage. The increase in value of modestly-priced homes tells me we have to do even more in regard to adding to the housing stock, particularly affordable housing."
The higher assessments are fueled by a 6.8% increase in total residential values, a pinch higher than last year, and 8.5% rise in commercial values, which is solid but less than the whopping 12.9% leap last year that was fueled by construction of big apartment buildings and a special focus on hotel revaluations, Hanson said.
New construction reached $604 million — robust but still under last year's record $750 million — with $173 million for single-family homes and $398 million for commercial properties, which include apartment buildings with more than four units, hotels, stores and offices.
The dollar amount for new construction of single-family homes is the most in city history, Hanson said. Home building sites, inactive during the Great Recession, are now bustling and new plats are being created as well, he said.
The new values, based on 2017 sales and other data in effect last year, serve as the basis for tax collections. The rising value of new construction will give more flexibility in preparing the next budget, and the large increase in commercial value will again shift some of the tax burden from single- family homeowners.
Under state law, new construction is vital because tight revenue limits restrict increases in tax collections to net growth, which is the value of new buildings, additions and remodeling minus the value of demolished properties.
The 7.4% rise in real estate values includes the $604.3 million in new construction and $1.24 billion in revaluations.
The new construction will allow a roughly 2.2% increase, or about $3.3 million, in tax collections for the next operating budget, city finance director David Schmiedicke said.
But Soglin added, "The money is already spent" on capital budget commitments for things like new police and fire stations that lead to increases in operating expenses in coming budgets.
Residential property values included the 6.6% increase in single-family homes and increases of 7.7% for condominiums, 8.8% for two-unit apartments and 5.7% for three-unit apartments.
For commercial property, smaller apartment buildings between four and 50 units showed single-digit increases while those with more than 50 units rose by the 15.9%. All other commercial buildings rose 6%, solid but far less than the 17.3% when hotels got a targeted revaluation last year.
"The rate of growth of the overall tax base will push down the tax rate. That's always a positive," Schmiedicke said.
Still, it's too early to know what new values may mean for individual tax bills, which will become clear in the late fall when the City Council approves a budget for 2019.
The new values show that the market for single-family homes remains hot, Hanson and assistant assessor for residential properties Jo Ann Terasa said.
"We have seen some properties increase above the pre-recession peak and in some instances higher than the previous peak," Terasa said.
Ten neighborhoods showed double-digit increases between 10% and the high 14.2% in the Lake Edge neighborhood on the East Side. Four neighborhoods had no increase and none decreased.
"There's a lot of demand for houses in the $200,000 to $250,000 range," Hanson said. "There are certain price ranges where the inventory is historically low. People just continue to bid up prices, often paying above the list."
Again, the city's priciest homes were in Spring Harbor on Lake Mendota, where the average value rose 3.1% to $1.04 million. Lake shore homes on the Isthmus rose an average 10.6% to $829,400.
And again, the most affordable homes were in the East Broadway area, where values rose 2.8% to $140,800. Two other areas — Burr Oaks-Lincoln School and Bram's Addition — had average values under $150,000. Last year, five neighborhoods had average values under $150,000.