HomeMy WebLinkAboutCity Council Packet 04-17-2001 BOEAgenda
City of Plymouth
Board of Review Meeting
Tuesday, April 17, 2000
7:00 p.m.
Council Chambers
1. Call to Order
2. City Assessor's Report
3. Public Comment
4. Adjourn
II
0
MEMO
CITY OF PLYMOUTH
3400 PLYMOUTH BOULEVARD, PLYMOUTH, MN 55447
DATE: April 17, 2001
TO: Plymouth Board of Review
FROM: Nancy Bye, City Assessor
SUBJECT: 2001 BOARD OF REVIEW
The following report explains the statistical measurement and general information the
assessing staff utilizes in determining values for the annual, January 2 Assessment. This
will hopefully make your job as a member of the Board of Review easier to understand.
The purpose of the Local Board of Review is to hear testimony from property owners on
their objections to the Assessor's 2001 estimated market value or property classification.
This may be done in three ways: (1) in person, (2) in writing, or (3) by the property
owner's representative.
The Board of Review is not empowered to adjust taxes, but only deal with the 2001
estimated market value or classification questions.
At the conclusion of the meeting -the Board of Review will recess, and will reconvene on
May 1, 2001 at 7:00 p.m. Decisions on all appeals will be made at that time based on staff
reports and information submitted.
Please read through the information and feel free to contact me with any questions or
comments you may have before the Board convenes.
Nancy Bye
Extension #5351
E-mail NBye@ci.plymouth.mn.us
TABLE OF CONTENTS
DESCRIPTION
LOCAL BOARD OF REVIEW AUTHORITY
2001 BOARD OF REVIEW SUMMARY
INTRODUCTION TO THE 2001 ASSESSMENT
INTRODUCTION TO PLYMOUTH ASSESSING DIVISION
2001 ASSESSMENT STATISTICS
ASSESSMENT TERMINOLOGY
2001 SALES RATIO STUDY
DISTRIBUTION OF MARKET VALUE
SINGLE FAMILY HOUSING BREAKDOWN
2001 ASSESSMENT SALES STATISTICS
RESIDENTIAL VALUE DISTRIBUTION
APPEAL PROCESS
LAKESHORE STUDY
ADDENDUM
PAGE#
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LOCAL BOARD OF REVIEW AUTHORITY
Minnesota Statutes, Section 274.01, provides that the council of each city shall be or shall
appoint a Board of Review. The Plymouth City Charter requires that the City Council act
as the Board of Review.
Assessments of property are made to provide the means for the measuring of the relative
share of each taxpayer in meeting the costs of local government. It is the duty of the
Assessor to assess all real and personal property except that which is exempt or taxable
under some special method of taxation. If the burden of local government is to be fairly
and justly shared among the owners of all property of value, it is necessary that all taxable
property be listed on the tax rolls and that all assessments be made accordingly.
The authority of the local board extends over the individual assessments of real and
personal property. The board does not have the power to increase or decrease by
percentage all of the assessments in the district of a given class of property. Changes in
aggregate assessments by classes are made by the County Board of Equalization.
Although the local board has the authority to increase or reduce individual assessments, the
total of such adjustments must not reduce the aggregate assessment made by the Assessor
by more than one percent of aggregate. If the total of such assessments does lower the
aggregate assessment made by the Assessor by more than one percent, none of the
adjustments will be allowed. This limitation does not apply, however, to the correction of
clerical errors or to the removal of duplicate assessments.
In reviewing the individual assessments, the board may find instances of under valuation.
Before the Board can raise the market value of property, it must notify the owner. The law
does not prescribe any particular form of notice except that the person whose property is to
be increased in assessment must be notified of the intent of the board to make the increase.
The Local Board of Review meetings assure the property owner an opportunity to contest
the valuation that has been placed on his/her property or to contest or protest any other
matter relating to the taxability of his/her property except the tax. The board is required
to review the matter and make any corrections that it deems just.
A new piece of legislation was added in the 1999 legislative session and affects the Local
Board of Review.
Effective May 26, 1999 for taxes payable in 2000 and thereafter:
Chapter 243, Article 5, Section 24
Allows property owners to refuse to allow an assessor to inspect their property. The
refusal must be verbal or in writing. The assessor may then estimate a property's
value by making assumptions believed appropriate concerning the property's finish
and condition. If the assessor is refused entry, the local board of review may not
adjust the market value or classification in a way that would benefit the property.
iJ
2001 BOARD OF REVIEW SUMMARY
The majority of properties in the City of Plymouth saw changes in their estimated market
value. The value changes range from general city wide increases to substantial increases
due to locational market activity. Average percentage increases in valuation are as follows:
Property Type
Residential
Residential Lakeshore
Condominiums
Townhomes
Apartments
Commercial/Industrial
Value Percent Change
13%
14%
13.5%
13.6%
13%
5.8%
Exceptions to the above market value changes would include new construction, quartile
areas, reappraisals, and/or other market adjustments.
The condominium and townhouse market, after being flat for a number of years, continues
to be a rapidly appreciating market. This is based on the aging baby boomers and the
demand for maintenance free living.
On March 16, 2001 estimated market value notices were mailed to all Plymouth property
owners.
State law provides that the assessment shall be an annual assessment with all property in the
taxing jurisdiction re -valued to its market value every January
2d. The City of Plymouth
continued to have a high quantity of building permits for new construction and remodeling
projects. This does not include the 5,600 quartile parcels that had to be reviewed and re-
appraised.
The Legislature in its 1993 session passed a law imposing a limit on how much an
assessor's estimate of market value is permitted to increase from one year to the next for
taxation. Under the law, assessors are required to continue to estimate the market value of
all properties. However, the law requires the use of a limited market value for purposes of
determining property tax bills. Approximately 18,175 parcels in the City qualify for a
limited value. These properties are taxed on their limited market value, not their estimated
value. $262,569,300 of estimated market value is not being taxed due to the limited
taxation law.
With the ongoing conversion of our computerized system for property appraisal,. certain
workloads shifted. A . computerized mass appraisal system requires extensive time
verifying the accuracy of the converted data as well as sketching to scale each property into
the new system. Our computerization of the assessing function of Plymouth continues to
be one of the most progressive and sophisticated systems that exists in the State of
Minnesota. The excellence and quality of the 2001 assessment is a direct result of this
computerization.
7
The assessment just completed for 2001 represents many hours of staff research and time.
We feel confident the 2001 assessment is fair and well equalized throughout the City of
Plymouth.
Respectfully submitted
Assessing Department Staff
3
INTRODUCTION TO THE 2001 ASSESSMENT
The 2001 Assessment affects all property owners in the City of Plymouth. As required by
current state law, the Assessor is required to reassess all property each year.
State Statute reads: "All real property subject to taxation shall be listed and assessed
every year with reference to its value on January 2 preceding the assessment." This has
been done and the owners of property in Plymouth have been notified of any change.
Minnesota State Statute 273.11 reads: "All property shall be valued at its market value. It
further states that "in estimating and determining such value, the Assessor shall not adopt a
lower or different standard of value because the same is to serve as a basis for taxation, nor
shall he adopt as a criterion of value the price for which such property would sell, or in the
aggregate with all the property in the town or district but he shall value each article or
description of property by itself, and at such sum or price as he believes the same to be
fairly worth in money." The statute says all property shall be valued at market value. This
means that no factors other than market (such as economics, personalities or politics) shall
affect the Assessor's value and the subsequent action by the Board of Review.
Market value has been defined many different ways. Simply stated, it is "the highest price
estimated in terms of cash which a property will bring if exposed for sale on the open
market by a seller who is willing but not obligated to sell, allowing a reasonable time to
find a purchaser who is willing but not obligated to buy, both with knowledge of all the
uses to which it is adapted and for which it is capable of being used."
The real estate tax is an ad valorem tax which is based on the value of property and not on
the ability of the property owner to pay. The values placed on all real estate in Plymouth
are based on the amount of land and the improvements upon the land, while no
consideration is given to who owns the land.
The 2001 Assessment (not the 2001 taxes) reflects an increase of 14% overall valuation
over the 2000 assessment (including new construction, quartile adjustments, and/or market
adjustments). This can be demonstrated as follows:
2000 TOTAL CITY VALUE 2001 TOTAL CITY VALUE
PRELEMINARY)
2001
PERCENTAGE
5,421,670,100 6,192,181,500
Total Value Increase: 770,511,400 14%
Value of New Construction: 151,603,000 3%
Appreciation of Existing Property: 618,908,400 11%
4
TOTAL
PERCENT
OF VALUE
GR0VVIlH IN THE CITY OF
PLYMOUTH
E 14%
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1994 1995 1996 1997 1998 1999 2000 2001
YEARS
2001 ASSESSMENT INTRODUCTION
During this past year, our staff has concentrated on collecting data on field property cards.
Once collected the data was entered into and calculated by the computer system. The output
is then analyzed for accuracy and parity.
Those areas of the city that equal 25% of all existing properties have been physically
reviewed during 2000 and represent over 5,600 parcels, excluding 2,500 building permits.
This is commonly referred to as the "Quartile". In the areas of re -inspection, new items
that previously were not on our records were added, or where applicable, deleted. 61 % of
all homes reviewed were internally inspected. A preliminary sales study was analyzed,
prior to placing a final value on,each property inspected.
Plymouth's preliminary residential median ratio entering the 2000 assessment was 83.8%.
This is determined by Hennepin County comparing the January 2, 2000 estimated market
values to sales occurring from October 1, 1999 through September 30 of 2000. The
average residential increase for the January 2, 2001 assessment was 13%. This was
determined by comparing the January 2, 2001 estimated market values to the same sales,,
thus establishing the 2001 estimated market values at a median sales ratio of 94.9 and a
mean ratio of 94.7 with a coefficient of dispersion of 7.1. In accordance with the results of
this sales study, certain areas of the city, certain styles, and certain sizes of houses were
adjusted in value, either lower or higher than the prior year value, to more properly reflect
actual market values. This past year the appreciation on existing homes was again in the
double digits.
The average 2000 mean sale price of existing housing stock in the City was $243,300, this
does not include townhouses or condos. This is extracted from the Hennepin County Ratio
Study of all arms -length transactions involving single family homes.
Lakeshore in Plymouth was adjusted according to the sale activity on each individual lake.
The average lakeshore property received an increase of approximately 14%. The average
sale price of existing lakeshore property in 2000 was $363,600.
Various townhouse and condominium complexes were adjusted according to market
activity as well as studied to determine if the number of bedrooms per unit affected the
sales prices. - The average increase to the townhouses and condominiums was
approximately 13.5 % to 13.6 %. The sale activity of condominiums and townhouses
remained brisk in 2000. The average sale price of condominiums was $117,100. The
average townhouse sale price was $156,300.
Commercial/Industrial property values increased an average of 5.8 % from the 2000
assessment to 2001 assessment. The continued increases in value are due to several
factors: continuing rent increases, shortage of supply with a strong demand for new
commercial and industrial space and the continuing growth of the economy. One year of
property growth does not represent the rate of inflation of the Consumer Price Index, but
rather reflects the trend of movement in the local real estate market.
Apartment property for the 2001 assessment increased an average of 13 % from 2000 to
2001. The factors contributing to this increase were the market activity, increase in rents
and the very low vacancy rates; less than 2% in Plymouth.
The value we place on the property is accomplished only after we have conducted thorough
studies in the market place. Costs of replacement are checked with builders in the area, as
well as cost manuals that are available, which are put together by experts in the field of
building and appraising. Sales of property are constantly analyzed to see what is happening
in the market place. The assessors/appraisers do not create value, they only measure its
movements.
Assessing property values equitably is partly science, partly judgment, partly
communication skills, and largely a mystery to many property owners. Add to that the fact
that property construction, financing and ownership are more complex today than ever
before and the task becomes more difficult.
Training cannot tell us how to find the "perfect" value of a property, but training can
consistently produce the same estimate of value for identical property by different
assessors. That, after all, is a working definition of equalization.
The following pages contain information that hopefully will inform you and make your job
as a member of the Board of Review a more productive one.
7
Plymouth Assessing Department
City Assessor
Nancy D. Bye CAE
Senior Appraiser Commercial Appraiser
Jan Olsson RES Earl Zent CAE
Appraiser Appraiser Appraiser
Bev Moos CMS I FJoan McCormick CMA Paul Kingsbury CMA
Part-time
Appraiser
Joann Lowrie
Assessment
Technician
Cindy Bowman
8
Accounting
Clerk
Joyce Kirkham
2001 ASSESSMENT STATISTICS
Total City Parcel Count (01-02-00) 22,176
Total City Parcel Count (01-02-01) 22,785
Parcel Count Per Appraiser 2001 Assessment 4,557
Assessor's Industry Standard per Appraiser 5,000
2000 Total Estimated Market Value $5,421,670,100
2001 Total Estimated Market Value (Preliminary) $6,192,181,500
1999 to 2000 Total City Valuation Growth +12%
2000 to 2001 Total City Valuation Growth +14%
1999 Total Building Permits 2,620
2000 Total Building Permits 2,500
1998 Plymouth's Average Home Sale Price 206,300
1999 Plymouth's Average Home Sale Price 231,300
2000 Plymouth's Average Home Sale Price 243,300
Does not include townhouses or condos)
2000 "Median" Sales Ratio (Assessment Level) 94.1%
2001 "Median" Sales Ratio (Assessment Level) 94.9%
2001 Hennepin County Median Sales Ratio 95.3%
2000 Coefficient of Dispersion (Assessment Accuracy) 6.7%
2001 Coefficient of Dispersion (Assessment Accuracy) 7.1%
1999 Approximate Number of Sales (including new construction) 1,950
2000 Approximate Number of Sales (including new construction) 2,200
9
ASSESSMENT TERMINOLOGY
AD VALOREM TAX - A tax varying with the value of a good or commodity; a real estate
tax based on the value of the property.
APPRAISAL - An estimate or opinion of value. The act or process of estimating value.
The resulting opinion of value derived from the appraisal may be informal, transmitted
orally; or it may be formal, presented in written form. Usually it is a written statement
setting forth an opinion of the value of an adequately described property as of a specified
date, supported by the presentation and analysis of relevant data.
APPRAISER - One who estimates value; specifically, one who possesses the necessary
qualification, ability and experience to execute or direct the appraisal of real property.
CAPITALIZATION - The process of converting into present value (or obtaining the
present worth of) a series of anticipated future periodic installments of net income. In real
estate appraising, it usually takes the form of discounting.
CAPITALIZATION RATE - The sum of a discount and a capital recapture rate. It is
applied to any income stream with a finite term over which the invested principal is to be
returned to the investor lender.
CITY MARKET VALUE RATE - Established in 1996 (payable 1997 taxes) as a direct
computation against the market value to offset the purchase of open space for nature areas
and trails.
CLASS RATE - Statutory percentage applied to the estimated value of a parcel based on
the parcel's classification. Formerly known as tax capacity rate or percentage.
CLASSFICATION OF PROPERTY - The classification of property after the valuation is
complete to identify the property as residential, commercial, homestead, non -homestead,
etc. Each class refers to a different statutory assessment rate. It is based on the use as of
the assessment date.
COEFFICIENT OF DISPERSION: (Assessment Accuracy) - In statistics, the measure of
absolute dispersion to an appropriate average. A measure of relative dispersion.
Sometimes referred to as an "index of assessment inequality". Under 10% is in the
excellent range.
COST APPROACH - That approach in appraisal analysis which is based on the proposition
that the informed purchaser would pay no more than the cost of producing a substitute
property with the same utility as the subject property. It is particularly
10
ASSESSMENT TERMINOLOGY (continued)
applicable when the property being appraised involves relatively new improvements which
represent the highest and best use of the land or when relatively unique or specialized
improvements are located on the site and for which there exist no comparable properties on
the market.
DEPRECIATION - A loss of utility and hence value from any cause. An effect caused by
deterioration and/or obsolescence. There are several types of depreciation.
PHYSICAL DEPRECIATION - A reduction in utility resulting from an
impairment of physical condition. For purposes of appraisal analysis, it is most
common and convenient to divide physical deterioration into curable and incurable
components.
PHYSICAL CURABLE DEPRECIATION - Physical deterioration which the
prudent buyer would anticipate correcting upon purchase of the property. The cost
of effecting the correction or cure would be no more than the anticipated addition
to utility, and hence ultimately to value, associated with the cure.
PHYSICAL INCURABLE DEPRECIATION - Physical deterioration which in
terms of market conditions as of the date of the appraisal is not feasible or
economically justified to correct. The cost of correcting the condition or effecting
a cure is estimated to be greater than the anticipated increase in utility, and hence
ultimately in value, of the property that will result from correcting or curing the
condition.
FUNCTIONAL DEPRECIATION - Impairment of functional capacity or
efficiency. Functional obsolescence reflects the loss in value brought about by
such factors as over capacity, inadequacy and changes in the art, that affect the
property item itself or its relation with other items comprising a larger property.
The inability of a structure to perform adequately the function for which it is
currently employed.
ECONOMIC OBSOLESCENCE - Impairment of desirability or useful life arising
from factors external to the property, such as economic forces of environmental
changes which affect supply -demand relationships in the market. Loss in the use
and value of a property arising from the factors of economic obsolescence is to be
distinguished from loss in value from physical deterioration and functional
obsolescence, both of which are inherent in the property. Also, referred to as
Location or Environmental Obsolescence.
11
ASSESSMENT TERMINOLOGY (continued)
EDUCATION HOMESTEAD CREDIT - The new education homestead credit reduces
school district taxes on residential homesteads and on the house, garage and one acre of
land for farm homesteads. The funds go directly to the state determined general education
fund of each school district.
ESTIMATED MARKET VALUE - The value which the Assessor has estimated the
property to be worth.
EQUALIZATION - The adjustment of assessed valuation of real property in a particular
area to establish a more equitable division of the total tax burden within the area.
FISCAL DISPARITIES - Program which provides for the sharing of 40 percent of the
growth of the commercial/industrial tax base in the seven county metro area since 1971.
A percentage of the property tax on each commercial/industrial parcel is calculated at the
seven county uniform rate.
GEOCODE NUMBER - A geographically related parcel numbering system. The number
contains thirteen digits made up of section, township, range, quarter -quarter and parcel.
The first seven digits, based on the public land survey, geographically locate the section in
which the property is located. The next two digits will designate in which quarter -quarter
the property is located. The ten through thirteen digits indicate the parcel within the
quarter -quarter. The parcels will be numbered consecutively beginning with 0001. When
a division is made, the next consecutive available number(s) will be assigned, and the old
number(s) will be retained for historical data.
GROSS TAX CAPCITY - A parcel's estimated market value multiplied by the gross class
rate for that type of property. Formerly known as assessed value.
HIGHEST AND BEST USE - That reasonable and probable use that will support the
highest present value, as defined, as of the effective date of an appraisal.
HOMESTEAD AND AGRICULTURAL CREDIT AID (HACA) - Replaces homestead
credit and agricultural credit. The State gives this aid directly to the local units of
government.
HOMESTEAD FULL YEAR - Property is granted a lower tax value if the owner lives in
and owns the property as of January 2. If a person owns and occupied their home up until
December 1, they receive a midyear homestead which carries the full homestead benefits
payable the following year. For example, the January 2, 2000, classification affects the
taxes payable in 2001.
12
ASSESSEMENT TERMINOLOGY (continued)
NON -HOMESTEAD - Residential property that does not qualify for a full year or half
year homestead. The tax capacity is higher, hence a higher tax.
INCOME APPROACH - That procedure in appraisal analysis which converts anticipated
benefits (dollar income or amenities) to be derived from the ownership of property into a
value estimate. The income approach is widely applied in appraising income-producing
properties. Anticipated future income and/or reversions are discounted to a present worth
figure through the capitalization process.
LEGAL DESCRIPTION - The formal way to describe a parcel of property typically metes
and bounds, lot and block or government survey.
LIMITED MARKET VALUE - The Legislature in its 1993 session passed a law imposing
a limit on how much an assessor's estimate of market value is permitted to increase from
one year to the next for taxation. Under the law, assessors are required to continue to
estimate the market value of all properties. However, the law requires the use of a limited
market value for purposes of determining property tax bills. Approximately 18,175
parcels in the City qualify for a limited value. These properties are taxed on their limited
market value, not their estimated value. $262,569,300 of estimated market value is not
being taxed due to the limited taxation law.
LOCAL TAX RATE - Rate of tax applied to the tax capacity of property to calculate the
tax due. Formerly known as tax capacity rate, mill rate.
MARKET VALUE - The most probable price in terms of money which a property will
bring in a competitive and open market under all conditions requisite to a fair sale, the
buyer and seller, each acting prudently, knowledgeably and assuming the price is not
affected by undue stimulus.
MASS APPRAISAL - A method used in valuation of a jurisdiction for tax purposes. As
the termimplies, it is a method of appraising a large number of properties at one time by
adopting standard techniques, and giving due consideration to the appraisal process so that
uniform or equality of values may be achieved between all properties.
METES AND BOUNDS -. A description of a parcel of land by reference to the courses
bearings, that is, the angles east or west of due north or due south) and distances(usually'
in feet or chains) of each straight line which forms its boundary, with one of the comers
tied to an established point; that is the bearing and distance from an established point; such
as a section corner or to the intersection of the center lines of two roads, etc.
If one part of the boundary is on a curve, this part is described by showing the number of
degrees of the central angle subtended by the curve (arc), the length of the radius, and the
length along the curve.
13
D01 LIMITED MAR
a w -Q -E , 18,175 PAR
ASSESSMENT TERMINOLOGY (continued)
PARCEL - A piece of land, with or without improvements, in one ownership.
PRICE RELATED DIFFERENTIAL: (Assessment Difference) - A statistic used to
measure the assessment differences that may exist between higher priced properties vs.
lower priced properties. 100 points is ideal. Within 10 points of 100 is considered
excellent. The PRD for the 2001 assessment is 100.247.
PROPERTY TAX REFUND - All homeowners with household income below $61,930
OR where the property taxes increased more than 12% over last year, may be eligible for
a property tax refund.
SALES COMPARISON APPROACH - Traditionally, an appraisal procedure in which
the market value estimate is predicated upon prices in actual market of value in a static or
advancing market (price wise), and fixing the higher limit of value in a declining market;
and the latter fixing the higher limit on any market. It is a process of analyzing sales of
similar recently sold properties in order to derive an indication of the most probable sales
price of the property being appraised. The reliability of this technique is dependent upon
a) the availability of comparable sales data, (b) the verification of the sales data, (c) the
degree of comparability or extent of adjustment necessary for time differences and (d) the
absence of non -typical conditions affecting the sale price.
SALES RATIO (Assessment Level) - The ratio derived by dividing a property's sale price
into the Assessor's estimated market value.
SALES RATIO ANALYSIS - Study of the relationship between the Assessor's values,
sales prices and the deviations resulting from differences between the two. The purpose of
such an analysis is to determine the efficiency, equity, quality and fairness of assessing
activities of a particular neighborhood or jurisdiction.
SCHOOL MARKET VALUE RATE - Established in 1995 (payable 1996) as a direct
computation against the market value after the passing of school bond referendums.
SPECIAL ASSESSMENT - Street, sewer, water, curb, or other infrastructure costs that
are incurred by a city/township and assigned to benefiting properties.
THIS OLD HOUSE" - The Legislature, in its 1999 session, passed a law to alter the
current exemption to property taxation on older homes. The property must now be 45
years of age or older (Article 5, Section 13 of the Omnibus Bill). The law is designed to
provide owners of older and deteriorated homes with an incentive to restore or renovate
their homes. In turn, is hoped that this will ultimately lead to the preservation of aging
homes in rural communities.
15
3 { r
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City of
Plymouth, Minnesota
This represents a compilation of information and
data from city, county, state and other sources that has
not been field verified. Information should be field 4A
verified and compared with original source documents.
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306,000 NOT TAXED
128 PARCELS
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City of
Plymouth, Minnesota
This represents a compilation of information and
data from city, county, state and other sources that has
not been field verified. Information should be field 4A
verified and compared with original source documents.
w`R '
TF
306,000 NOT TAXED
128 PARCELS
ASSESSMENT TERMINOLOGY (continued)
To qualify for the exemption of improvements from the property tax, the property must be
45 years of age or older at the time the improvements commence and it must be
receiving the homestead classification or will be receiving the homestead classification by
December V of the year the improvement is made.
Only the improvements made to the residence and garage, or the construction of a new
garage qualify for the exemption. An application must be made to the Assessor's Office
for the exemption.
Improvements such as swimming pools and yard improvements are not included. Only
improvements which contribute to increase the value by $5,000 or more may be eligible
for the exemption. If more than 50 per cent of the square footage of the house or fifty
percent of the value is increased, it shall constitute a new home and not qualify.
Properties valued to $450,000 may qualify. To qualify , for exemption, the homeowner
must have obtained a building permit. There is no limit to the total numbers of building
permits to be considered, only the total dollar amount of each improvement.
The total qualifying value is dependent upon the age of the residence. Houses that are less
than 45 years of age, do not qualify. The qualifying value of houses that are at least 45
years of age, but less than 70 years, is limited to one-half of the value of the improvement
up to a maximum exemption of $25,000. Houses that are 70 years of age, or older, are
eligible to have the actual of any improvements excluded, up to a maximum of $50,000.
The valuation of the improvement shall be calculated and determined by the Assessor and
shall be based on the increase in market value of the year period and once the value of the
improvement is established by the Assessor, it remains frozen during the ten year period
of exclusion; however, the inflationary trend for the total value of the property, including
that portion attributable to the addition, will be eligible for taxation.
Under the law beginning April 1, 1994, owners must disclose to prospective buyers
whether any improvements made to the home are exempt from property tax. Owners are
also required to notify buyers that the exemption will terminate when the property is sold.
The exemption for the value of the improvement remains in effect for 10 years beginning
with the initial assessment year in which the improvements contributed to the value of the
house or garage.
The following pages discuss the methodology and our 2001 Sales Ratio Study. We are
fortunate in Plymouth to have a very active market with numerous sales to be able to
accurately measure our assessment.
17
2001 SALES RATIO STUDY
Equalizing is done in today's procedures through ratio studies. These studies compare the
Assessor's value with that same property's actual sale price. This comparison gives us
ratio indicators that are recognized by the County and the State Commissioner of Revenue.
The ratio indicators must reach acceptable levels or they will trigger corrective action for
general across-the-board adjustments by the County Assessor or the Commissioner of
Revenue. These general corrections are essentially a "shotgun blast" type correction that
affects the adequate and inadequate values alike, and although they correct equalization
across jurisdiction lines, they do just the opposite within a jurisdiction by increasing
inequity. In Plymouth, this type of correction was received on Industrial properties for
the 1998 assessment (-5% to building value). Fortunately it has never been done to
residential properties.
The 2001 sales study recently completed by our staff and Hennepin County places our
overall median ratio at 94.9%. Hennepin County's average median ratio is 95.3 % which
puts Plymouth below the average and dictates that jurisdictions at or above the median
carry a slightly greater share of the load. We want to be the leader in most 'other areas,
however, in equalization ratio studies we certainly don't want to be at or near the top.
The Commissioner of Revenue and the Hennepin County Assessor have mandated that any
jurisdiction falling below a 90.0% plateau will be forced into corrective action, and then
everyone suffers.
Our coefficient of dispersion in this year's study is 7.1 %. This is comparable to other
jurisdictions of our size in Hennepin County. (Anything under 10 is considered
excellent.) This is a direct result of our computerization of the appraisal process and
demonstrates our ability to administer fair and equalized valuations at both ends of the
value spectrum.
Our price related differential is currently at 100.2 This shows our ability to treat higher
priced homes as equally as the lower priced homes. 100 is consideredep rfect.
18
DISTRIBUTION OF ESTIMATED MARKET VALUE BY PROPERTY
TYPE
2001
Apartments 6%
Residential
Commercial/Industrial
Apartments
TOTAL EMV
Percentage
70.00%
24.00%
6.00%
2001
4,366,089,700
1,471,638,800
354,453,000
6,1929181,500
19
nesiaennai lu ro
MIX
3,766,941,500
1,355,916,500
301,812,100
5,421,670,100
2001 RESIDENTIAL PROPERTY VALUES
Total Estimated Market Values According to Assessor Records
Market Value Ranges
50,000 & under
City of rh $
50, 001 to $100, 000
Plymouth, Minnesota ® $100,001 to $200,000
200,001 to $300,000
N $300,001 to $400,000
This represents a compilation of information and W E 400001 to $500,000
data from city, county, state and other sources that has f 1
not been field verified. Information should be field Over $500, 000verifiedandcomparedwithoriginalsourcedocuments. 3
MEMO
CITY OF PLYMOUTH
3400 PLYMOUTH BOULEVARD, PLYMOUTH, MN 55447
DATE: April 17, 2001
TO: Assessing Staff
FROM: Nancy Bye, City Assessor
SUBJECT: SINGLE FAMILY LIVING UNIT COUNT. BREAKDOWN
TOTAL CITY)
The following is a listing of the type and the number of living units for each that is on the
tax rolls for assessment year January 2, 2001.
TOTAL LIVING UNITS: 25,953
2001 Assessment represents an increase of 636 living units over January 2, 2000.
Total number of homesteads (1/2/01) 19,652.
21
2001 ASMT
TYPE OF DWELLING OF UNITS
Apartment Units 5,667
Single Family Homes 15,147
Condominiums 2,281
Townhomes 2,593
Permalease 44
Mobile Homes 59
Farm Houses 22
Seasonal Res. (Cabins) 7
Co -Op Units 133
TOTAL LIVING UNITS: 25,953
2001 Assessment represents an increase of 636 living units over January 2, 2000.
Total number of homesteads (1/2/01) 19,652.
21
MEMO
CITY OF PLYMOUTH
3400 PLYMOUTH BOULEVARD, PLYMOUTH, MN 55447
DATE: February 01, 2001
TO: Nancy Bye, City Assessor
FROM: Jan Olsson, Senior Appraiser
SUBJECT: ASSESSMENT - HENNEPIN COUNTY STUDY
SALES STATISTICS
OVERALL SALES RATIO
2000 Estimated Market Values were used on all sales)
STYLE OF SALES AVG. SALE PRICE MEAN RATIO
Ramblers 133 202,800 922
Splits 194 207,100 947
Two Stories 237 297,700 974
Rambler - Cluster
Homes 10 271,900 965
Splits - Cluster
Homes 12 207,200 941
Two Stories - Cluster
Homes 4 221,300 1.00
Condominiums 242 117,100 948
Townhomes 133 156,300 957
TOTAL 940
The above figures are based on the sale of existing homes that meet the state criteria for arm's length
transactions.
Approximate Number Homes Sold Including New Construction 2,200
Average Sale Price of Single Family Homes $243,300
cc: Appraisal Staff
22
PLYMOUTH RESIDENTIAL PROPERTY VALUE DISTRIBUTION
2000
10
0
UNDER 550.000 550.001-5100.000 S100.0014200.000 $200.001-$300.000 S300.001-5400.001 5400.001-$500.000 OVER $500.001
Value
VALUE
UNDER $50,000
50,001 TO $100,000
100,001 TO $200,000
5200.001 TO $300,000
300,001 TO $400,000
5400,001 TO $500,000
OVER $500,000
TOTAL
PERCENT # OF HOMES
1.58 311
8.98 1,765
52.57 10,333
26.89 5.286
7.42 1,458
1.90 373
66 129
100.00 19,655
23
PLYMOUTH RESIDENTIAL PROPERTY VALUE DISTRIBUTION 2001
VALUE PERCENT OF HOMES
UNDER $50,000 50 94
50,001 TO $100,000 5.30 1,062
100,001 TO $200,000 46.61 9,335
200,001 TO $300,000 31.77 6,363
300,001 TO $400,000 10.85 2,172
400,001 TO $500,000 3.66 739
OVER $500,000 1.31 262
TOTAL 100.00 20,027
50%]
45%-
40% --
5%
40•/.
35%
30•/.
25•/.
20%
10%
5%
zZ
0 0
35%--
r^ m o
30%--
O
W O
r
25%--
Cl
O
20%-
C20 O
O
ClO OO
O O
O O
10%--
5%
0%
i
24
zZ
0 0
o 0o
r^ m o Cl X
O N
O
W O
rr
Cl
OCl
C20 O
O
ClO OO
O O
O O
24
0 0 o m
ClO ClCl Cl X
O N
r r r OO
Cl
O
O O
O
O COO
OO ClO OO
VALUE
MARKET VALUE APPEAL PROCESS
NOTICE OF MARKET VALUE
DISCUSS WITH ASSESSOR'S OFFICE
LOCAL BOARD OF REVIEW
DENY APPEAL
COUNTY BOARD
OF EQUALIZATION
CHANGE
VALUE
STATE TAX COURT
25
ABATEMENT PROCESS
ADMINISTRATIVE
REVIEW)
APPROVE APPEAL
DENY APPEAL
2001 RESIDENTIAL LAKE SHORE SALES STUDY
2000 SALES)
NUMBER NAME 1 YEAR AVERAGE AVERAGE
OF OF OF LOT SALE
PARCELS LAKE SALES VALUE PRICE
115 Bass 5 121,000 TO 456,500
200,000
37 Gleason 1 95,000 TO 259,900
230,000
48 Hadley 3 120,000 TO 495,000
175,000
33 Lost 2 90,000 TO 337,450
120,000
141 Medicine 2 135,000 TO 237,500
210,000
43 Mooney 2 120,000 TO 662,500
320,000
53 Parkers 0 0 0
8 Pike 0 0 0
60 Schmidt 3 120,000 TO 361,333
150,000
530 18
Parcels Sales
Hennepin County Sales Study of all Residential Lake Shore Sales in Plymouth for the
2001 Assessment included:
TOTAL SALES: 8 MEAN RATIO: 85.5 Preliminary Ratio
After increases MEAN RATIO: 98.9
Lakeshore properties were given a city wide average increase, then attention was paid to
the location of the lakes, the similarity of the lakes, and the market activity in the last year
in the various neighborhoods surrounding each lake to determine if further adjustments
were necessary.
26
F 1 LI1 jUM
27
The
Published monthly except
combined issues for May -
June, July -August and
November -December.
Minneapolis Area
Association of REALTORS'',
5750 Lincoln Drive,
Minneapolis, MN 55436
Telephone: 952.933.9020
Fax: 952.933.9021
Office hours:
8:00 a.m. to 4:30 p.m.,
Monday through Friday,
except holidays.
Subscription rate: Members:
12 a year paid with dues.
Others: $30 a year.
USPS 351160
ISSN 1054-9684
Periodicals postage paid at
Minneapolis, Minnesota and
additional mailing offices.
POSTMASTER: Send
address change to:
The REALTOR*,
P.O. Box 9570,
Minneapolis, ND! 55440-9570
Minneapolis Area
Association of REALTORS'*
Fran Davis
President
Budd Batterson, GRI
President-elect
Jon Perkins, GRI
Secretary
Robin Peterson, GRI
Treasurer
Mark D. Allen
Chief Executive Officer
MINNEAPOLIS'
w.. uv.w....a
REALTORS
rmt/arcwmafW
Stocks, Rates Take Heat Out of Bidding Wars"
he nationwide torrid housing
market is cooling off declared a
recent USA Today headline.
Nationally, sales of existing and new
homes are down six percent from the
record setting standard of 1999. This
stands in stark contrast to the Twin
City housing market, which is keeping
pace with the hot markets of 1998-
1999. The decline in the national
housing market is being directly
attributed to rising mortgage interest
rates, currently at a five year high. In
addition, evaporating wealth caused by
the Nasdaq sell-off has had a chilling
effect on many would-be homebuyers.
While you cannot debate that the local
housing market has kept pace with the
past two years, local consumers will be
hearing reports from the national news
media that the market has slowed
down. Local REALTORS® will need to
recognize this and educate their con-
sumers on local housing market condi-
tions.
May MLS statistics verify the Twin
City residential real estate market has
definitely kept up an active pace. There
were 5,311 pending sales in May, up 1.0
percent from 5,260 pending sales in
May 1999. Brisk pending sales com-
Listings Processed
bined with the low listing inventory
continues to drive up prices of Twin
City real estate. In May the average
sale price of a closed home stood at
168,100, up 10.2 percent over May
1999.
Year-to-date pending sales through
May are at 22,296 units, down 1.6
percent from 22,653 units through May
1999. The number of new listings
processed through May is at 27,149
units, up 1.8 percent over the same
time period in 1999. The average price
of a closed home in 2000 is $162,700,
an 8.2 percent increase over the
150,400 average during the first five
months of 1999.
As previously forecasted the Twin City
residential real estate market is right
on track to finish a couple percentage
points behind 1999. Moving into the
future, the unknown factor is how the
interest rate hikes by the Federal
Reserve along with the correction in
the stock market will impact local real
estate sales. The next few weeks will
be critical in determining how Con-
sumer Confidence is impacted by these
events.
Sources: The Real Estate Outlook, NAR, Realty
Times, Inman News, USA Today.
J:Year to tmte-,Z
1999 20_00 change 1999, ;2000 change;
6,065 1 6,454 6.4 Q 26,656 27,149 1.86
Pending Sales_.. _.._:...5,26
Current Listings 13,666
Closed Sales, 4,149
Closed Sales 4,644
Dollar Volume ; $632,722,500
Average Price $152,500
Median Price9? $130.900
Web page: mplsrealtor.com d°ntlaio"M sr''condo'0115 .w**0m. -
N pMedY tip- sin& Camay, condo, Wwnhome. W*thoms. dtrpbx. moble home, rarmsmobbr farm, k"stment and k)Waaeage.
eased on data hom the RegWW MWb* Listing Service.
2 - The REALTOR* - July / August 2000
5,311 1.0 U 22,653. 22,296 1 6
13,437 1.7 V
4,830 16.4 Q 16,715 18,1513 8 6 Q
r.__.....,.... Y,.,. _,.•.. z
5,416 16.6 U 18,
799Y
20,674 10.0 Q
811,923,000 128.3 V 514,345,200 2,954,137,600 17 5 Q °
168,100 10.2 U
V
150,400 162,700
1391100
8.2 "lJ
9 0 +Q145,000 10.8 128,400
Web page: mplsrealtor.com d°ntlaio"M sr''condo'0115 .w**0m. -
N pMedY tip- sin& Camay, condo, Wwnhome. W*thoms. dtrpbx. moble home, rarmsmobbr farm, k"stment and k)Waaeage.
eased on data hom the RegWW MWb* Listing Service.
2 - The REALTOR* - July / August 2000
The
Published monthly except
combined issues for May -
June, July -August and
November -December.
Minneapolis Area
Association of REALTORS,
5750 Lincoln Drive,
Minneapolis, MN 55436
Telephone: 952.933.9020
Fax: 952.933.9021
Office hours:
8:00 a.m. to 4:30 p.m.,
Monday through Friday,
except holidays.
Subscription rate: Members:
12 a year paid with dues.
Others: $30 a year.
USPS 351160
ISSN 10549684
Periodicals postage paid at
Minneapolis, Minnesota and
additional mailing offices.
POSTMASTER Send
r
address cThangDe to:
R1 4e REALTOR%
P.O. Box 9570,
Minneapolis, MN 55440-9570
Minneapolis Area
Association of REALTORS®
Mran Davis
President
Budd Batterson, GRI
President-elect
Jon Perkins, GRI
Robin Peterson, GRI
Treasurer
Mark'33. Allen
Chief Executive Officer
lINNEAPOIJS
REALTOR
w -
T
01 RII
S
FORA FAWhafsa'
Web page: mplsrealtor.com
39.5 billion dollars in 1999 residential brokerage commissions
id you generate your share of
revenues in 1999? REAL
Trends publication recently
projected there were 10,721,880 broker
controlled U.S. residential real estate
sides in 1999. These transactions
reflected $720 billion dollars worth of
residential real estate and resulted in
39.5 billion dollars of residential
brokerage commissions paid according
to REAL Trends estimates. While their
projections may be debated (i.e. they
are showing an average sale price of
68,000), the significant point is the
real estate brokerage industry gener-
ates billions of dollars in commission
revenue.
There were 3,912 pending sales in
September, up 3.7 percent from 3,772
pending sales in September 1999. Year-
to-date pending sales through the
third-quarter are at 39,767 units, down
2.2 percent from 40,655 units through
the third quarter of 1999. The average
rice of a closed home in 2000 is
172,400 a 9.9 percent increase over
the $156,900 average during the first
nine months of 1999.
The Twin City 2000 residential real
estate market continues on pace to
finish slightly behind 1999, as forecast
at the beginning of the year. Residen-
tial real estate is projected to finish the
year with 48,500 pending unit sales for
the third highest total in history.
The national housing market made a
good comeback following a slowdown
earlier this year. The National Associa-
tion of REALTORS° is projecting home
sales to remain strong for the balance
of the year, with existing home sales
falling 4.2 percent behind the record
volume of 5.2 million sales in 1999.
Looking forward the market will be
vulnerable to current international
economic and political issues. According
to Dr. David Lereah, NAR's chief
economist, "Higher fuel prices could
result in inflationary pressure and
higher interest rates, and continued
volatility in the stock market can
readily affect consumer confidence. The
good news right now is that the funda-
mentals of the U.S. economy are
healthy."
New construction continues to be a
booming market. While planned hous-
ing units are about 4 percent behind
1999's record, they are still at least 10
percent ahead of previous highs.
According to the Builders Association of
the Twin Cities, the following cities are
the most active in planned construction
units: Maple Grove, Apple Valley,
Shakopee, Lakeville and Woodbury.
Sources: The Rte( galuk Oat k, ppb REpL Vends, Builders
Association of the l vin Cities aU Slrcd oarnal
2 • The REALTOR' November / December 2000
ColERCP LyRSTATE
A':.I FdAJ1V rr4• .
Strong demand for office space
is reported in western suburbs
By Melissa Levy
Star Tribune Stafff'Writer
Office tenants have been ac-
tively leasing space in the western
and southwestern suburbs of the
Twin Cities area, where several
new, high-end buildings have
opened this year.
Overall, nearly 3 million square
feet of office space will be ab-
sorbed in the metro area in 2000,
double the 1.5 million square feet
absorbed last year, according to a
year-end market report released
Wednesday by United Properties,
a Bloomington -based commercial
real estate firm. Absorption is the
amount of space occupied minus
the amount vacated.
It's a healthy environment not
just ,for owners, but for tenants,"
said Mike Ohmes, vice president
of brokerage services at United
Properties.
With more than 4 million
square feet of newly constructed
office space added to the market
Supply outpaces demand in office space
The amort of mndti-ter"A office space in the Twin Cities increased nearly 7Pmentinthepastyear. with the additl0rnal space pushing the vacancy rate to10peroertfrom8percentin1999. It is the first time vacancy rates have beenaship,Jils 10 percent snce 1994.
44.
r - .:
Mul&tenant office space Mritirtertent
feet) n riA= of squarearcar rates ' , ' ' +:r <<jc i{
67.5
45.3'
r 30
26 F!i
1576 ;10%
10 ..
t '
95 '001900S5 '95 • '-
SaiocUHGedproperties
this year — in both single -user
and multi -tenant buildings — va-
cancy rates have increased to 10
percent, from 8 percent last year.
Rental rates have remained flat in
most areas of the market. United
Properties' brokers said.
Another 5.5 million square feet
of owner -occupied and multi-user
office space is under construction
in the Twin Cities area.
OFFICES contimms on D2- 2—
81 percent occupancy in west.
OFFICES from D1
Vacancy rates expected to be
at the same level as this year
Of the office buildings under
construction, 1.7 million square
feet of space is scheduled to be
completed in 2001. Ohmes said
that absorption should be in the
1.6 million- to 1.8 million -square -
foot range next year, with vacan-
cy rates at the same level as this
year.
This year, the west and south-
west markets will account for
more than 60 percent, or 1.8 mil-
lion square feet, of the metro ar-
ea's total absorption. .
In the western suburbs near
Interstate Hwy. 394, about
842,000 square feet of office
space has been absorbed this
year. That is more than in the
past sixyears combined, said Jim
Jetland, vice president of office
brokerage at United Properties.
The four major new office de-
velopments in the Twin Cities'
western region "saw tremendous
absorption • and success," with
combined occupancy of .81 per-
cent, he said.
But the new projects in the
southwestern suburbs near Inter-
state Hwy. 494 haven't leased up
as quickly, jetland said. Qf the
924,000 square feet added to t
southwestern region this year.
percent has been reserved. 1
said. Another 815,000 square fe
of space is 'set to be added to tl
region in 2001.
I think people are cautious
optimistic about the [southwec
market going forward," Jetlai
said.
In downtown Minneapolis. 4
million square feet of office spa
is under construction. There ha
been varied estimates of he
high the central business di
trict's vacancy rates will peak
the space comes online over tl
next couple years.
United Properties' forecast
for vacancy rates to peak at abo
13 percent in 2002, said Bre
Erickson, senior associate of c
fice brokerage. A recent report -
the local chapter of the Natior.
Association of Industrial and C
fice Properties predicted rates
downtown Minneapolis for Cl!a
A, or high-end, office space cou
reach as high as 17 percent 1
2002
Melissa Levy can be contacted at
mlevy@starlF une_ca;n
Builders say land scarce in area
Land shortage is
contributing to rising
housing costs
By Kim Johnson
Sun Newspapers
The amount of land available
for building houses and com-
mercial developments on in the
Twin Cities is dramatically less
than original estimates from
the Metropolitan Council indi-
cate, according to a recent study
by the Builder's Association of
the Twin Cities (BATC).
That land shortage is con-
tributing to the rising cost of
housing in the area, the study
continued, adding that land
prices are 20 percent to 35 per-
cent of total housing costs.
Using aerial photographs of
the metropolitan area, the Met
Council estimated in 1999 that
about 97,000 acres of
vacant/agricultural land exist
within the Metropolitan Urban
Services Area (MUSA). The esti-
mate did not specify that all
that land was developable.
The MUSA line, as estab-
lished by the Metropolitan
Council, restricts how far cities
can expand their public utili-
ties.
The BATC study states that
less than half of that 97,000
acres can support residential or
commercial development.
The Met Council figure did
not factor into account what
parcels were dedicated for
parks, or what property was al-
ready owned, and therefore un-
likely to be developed, by busi-
nesses, families or churches,
said Wendy Danks, BATC's
marketing director.
In the BATC study, conduct-
ed by Dahlgren, Shardlow &
Uban Inc. of Minneapolis, re-
searchers talked to city officials
and developers from 23 commu-
nities straddling the MUSA
line. Some of the cities surveyed
included Chanhassen, -Chaska,
Eden Prairie, Inver Grove
Heights, Lakeville, Orono, Ply-
mbuth, Rosemount, Shakopee
and Woodbury.
Parklands and other va-
cant/agricultural property un-
likely to be developed were sub-
tracted from the Met Council
LAND: To Page 25A
I
FSrom Page ILA
figure. The BATC study identified about
21,500 acres available for development in
the 23 cities it targeted. However, the as-
sociation is beginning an even more de -
tailed -study, which could further reduce
that number
Phase two ofthe studywill identify areas
where pobieat coalitions, steep grades and
railroad and ttreet right-of-ways would
limit, ifnot rule out development -- -
We thinkthis'is an impoitant region-
al growth- issue,' said Tom Mc4lveen,
BAWa director ofpublic policy He added.
that a precise measurement of what land
is available for both commercial and res
idential development is important when
trying to avoid urban sprawl.
The BATC is working with the Met
Council, state legislators and city officials, = is to increase the amount. of laW avaf
hoping a. development master plan can be ' -. able to development, and a second is t
created, McElveen said. The master'plan• revamp cities' building fee structures.
would. include areas not to be developed, BATC officials. presented their fine
such as forests and wetlands, and it would ings to the Mayors Regional Housin
identify regional transportation needs. Task Force, which recently stated one c
The environment matters ... to the
builders,"
its objectives should be.to study cities' fe
community and to the structures.
McElveen said, adding that a transports- The BATC's recommendations t
tion plan would also help determine counteract the area's land shortage is t
where. new developments should go and : extend or even eliminate the MUSA Linc
what they, should be. which affects what land is available fo
The BATC isnot contending that the development
land shortage is the. only thing tliatdis . Our policy is -that- [therMUS-A-hnel i
causing housing costs to increase, -Dinka - not working for the region," McElvee.
said, addingthat there are numerous fac- said. `At the end of the day, you mayy-nc
tors contributing to rising housing prices. need a MUSA line at all.'
However, there are two things region- The BATC land study is available at th
al -and local government agencies can do organization's Web site 'at www bateor.
to improve the situation, she added. One line.org/bate land study.html. -
Tuesday
JANUARY 30, 2001
A'p'''artm
for rent
N tol 1:,Ike
State's -rental vacan
is among: lowest in' "
By Jean H4fe :s7_ ger the Twin
Star Tribune Stafj'Writer In 2001
It may be more difficult to
vacancyc
In th
find rental housing in Minneso- , income h
to than in nearly any other state: cult rentE
in the nation according to apartmer
new report on. Minnesota's af- percent i
fordable housing predicament. median r
Only two states, Vermont percent,"
and New Jersey, had significant- is sched
ly lower rental vacancy rates ' today.
than Minnesota in 1999. And,
according to the report by the HOUSING
legislative Auditor's office, only — The rel
three of the nation's 75 largest mends
metro areas had significantly• the situ
lower rental vacancy rates than
PAGE AB • STAR TRIBUNE **
HOUSING from Al
Law on affordable housing
called `marginally successful'
In addition, the current va-
cancy rate is unusually low at 1.5
percent." the report said. 'Min-
nesota's rental market has been
tighter than most other markets
for at least 10 years."
The study looked at the rea-
sons for the shortage of afford-
able housing in Minnesota, a
subject of growing interest at the
Legislature. But the report makes
no recommendations on how to
remedy the situation.
It found that Minnesota's af-
fordable housing problems are
rooted in wages that haven't kept
pace with housing costs, in state
efforts to build housing — such
as the Livable Communities Act
that have more incentives than
teeth, and in high land, labor and
materials costs that make build-
ing homes expensive.
The report defines as 'afford-
able' a house that sells for
140,000 or less in the metro area
or for $95,000 or less outstate. For
renters, 'affordable" translates
into $738 or less for a two-bed-
room apartment in the metro
area or $495 for that apartment
outstate.
The report found that the
number of Minnesota households
having a hard time affording
housing maybe increasing.
Workers who earn the median
wage in 14 of the 25 fastest -grow -
mg occupations — including
home health aides. cashiers and
retail sales — would have to
spend more than 30 percent of
their income on rent for an aver-
age one -bedroom apartment in
the Twin Cities. The 30 percent
benchmark is typically used to
determine if housing is af-
Snmaable.
For example. the average rent
for a one -bedroom apartment in
the Twin Cities is about $664 a
month, the report said. But a re-
Uil sales clerk who worked full
lime and earned the statewide
median wage of $8.06 an hour,
mad lived alone. could afford
about $397 a month for rent.
That amounts to about 30 per-
cent ofthe cImVs income.
hat sales clerk would have to
cam about SI277 an hour in or-
der to afford the average Twin
Cities apartment, the report said.
Those most likely to have
problems paying for housing are
low-income people, senior citi-
zens, single parents, renters and
minority members, the report
said. About one in four Minneso-
ta households spent at least 30
percent of their income on hous-
ing in 1989, the last year for
which data are available, the au-
dit said.
Meanwhile, the law designed
to increase affordable housing in
the metro area, the Livable Com-
munities Act (LCA), has only
been "marginally successful," the
report said. The reason: It has
few teeth. The Metropolitan
Council, which monitors the
housing built under the law, can-
not reject an affordable housing
plan proposed by a municipality
and the action plans are not le-
gally binding, the report said.
In addition, few municipalities
are meeting their LCA housing
goals, the report said. If munici-
palities met their goals, about
77,000 new affordable units
would be added to the region
between 1995 and 2010, the Met-
ropolitan Council has estimated.
But it estimates that only 84 per-
cent of those units will be .built
by by 2010, and even that num-
ber is probably too high, the re-
port said.
Nonetheless, the LCA has
prompted some Twin Cities com-
munities to focus more attention
on providing affordable housing.
About 104 of the metro area's 186
municipalities participate in the
program, including Minneapolis
and St. Paul, the audit said.
The report also found:
Home prices rose faster
than income from 1990 to 1999.
The median home sales price
went up 61 percent statewide.
and home prices in the lowest 10
percent of the market soared 80
percent. Median household in-
come went up 50 percent during
the same period.
In 70 of Minnesota's 87
counties in 1999, median -priced
homes in -the county were con-
sidered affordable. That included
Average rents for Twin Cities -area apartments, 1999 and 204(
1999 2000 Percent change
Al ... ' S678..-.:.. $751 1196
Efficiency $465 $504
x
8
Or>e#eedroom ' V$603'r `
Z, $664;,_
Two-bedroom $753 $815 8
3; L,__ 1A90M.
Source: Office of the Legislative Auditor
Twin Cities communities producing most housing, 1998
Affordable Affordable units as
qty Units units percent of total
Lakeville 680 97 14
x'64,3.38$<.
Blaine 587 252 43
a, f
Maple Grove 450 67 1- 15
Hennepin and Ramsey counties.
The 17 counties where the medi-
an -priced homes weren't afford-
able generally surrounded Hen-
nepin and Ramsey counties.
The report found that develop-
ers of affordable housing patch
together an array of funding
sources to build their projects.
concludes that: 'Increasing th
production of affordable housin
may require government inter
vention.
lean Ropfensperger can be con-
tacted at hopfenfstartribune.con
Area home sale's
jump up 14 . 75%
By Neal Gendler
Star Tribune Staff Writer
The hot Twin Cities real estate mar-
ket defied flagging national activity in
February as the number of existing
home sales shot up 14.75 percent —
and the total value soared almost 30
percent — from February 2000.
Nationally, sales last month fell 0.4
percent from January and were off 2.6
percent from February 2000, although
they remain "exceptionally high," the
National Association of Realtors said
HOMES from D1
Median home sale price rises
50 to $157,750 in February
That makes a "fast and flu-
id" market, he said, so 'it's'
critical that buyers have a
strategy planned before going
to look at homes. Buyers need
to be preapproved for a loan,
determine what they're look-
ing for, where they want to
look and how they will re-
spond to a bidding war, said
Batterson, an Edina Realty
agent. 'On the vast majority ofhomesthatarewellpriced,
the buyer is likely to be facing
multiple offers."
Well priced*. doesn't mean
a . bargain price, he said. 'It
means a house that feels com=
fortable to a buyer in compar-
ison with the others the buyer
has seen." He added that buy-
ers 'know that quite often, the
listing price on a house be-
comes the floor at which they
might be.able to buy it."
Marketwide, the result is'a
continuing price increase, es-
pecially in lower brackets. Al-
though the 4,750 new listings
processed last month were up
p from a year earlier,
that was up only 1.6 percent
from January. The $365 mil-
lion in February sales closed
was..aow
in Januaj
cent froi
February'
Monday.Locally, however, strong de-
mand continues to fuel the market's
pace and price.
As we're into the third consecutive
hot spring market, the good news is
that this year the number of homes on
the market is up — but the numbgr of
buyers in the market is also up," said
Budd Batterson, president of the Min-
neapolis Area Association of Realtors.
HOMES continues on D4: 1
Median price hits $157,750.
Price rise pinches entry-level buyers.
The median price — where
half sold for more, half for less
rose to $157,750 in the
Twin Cities last month, only
50 mom thaainJan, but
A -13:5 -percent increase from
13000 -in-February2000.
The data, compliea"f m,
broker reports to the Regional
Multiple Listing Service, are
for sales of single-family,
townhouse, condominium
and co-op sales in the 13 -
county metropolitan area.
Batterson said rising prices
also push inventory out of
reach for entry-level b . ers.
Me. number of entry- evel
homes' we're "seeing - —
100,000 to $150,000 — is
slim," he said. Move -uphomesinthe $350,000 -to -
move -up
in second- and third -ring
suburbs. That's. still a strong
market," but sales take "a
number of days or a few
weeks."
The number of listings for
all property types was 13,073
at month's end, an increase of
10 percent from last February.
Batterson said interest
rates a bit below 7 percent are
helping to spur sales, "but I
don't think it's a pure interest -
rate play." He said jobs attract
people to the Twin Cities area.
and people not only want to
own but also want 'the invest-
ment return that homeowner-
ship provides. For many peo-
ple, the investment return on
their house has been the best -
performing part of their port-
94o.in thelast year;..:.. .
Neal CeRdleiY
Home sales dip ;
but housing is ,
stilla' mainstay
Associated Press
WASHINGTON, D.C. — Sales of new and
existing homes each dipped slightly in Feb-
ruary, but demand remained strong as
housing continued to demonstrate few ad-
verse effects from the slowdown in the over-
all economy.
Sales of new single-family homes fell by
2.4 percent last month after a steeper 5.4
percent decline in January, the Commerce
Department reported Monday.
SALES continues on D5:
Mortgage rate drop props up sales.
New home:sales
Seasmla ad)JSW "uw
rate; i.ttausands of oohs
00 Feb.
goo
edo a
MAM JJASONO J l ,°7
sw='CaMerenoe Boal
AssaaaoeQ Ras _ •
tNSiDE:
Dow industrials rebound
continues.. D4
SALES from D1
Mortgage rate drop helps
keep home sales healthy
Even with the back-to-back
declines, sales of new homes
remained at a healthy annual
rate of 911,000 units in Feb-
ruary.
eb-
ru
Ukewise, sales of existing
homes were down slightly in
February, a dip of 0.4 percent,
following an increase of 5.3
percent in January. The small
February decline left sales at a
strong annual pace of 5.18
million homes.
In the Twin Cities area, res-
idential building permits were
off 15 percent from February
2000, but builders still enjoyed
the third-best February in
more than a decade. The 132
metro -area cities tracked by
the. Keystone Report issued
627 permits, down from 736 a
year earlier, but ahead of Feb-
ruary 1999 by more than 10.
Ft.
orr
the first two months,
permits were off about 15 per-
cent from the 2001 period but
remained a little ahead of
those months in 1999 and
1998. Jeff Schoenwetter, presi-
dent of the Builders Associa-
tion of the Twin Cities, called
the local new -home. market
very hot" and said he expects
to see strong numbers in
about 10 weeks, when permifs
are issued for homes pur-
chased during the Parade of
Homes Spring Preview.
In the midst of all the eco-
nomic mess, housing is put-
ting in a remarkable perfor-
mance," said David Seiders,
chief economist at the Nation-
al Association of Home
Builders.
Analysts attributed the
continued strength to declin-
ing mortgage rates.
David Lereah, chief econo-
mist for the National Associa-
tion of Realtors, which com-
piled the existing -home -sales
report, said the drop in 30 -
year fixed-rate 'mortgages
since a peak in May 2000
means that an additional
300,000 households can quali-
fy to buy a typical home.
Although . the slowing
economy is causing a little
drag on the market, consum-
ers who are confident about
their own future are going
ahead with big-ticketpur-
chases like homes and cars,"
Lereah said.
According to a nationwide
weekly survey of rates, 30 -year
fixed rate mortgages dropped
to 6.89 ppercent last week sig-
nificandy below the peak of
8.64 percent hit in May.
In that month, the Federal
Reserve Board pushed up
short-term interest rates for a
sixth time in an effort to slow
an economy that at the time
was growing at a sizzling pace.
However, with economic
growth slowing dramatically
at the end of last year, the Fed
switched course. The central
bank has now cut interest
rates three times since Jan. 3.
reducing them at the fastest
pace in 16 years.
Despite the quick turn.
around, a number of critics
contend that the Fed waited
too long to cut rates. signifi-
cantly pushing up the risks of
an outright recession.
The National Association of
Business Economists said
Monday that 34 percent of a
panel of 267 of its members
believed that the Fed had
been too restrictive with mon-
etary policy, the highest read-
ing since February 1996.
Economists are looking for
the Fed to ease rates further in
coming months, helping to.
keep mortgage rates low and
the economy out of a re=
cession.
Sciders forecast that sales
of new homes this year should
total 875,000, a solid perfor-
mance but a drop from recent
highs of 907,000 in 1999 and
903,000 last year.
But he said that forecast
could be off the mark if the
stock market continues to
plunge and consumers sud-
denly decide to stop spending.
If the stock market goes
into another tailspin and con-
fidence levels continue to
erode, then almost no mort-
gage rate is likely to keep peo-
ple in the market," Seiderss
said.
11:. 5.4 percent drop in
new -home sales in February existing home dipped 0.6 per -
cent to $174,700, according toreflectedweaknessintheMid- the Realtors' report. west and West.
The median price for a new The small decline in sales
home, the point where half of existing homes reflected
weakness in the Northeast, the homes sold for more and.
half for less; was $210,900 in where sales dropped 3 per-'
February, up 3.2 percent from cent, and the South, where
sales dropped 2.8 percent. January's median price of
204,400. Sales of existing homes ac -
The average price of a new tually rose 3.1 percent in the
West to an annual rate of 1.33homewasupaslight0.1 per- million units and were up 1.8centto $167,000 in February.
The median price of an percent in the Midwest to an
ex-
isting home was up 1.2 per- . annual rate of 1.16 million.
Staff Writer Neal GendlercentinFebruaryto $138,800,
while the average price for an
contributed to this report.
Turn5our tax business
into big business.
Published Sunday, April 1, 2001
Home market is lightning-fast despite economic pessimism
Neal Gendler / Star Tribune
startnum.com For the third consecutive spring, too many Twin Cities area home buyers are chasing too few
Business homes for sale. They're apparently undeterred by gloomy national economic forecasts.
i
Maud
buyer competition leads to multiple offers and bidded-up home prices, which normally
Maud rim would make it more difficult for first-time buyers to get into ownership. But Budd Batterson,
an Edina Realty agent who's president of the Minneapolis Area Association of Realtors, said
A glance at Budd Batterson the market isn't normal. The reasons are a strong local economy, low rental vacancy rates and
prosperous home buyers.
QWhat's happening in the market?
AThe market is very, very strong, with a lot of buyers.
We're not seeing the signs of recession and things of that nature that have been predicted so
often lately. We've been blessed with a very diverse economy in the Twin Cities area, and
while there are layoffs occurring across the country, we're not seeing them. Most people here
who are facing that prospect have little trouble replacing a job.
QWhat's making the local market so active?
AThere are more buyers than homes. That's because it's a natural desire for people to want to
own a home. A lot of people who have not owned have seen others getting tremendous
appreciation and want to get in on that. And it's a very tight rental market, the cost of rent
reaching a point that makes buying more attractive. Rents often equal what first-time buyers
would pay to own.
QWhat does the competition for homes do to the ability to buy?
APrices at the bottom of the market are rising, which moves everyone up. What's happening
is that the bottom rungs of the ladder are further from the ground — that first step has gotten
steeper.
QWon't that price people out of the market?
AIt makes people want to get on that ladder now. Pricing people out is something we're going
to have to work on as an entire region. rim hoping were wise enough with our land use and
planning to avoid that problem
QHow does land use affect existing -home prices?
ARising land prices have driven up the cost of new construction, and as new home prices rise,
existing homes rise with them I think it becomes paramount that all of the players in the
housingmarket come together to make sure we can create affordable housing, housing
options, so that we keep the first rung of the ladder within reach. The Met Council is mindful
of this; I think there's good leadership there. Land prices clearly are one of the biggest
challenges. Density and the cost of [governmental building] approvals are two other
challenges. In some communities, high density is five units per acre; in others, high density is
15 or 20 units an acro.
httpJ/webserv5.startribune.com/stOnLinelcgi-binlarticle?tbisSlug=HEAD01 &dated -Apr -20(... 4/3/01
Home market is lightning -fast despite economic pessimism Page 2 of 2
QIs this year's inventory shortage worse than in the previous two springs?
Al saw some statistics that said there were more houses on the market this year compared to
last year, but it feels like last year in certain market areas and certain price ranges. Particularly
in city neighborhoods and in first -ring suburbs, we're seeing a rapid rise in prices. There's been
a renewed interest in living in the city or in first -ring suburbs. I think we're going to see more
and more of that. For example, [Minneapolis'] Phillips [neighborhood] is having a tremendous
increase in values.
QAre low interest rates causing refinances that cut inventory?
ARefinances have played a role in the inventory shortage in a couple of ways. One is that
many people have refinanced their equity out of their houses and used it for cars, boats and
bills, and they no longer become sellers; they're not moving up because they've used their
equity. Another way is that with the length and duration of this seller's market, many people
who were going to make the optional moves have made them. Some of those equity eaters, if
they refinanced nearly three or four years ago, may again have enough equity to make elective
moves.
QThis is the third consecutive spring like this. How long can it go on?
AWe're in the eighth year of a seller's market and we've had three hyper -sellers markets. I
don't have a crystal ball. Had you asked me would it be a strong spring, I'd have said yes. Had
you asked me would it duplicate the last two springs, I'd have said no.
QWhat do you foresee with the economy and its effect on buyers?
AThe problem is on the inventory side. If the economy slows, it may slow down the number of
homes that come on the market. People become more hesitant to make a move even though
they're employed. Last year we saw a lot of stock -market -fueled buying. None of us is as
wealthy as we felt a year ago. But this year, even without the go-go market, we're seeing a lot
of buyers in the marketplace. The first-time buyer is buying $160,000 and $180,000 homes. To
Halated item get a house in the suburbs, that's becoming the necessary level. Often it's two buyers together.
A glance at Budd Batterson
Lenders have done a good job of addressing the issue of affordability by creating programs
with low down payments, expanded ratios and basing their loan decisions on credit scores —
which give a good idea of whether people will repay their loans — rather than just basing their
Q
startribune.com decisions on income.
Business
Neal Gendler can be contacted at r eudle ra.;7artribune conr
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