Tempe leads SE Valley in home valuations decline

The Arizona Republic
March 7, 2011
Edythe Jensen

Residential property valuations set by the Maricopa County assessor for 2012 taxes continue to drop, putting pressure on cities and towns to raise tax rates.

Some fared better than others in a comparison with last year's values. Tempe had the biggest median valuation decline in the Southeast Valley at 17.53 percent, while Sun Lakes' 4.48 percent was the smallest. Chandler's drop is near the county's 11 percent average, Mesa's is slightly higher and Gilbert's lower.

The new valuations were mailed to property owners last month and will be the basis for taxes paid in late 2012 and early 2013. The economy is expected to be better by then, but the lag time between valuations and tax collections could extend budget woes for municipalities as many delay road improvements and construction projects traditionally funded by property taxes.

Housing analyst R.L. Brown said the county's median valuation numbers don't reflect critical neighborhood differences. However, retirement communities like Sun Lakes traditionally hold their values because Arizona continues to attract aging newcomers who are not as affected by the economic downturn and high unemployment rates.

Areas where speculative buying and selling of homes was popular during boom times are those hardest hit by today's valuation drops, he said. In Tempe, several factors figured into the steep decline. One was the proliferation of new, high-priced condominiums just as the market peaked, Brown said. High-priced condos are suffering some of the steepest value declines in today's market, he said, and as many are converted to rentals, values will continue to drop. The other factor in Tempe is connected to the transient student population.

"There has been a lot of buzz about parents buying for their kids, but that kind of evaporated, and the kids destroyed the condos."

Brown said Ahwatukee valuations may have declined slightly more than those in Chandler and Gilbert because owners may have over-improved their houses and saw values increase when the market was willing to pay for those improvements.

For residents wondering about their own abodes or considering a move, Brown said they should pay attention to neighborhoods. "If you selected a neighborhood that was stable and didn't get inundated by flippers and investors, you're in good shape. If you didn't, you're in bad shape."

Municipalities preparing for the next two budget years have done some hand-wringing recently over the declining valuations. Many will face the politically unpopular decision of raising municipal property tax rates to prevent revenues from plummeting. In Chandler, for example, budget officials have told the City Council that without a tax-rate increase the city could wind up with deteriorating roads and no money to maintain them. Even with an increase, nearly all building projects will be delayed for years.

Municipal rate increases would not raise tax bills for most property owners because the values on which those rates are levied have declined so much. But some officials have said beleaguered residents, many who owe more on their mortgage than their home is worth, deserve lower tax bills.

Jennifer Schuldt, vice president of the Arizona Tax Research Association, said municipalities and school districts are authorized by state law to offset drops in property value by increasing tax rates and that rate increases in response to valuation drops are commonplace.