Come Monday, the value of a Duluth home probably will be less than it was the week before.
For the first time in at least three decades, the city assessor's office is lowering residential property values by 3 percent across the board, marking a reflection in the city's slumping home sales.
"I'm about to give the mayor and the budget office a little bit of a decrease in the property tax base, probably for the first time in 30 years," said John Gellatly, the city assessor. "We found evidence of a depreciated market for the first time in a long time."
The decrease in values, which will be posted by the end of the day on Monday, stems from a market study of assessed home values versus home sales from October 2007 to September 2008. The study showed that the median home assessment was 6 percent lower than the median home sale -- well within the acceptable range set by the state department of revenue.
But Gellatly said recent data suggests the median assessed home value is creeping toward going higher than the median home sale.
"My concern is that if foreclosure sales slow up the market, if we don't do a decrease now, we could end up over 100 percent by the summertime," Gellatly said. "The market is falling toward my assessments."
The only two categories of homes that won't see a drop in assessed values are those in a neighborhood previously under-valued, and those that have been significantly improved.
But falling home values don't necessarily mean a falling property tax bill.
If the city, school district and county levy the same amount next year, most residential property owners would see a slightly lower tax bill, while business and industrial property owners would have to pay more in taxes to make up the difference.
And don't expect the property levy to be the same next year.
"If the city raises the levy, I don't think anybody will see a reduction," Gellatly said. "And the county and school district have to hold as well."
Duluth Mayor Don Ness wouldn't say Wednesday if the drop in residential home values will affect how much the city will seek to levy next year.
"Our decision-making for creating the 2010 budget hasn't even begun," he said.
Realtors and home appraisers contacted Wednesday said the adjustment made by the assessor's office was appropriate given the downward trend of housing sales.
The housing market isn't as bad in Duluth as it is in other markets such as the Minneapolis metro area, where the Star Tribune reported the median sale price of a home fell 33 percent since 2007. In Northeastern Minnesota, the median home sale price slipped 1 percent from $149,500 in 2006 to $148,000 in 2008, according to the department of revenue.
Some in the local real estate and appraisal businesses didn't expect that the assessor's decision would affect home sales.
"It won't cause an adverse reaction in the market," said John Vigen, an appraiser with Ramsland & Vigen in Duluth. "It's simply following what the market is doing."
DAAR President Pat Johnson said she believes the local housing market is stable compared to others.
"I wouldn't say it's not good," she said. "It's a good, solid market."