A mixed tale of Galesburg property sales

 

by Mike Kroll

The Zephyr, Galesburg

 

The news for Galesburg city property tax payers is mixed. Most residents will almost certainly see their property tax bill rise next summer by four percent but the prevailing fear that the local property market had collapsed in the shadow of gloomy local economic conditions has not been substantiated. This is bad news when you must come up with the twin property tax payments next summer but good news for many property tax supported entities who will welcome the availability of additional revenue.

This is also good news for those trying to sell their homes as the average selling price of existing Galesburg homes in 2006 was $5,500 higher than that just one year earlier. As one local Realtor said to me, “Galesburg is currently a seller's market. Nice homes sell very quickly and for a better than fair price.”

Illinois statute mandates that local township assessors conduct a “quadrennial” reassessment of all residential, commercial and industrial properties within their jurisdiction as a means of maintaining fairness and accuracy of assessed property values. Unlike appraisers who typically evaluate a property to assure its worth to a lending institution, assessors do what City of Galesburg Township assessor Darrell Lovell calls a “street appraisal. Such an appraisal depends upon official records and an exterior visual inspection most commonly conducted from the street or sidewalk.

“Even if we were permitted to visually inspect the interior of a home as done by appraisers that approach simply wouldn't be practical due to time constraints,” explained Lovell. “There are nearly 13,000 property parcels in this township, 10,399 of which are houses, and I have less and a year in which to reevaluate each and every one during a quad year. Even with additional help this is a huge task.”

Lovell maintains a computerized database of every parcel in the City of Galesburg township, which includes most but not all of the corporate limits of the city of Galesburg. Some northernmost parts of the city that have been annexed in are in a different township outside of Lovell's jurisdiction. In this database is contained basic information about each home, such as year and type of construction, number of stories, number of bedrooms, square feet dimensions, garage, basement, etc. And most importantly there is an assessed fair market value placed on the home by Lovell and a color photograph of the home's exterior from the street. All of this information is accessible on the Internet from Lovell's website, www.ci.galesburg.il.us/assessor/ and searchable by address or parcel number.

The job of an assessor like Lovell is to use this information to categorize homes into “comparables” so that his record of property sales can be used to determine the fair market value of each home. Whenever you sell your home in an arms length transaction that sale price becomes the home's fair market value but for homes that haven't sold recently sales of similar homes are used by Lovell to assign a fair market value. In Illinois non-farm property tax values are calculated based on one-third of the fair market value of a parcel with a variety of adjustments applied.

Property owners are not solely at Lovell's mercy. They can appeal his assessment of their property's value with the County Board of Review that hold hearing annually. Most of the time such appeals are made by large commercial or industrial property owners or third-parties looking to take advantage of the system. But every year a group of regular home owners will take the time and expense to build a case that their property is over assessed and request an adjustment. To Lovell's credit he appears to make very few errors and seldom large ones. People may not like paying property taxes but most in Galesburg accept their property's assessment as fain.

As future sales take place in between quadrennial years Lovell compares the actual sale price to what he had determined the fair market value of the home to determine the accuracy of his assessed values each year. These comparisons yield what is called a multiplier that is then applied to all properties in the township prior to calculating the next year's property tax bill. If the calculated multiple is under 1.0 then the assessor has generally overvalued properties while multipliers greater than 1.0 mean that actual sale prices are outpacing assessed values. From an assessor's point of view the ideal is to remain as close to a 1.0 multiplier as possible as that suggests the highest degree of accuracy in assessed values and therefore a fairer system.

“We have just completed the 2006 quadrennial and there is reason for some optimism about the local economy,” stated Lovell. “The average sale price of an existing home in 2006 was $73,500 compared to an average price of $68,000 in 2005. New home construction is even more telling. In 2005 the average price of a newly constructed home in Galesburg was 125,920 but in 2006 that jumped to $210,500, of course only six new homes were built in 2005 and 15 in 2006. Of the new homes built in 2005 half were Habitat for Humanity houses and the lower price of those three homes accounts for much of the difference. Only one Habitat home was constructed in 2006.”

Lovell's numbers show that there were 231 property transactions in 2006 in Galesburg and 124 of those sold for more than the fair market value he had them assessed at while 107 sold for less. Based on these results Lovell believes that the multiplier for next year's property tax bills will be 1.04 in Galesburg. This year's multiplier was 1.0 and one year ago it was 0.98 and the year before 0.985. “Galesburg has already turned the corner in real estate values and I am happy to say that the bottom never did fall out of the area real estate market as many of us feared it would in the aftermath of the Maytag and Butler closings,” commented Lovell.

Lovell's records show that the market value for new home construction hit a peak in 2000 when 35 new homes were built totally $5.31 million in value. Sales of existing homes in that year averaged $70,000 each but jumped to $74,900 in 2001. During the past seven years (2000-2006) 109 new homes were constructed in Galesburg, that is considerably less than many comparably-sized communities in Illinois according to Lovell. What is more disheartening is that during that same timeframe 144 homes were demolished leaving a net loss of 35 homes in the last seven years.

“Galesburg has some of the lowest housing prices in Illinois as compared to similar size cities. We seem to trade off the distinction of lowest cost homes from year-to-year with Danville. Part of this can be attributed to our population decline but part of it also has to be due to the inability of many residents to properly maintain their homes under the current economic conditions in Galesburg. I have conducted five quadrennial assessments since first being elected assessor and I must say that this last one was the first time I recall describing the condition of so many homes as either 'poor' or 'unsound.' This quad saw the condition rating of many Galesburg homes drop a notch or so and I found that to be very discouraging. Even worse is that while a condition rating of unsound implies a home that is virtually uninhabitable many such homes nevertheless had people living in them.”

Lovell also noted that even some comparably new homes are showing signs of neglected maintenance. The deterioration of Galesburg's housing stock is not solely the result of our large number of older homes. In general the homes in the worse condition are those that are not owner occupied. There are many rental properties that simply receive little or no maintenance and deteriorate as a direct result. It must be hard to witness this gradual decline over 20 years as Lovell has but it has provided him with a unique insight and perspective.

“You can't come away from what we have been seeing with Galesburg's homes without recognizing that the character of this city is changing drastically. The middle class is evaporating in Galesburg. While projects like the new shopping center on Seminary Street will generate both sales taxes and substantial additional property taxes, particularly for the schools, home ownership is the role of a community's middle class. Middle class families have left Galesburg and won't return until we can provide them a good reason. They will live here to work at good local jobs or they will commute to work and live here for a better quality of life. Right now Galesburg isn't yet a compelling draw either way.”

 

7/26/07