by CHRIS ROGERS
Like much of the U.S., 2021 was a record year for Winona County home prices as low interest rates and intense competition for limited homes drove sale prices up. “There are many more buyers than sellers, and the dollars have just reached levels that probably weren’t even in the imagination a year ago,” Winona County Recorder Bob Bambenek said. That trend is also driving up property taxes for homeowners.
In Winona, the average sale price for a single family home rose steeply from $173,000 in 2020 to nearly $190,000 in 2021, a nearly 10 percent increase, according to state real estate records. In the final quarter of 2021, 80 percent of homes sold in Winona went for prices above the county’s assessed value, according to Bambenek. “If you have a home that’s been well taken care of, you’re going to get an unbelievably high price for it,” he said.
With a limited inventory of homes for sale, there are far more buyers than sellers. “A healthy market is six months of inventory,” Coldwell Banker Supervising Broker Steve Lillestrand said. “The last numbers I saw had us just under two months.”
He continued, “There are a lot of bidding wars. You wind up with multiple offers on properties, and depending on the price point, I’ve seen them sell for as much as $40,000-50,000 more than the asking price.”
“There is a huge gap between supply and demand — record low inventory — which is driving up the home values or the market value that someone is willing to pay for a property,” Edina Realty Sales Manager Emily Barkeim agreed. She added, “If the property is well-maintained and realistically priced when it’s listed, those are still continuing to get multiple offers on a property and that creates a bidding war.”
For would-be buyers who try and fail to purchase multiple homes, the situation can get very frustrating. After working so hard to find the perfect fit for a client’s wishes and budget, Winona-based Keller Williams realtor Matt Loos said, “When you hear that, ‘I’m sorry, we choose another offer,’ your heart just sinks. But that’s how it goes.”
With those bidding wars, Loos continued, “Prices are getting driven up and sometimes you’re seeing people paying above even the appraised value.”
Why is inventory limited? It’s been an issue for several years now, but local realtors noted that pandemic era supply chain disruptions and labor shortages drove up the cost of construction. Normally, people building new “move up” homes helps free up starter homes for others to buy, but with costs discouraging new construction, competition for a limited number of existing homes intensified.
Barkeim also pointed out that the pandemic’s work-from-home trend caused people to place more value on having space at home and that economic uncertainty caused folks who might have otherwise been ready to upgrade to stay put.
High home prices are great for sellers and bad for buyers, but they also have an impact on homeowners doing neither. Property taxes are based on government assessments of a property’s value, which are in turn based on recent sales of similar properties. With home prices going up so quickly, homeowners are also seeing their property taxes increase.
State rules require the county’s assessments to be within 90-105 percent of the median sale price for a given type of property. As home prices shot up, county valuations lagged behind, falling to a ratio of 83, and now the county has to hike up those valuations — and by extension the taxes homeowners pay — to keep up, Winona County Assessor John Conway said.
Last summer, the county raised home valuations by an average of 7.3 percent. This year, Conway said he expects an increase in the neighborhood of 15 percent. Official statements will be mailed to property owners later this spring. That means even if local governments don’t increase the total amount of tax they’re collecting, homeowners’ taxes may still increase because their more valuable properties are picking up a larger share of the property tax burden.
For homeowners with no intention to sell and take advantage of the hot housing market, the tax impact can be frustrating. (See letter to the editor page 4A.) For people in that situation, Conway recommended looking into the Minnesota Department of Revenue’s property tax refund programs. The standard refund gives some money back to homeowners with a household income under $119,790. A special program also makes refunds available to homeowners regardless of income if their property taxes increase by 12 percent or more not due to improvements. More information is available at www.revenue.state.mn.us/property-tax-refund.
Will this trend end anytime soon? “Supply and demand is a big factor. Until that gets corrected, things are going to keep going up. But you think at some point it would level off,” Conway said. While there’s some talk of interest rates going up, Lillestrand doubted it would be enough to put a damper on home buying. “I don’t foresee any big changes coming anytime soon,” he said. Keller Williams realtor Aaron Perleberg agreed, “I’m predicting that we’ll see another 2021 again.”