Owners of single-family homes in Eden Prairie this week are learning about increases in their home’s value that are being described as historic and unprecedented.
The annual property-value notices are showing that the typical Eden Prairie single-family home increased in value by 19.3% over a 12-month period.
And, while the spike in value doesn’t necessarily translate to higher taxes in 2023 – that will depend on budgets and tax levies set next fall by the school district, city, county, and others – it’s an increase that is eye-catching and a reflection of housing demand that is far outstripping supply.
Adding to the angst is the fact that, in recent years, more and more homes in Eden Prairie have lost their eligibility for the Homestead Market Value Exclusion (HMVE) – what used to be called the homestead credit – a special program that lowered a home’s taxable market value. That’s because only homes valued at $413,700 or less are eligible for HMVE, and the exclusion declines as you approach that dollar-value threshold.
The City of Eden Prairie estimates that one in five residential properties in Eden Prairie will no longer be eligible for HMVE, and most properties that remain eligible will see a reduction in their exclusion amount.
But, the spike in home values isn’t limited to Eden Prairie. The increase in median value for single-family homes in suburban Hennepin County overall for the same period is 18%, according to City Assessor Jon Thompson. He said the increase is 20% in Carver County and 23% in Scott County.
At the low end for 2022, home-value increases are Minneapolis (10%) and St. Paul (13%).
For Eden Prairie, the nearly 20% jump is more typical of an increase that Eden Prairie would experience over 10 years, not one, said Thompson. Looking at the last 10 years, home values decreased 4.4% in 2012 (an aftershock of the Great Recession) but were flat or increased slightly in the years that followed.
Thompson is quick to point out that the increases in home values are strictly a reflection of the home sales market. The annual assessment process analyzes what a property would sell for in an open-market transaction, with assessors estimating values based on actual sales of comparable properties, also factoring in recent remodeling projects. The data is pretty accurate, Thompson insists.
“Demand is far outstripping supply. It’s just where the market is now,” he said. “If the market corrects, we’ll be right behind it” and make adjustments accordingly.
It’s not that the Eden Prairie market is devoid of homes. The amount of residential property available sold for the period in question was up 28% over the previous year, Thompson said. It’s that demand is so far ahead of even higher inventories. Historically low-interest rates have played a role in that. So has pandemic-related demand for homes large enough to accommodate a home office, and large homes are an Eden Prairie staple. A lack of new-home construction in Eden Prairie adds to the frenzy.
Lyndon Moquist, the managing broker for Edina Realty’s office in Eden Prairie, said that in a “balanced” market Eden Prairie would typically have an inventory of for-sale homes that is large enough to meet the demand for 4-6 months. “We’re currently sitting at under a month” for home inventory, he said, and 2022 started with just a three-week inventory.
At the same time, demand for single-family homes is being driven in part by a millennial population – those born from 1981 to ’96 – that is larger than the Generation X and Baby Boomer generations born earlier, coupled with those low-interest rates and equity that’s been built from recent years of stock-market growth.
“More buyers chasing fewer homes,” Moquist said, and it’s a nationwide trend.
Other types of Eden Prairie property saw smaller increases in value from 2021 to 2022. Estimated market value for apartments increased, on average, 4.7%, and for commercial/industrial properties the increase was 3.5%, according to the city.
The home-value notices appearing in Eden Prairie mailboxes this week outline a process for appealing one’s property value. It typically starts with a call to the city assessor’s office but can also lead to a formal appeal before a local Board of Appeal and Equalization. The deadline for appeal applications is March 25.
Thompson said he expects the board to see more appeals this year.
If you are interested in how property values are calculated, and how to appeal the value assigned to your property, you can find information on the City of Eden Prairie’s website.
Mark Weber is executive director of the Eden Prairie Community Foundation.
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