Fallout from the real estate bubble in Western North Carolina has landed Macon Bank on the watch list of the Federal Deposit Insurance Corporation, a federal banking oversight arm.

Macon Bank has been operating under the scrutiny of the FDIC since March. The oversight agency has laid out a series of benchmarks the bank must meet, from strict performance targets to heightened involvement by the bank’s board of directors.

By Mark Jamison • Guest Columnist

A fellow once asked me, about a car I was selling, “What’s the least you would take for that car?” I thought for a second and replied, “What’s the most you’d give for it?”

In that exchange was the essence of the market. Buyers want to pay the least they can and sellers want the most they can get and the idea of the market is to find a place where their interests intersect.

In the case of the car we both had information we could go on to determine a fairly narrow range of value for the car. There are published reports of what similar vehicles sell for and there are other bits of information that gave both of us a range in which a realistic price ought to exist. What was left was to consider our individual needs, how much he might want the car versus how badly I needed to sell it.

The parameters of the transaction though were determined by this thing we call a market which is nothing but a confluence of information, need and desire. The market gives the buyer and the seller some assurance that there is a reasonable range of price that can be arrived at by applying the available information to the available supply and demand.

I’ve had several conversations recently with people seeking to buy or sell property here in Jackson County. A question seems to keep coming up, what is anything actually worth? I have a friend who is looking to buy a few acres on which to build a house. He’s found a piece of land that seems suitable and is to his liking. He wants to offer a fair price but because of the failure of the market he has no idea of how to determine what that might be. I happen to know the seller in this transaction, and he too would like to arrive at a fair price but has little means of judging what that might be. Because neither trusts the market, neither is willing to complete the transaction.

There are many factors that have contributed to the failure of the market for land here in Jackson County. Prices had reached speculative levels before the overall crash. Many of our normal pricing mechanisms like government valuations reflect these prices, which are clearly no longer valid. Then too we had a number of development companies that to varying degrees had engaged in a game of catching the rising bubble. They offered plans and schemes that probably never would have succeeded but were at the least based on the fiction of ever-rising prices.

These plans and schemes were specifically designed to be attractive to a class of buyers who felt particularly wealthy due to inflated stock, capital, and property markets. These were people who were living an illusion, their wealth was neither liquid nor solid yet their willingness to spend on things like second homes reflected a confidence that simply was not justified.

 

Protecting the land

While the great property bubble was building there were many here in Jackson County who were concerned about the unfolding events. Thousands of acres of environmentally sensitive land were being slated for development. It seemed that the plans for these developments gave little attention to either environmental consequences or for that matter more prosaic concerns like the ability of local infrastructure to absorb and service the additional development. In addition, the idea of turning Jackson County into a wealthy enclave of gated developments was far from attractive and highly unsettling to people, both natives and those who had relocated here.

Somewhere between the golden goose of high-end gated development on every available parcel and absolute preservation there was likely to be a middle ground. Many of those who supported the development of land use regulations saw those regulations as a means to ensure that development bore the burdens and responsibilities of its impacts as a consequence of reaping profit. Many recognized that some, moderate development offered good solid middle-class jobs in the trades for many long time Jackson County residents. The failure of the boon times was that it overwhelmed the county’s capacity to absorb it. Many of the plans were unrealistic, financed in highly speculative ways and far too nebulous in terms of their care for existing communities and sensitive environments. In addition, many of the developers ignored local economies and local tradesmen in favor of carpetbaggers and firms designed to work quick, cheap and fast as a means of deriving maximum profit to the exclusion of all other considerations.

The crash put an end to all of that. And while many of the speculators, the developers, real estate hucksters, attorneys and financiers who fueled the boom lost heavily, some of those hurt worst were local individuals and communities who were left with high property valuations, higher taxes and a moribund economy.

We’ve moved from a highly inflated market fueled by speculation and untenable assumptions to no market, a sense that no one knows quite what anything should be worth and everyone seems hesitant to engage in even basic economic activity. The uncertainty affects the retirement plans of some, the job prospects of others, and even the fundamental assumptions on which much of the county’s budget is based.

 

Fixing a damaged market

The problem, it would seem, is that there is a great deal of inventory available (although much of it is compromised by various legal entanglements). Some very large areas that had been slated for high-end development are locked into a legal limbo.

Some of the land most impacted is also some of the most environmentally sensitive. Some of it currently has half done, poorly done infrastructure that threatens a tremendous mess. For examples, one only has to look at the reporting on some of the more informed local blogs. And perhaps even worse is that many of the 7,000-plus lots that were essentially exempted from the land-use regulations exist within these developments.

So, we have an essentially non-functioning market in Jackson County, a damaged economy, and a huge inventory of damaged and legally encumbered land.

I wonder, though, if there isn’t a possible solution that might serve everyone’s interests to some degree or another. The overall public interest might best be served if some of the most sensitive land that was slated for development and is now compromised by legal, financial or environmental complications was transferred into the public trust either through conservation easement or transfer into state or federal parks or game lands.

The first argument one might expect to hear about such a proposal is that the county could not afford to lose the prospective tax base. That same argument was made 40 years ago when much of the land that is now Bear Lake Reserve (or was, since some has since been sold) was offered into the public trust. In retrospect, we can see the loss of opportunity and the costs that development has imposed.

The fact is that a sizable reduction in inventory would actually give the market some basic parameters against which to re-establish itself. The future loss of supposed tax base, certainly no sure thing given recent events, would likely be offset by the faster recovery of local property markets and the associated increase in economic activity.

There are those who might argue that at present the terrain looks quite nice thank you. Development has been halted and the assaults on the environment and our communities have ceased. I would reply that at best that is only temporary and that we have all the elements for another bubble in place, although I would concede that it is an event likely not to occur for perhaps 10 years.

Still, there is a tremendous amount of money, both corporate and private equity, sitting on the sidelines at the moment. The hesitancy of that money to move might just as likely be attributed to wiliness as fear. Someone somewhere is waiting to pick up distressed assets at a bargain and the question isn’t if, it may be when. The ensuing consolidation may actually be worse. There is some indication that parts of the trophy market are, if not recovering, at least evolving. One should remember that those in the top 2 percent of income have actually done quite well of late.

We may have an example of a more savvy investor here in Jackson County. J.P. Kennedy, a software developer for the oil services industry, may be one of the largest single landholders in Jackson County. He sold much of what became Bear Lake to Centex and bought back some of that when Centex failed. It also appears he has been involved at various levels with the Legasus properties.

Mr. Kennedy or some entity that is as equally well resourced may be in a position to consolidate thousands of acres for development. Given the current attitudes of those in power at state and local levels it is likely that government might find itself willing to be accommodating to the desires of ostensibly powerful interests. And for all the good the ordinances did, their creation left avenues large enough to drive a very large bulldozer through for those who might be so inclined.

 

Unlikely partners?

What’s to be done? Well there might just be an opportunity available provided those with power and those with expertise can come together in some fairly creative way. A couple of banks and a private equity company or two own some pretty worthless paper on several thousand acres. There are any number of lot owners who purchased lots in developments that will never exist. There are claims, counterclaims and foreclosures, tax liens and likely any other number of legal hurdles that might make immediate development of any of this land impossible.

If local, state and federal agencies — along with conservation and preservation organizations — were to put their heads together, it occurs to me that between existing tax credits and incentives, easement possibilities, and possibly even mitigation credits, that a reasonable proposal might be created that would allow the banks and private firms holding what amounts to useless paper to clear their balance sheets fairly quickly. Actually, those developers and investors that didn’t go under might like to participate, since the elimination of inventory and the likely restoration of the market that would follow would be in their interests as well.

We live in an unsettled time. Governments at all levels are cutting programs and expenses. Investors are timid and markets are stymied. The times are difficult, but difficult times often uncover unique opportunities.

(Mark Jamison lives in Webster and can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..)

This isn’t the easiest time to be a real estate agent in Jackson and Macon counties, not with the crippled housing market and a customer base that is, in most cases, hard pressed to find the dollars to buy new homes.

Nowhere is it tougher than the upscale communities of Cashiers and Highlands, a market catering to second- and third-home owners. Here, where houses just a few years ago routinely sold in the millions, the bottom has fallen out.

Terry Potts isn’t complaining. But, as the owner of four separate real estate offices in Highlands alone, Potts perhaps is experiencing even greater pain than most agents.

“In most cases, property has been selling for about half the tax value,” Potts said of the market in Highlands, adding that what has sold are, generally, bank foreclosures.

“I think that’s why they put it off,” Potts said. “And I do think the values are going to drop a good bit — if they truly use values of (properties) that have sold.”

“It” would be the property revaluations, now scheduled to take place in both Jackson and Macon counties in 2013. Countywide appraisals were last conducted in Jackson in 2008 and Macon in 2007, at practically the peak of the housing boom in Western North Carolina.

Macon County commissioners decided to postpone its revaluation from 2011 to 2013; and Jackson County recently opted to push its back one-year from 2012 to 2013. State law mandates revaluation takes place at least every eight years; both counties had been on four-year cycles.

The issue?

 

‘True’ market value

In both counties, the tax assessors predicted difficulties with calculating true market value when little property has sold. Bobby McMahan, Jackson County’s tax assessor, recently told commissioners one township with 4,000 parcels had just three property sales in three years — hardly enough to establish a baseline.

McMahan wanted commissioners to delay Jackson County’s revaluation until 2015. This would have meant, however, that taxpayers would continue paying taxes for several additional years on what are now hyper-assessed properties. Some residents, particularly those living in southern Jackson County, cried foul — and not just over the possibility of shouldering an unfairly large tax burden, but about the overall level of services the Cashiers area receives back.

“The emotional irritation is that there is a miniscule percentage coming back to southern Jackson County and these townships,” said Phillip Rogers, who lives near Cashiers in the Hamburg Township.

“I’m personally contributing property taxes on two houses … I don’t mind paying the taxes as much as I mind not getting a return on services,” Rogers said.

But even if property values are lowered, it’s unlikely to provide residents such as Rogers tax relief, as he knows. In light of falling property values, Jackson and Macon counties would have to raise the tax rate if they want to bring in the same amount of money.

“That’s true,” agreed interim Jackson County Manager Chuck Wooten of the options facing local leaders. “In order to be revenue neutral there would have to be an increase.”

Wooten estimated that staying revenue neutral in Jackson County would require a tax-rate increase of the current 28 cents per $100 valuation to the mid-30s.

The largest drop in property values, not surprisingly, is expected in the Glenville and Cashiers area — the same areas where they had risen so rapidly over the first part of the decade.

Norman West, a longtime real-estate agent, primarily works in Cullowhee, the fastest growing part of the county population-wise, according to the 2010 Census.

Even so, things aren’t good, West said, “but we tend to be a little more insulated than some other communities” because of Western Carolina University.

West said what Jackson County has yet to truly contend with is the crash of high-end developments — granted, many lots in such developments already have been through foreclosure, but he believes there are many more to come. The fallout from the Great Recession isn’t over.

“These are uncharted waters,” West said.

 

Things that roll downhill

Jack Debnam, a real-estate agent who serves as chairman of the Jackson County Board of Commissioners, acknowledged local leaders have been placed in an unenviable position.

To offset the lower property values when revaluation starts in 2013, they will either have to raise taxes or cut county services.

Commissioners might face that dilemma sooner than 2013, however. The county already faces a budget shortfall. Wooten has asked each department to cut 5 percent from their budgets in the coming fiscal year.

There is every likelihood state leaders will shift portions of the $2.4 billion budget deficit they are facing downhill to local governments. After that, there’s nowhere downhill to go — again, local leaders are left to slash services or raise taxes.

“We just don’t know where the state’s going to put us,” Debnam said.

In Macon County, Bob Holt, a Franklin resident and real-estate instructor for Southwestern Community College, said during the first quarter of this year, sale prices were running at 63 percent of the assessed value. He expects to see values drop after this evaluation.

Richard Lightner, Macon County’s tax assessor, said his office could ask commissioners to delay the revaluation again, up to 2015, but that he doesn’t plan to do that.

“I think we need to adjust to where reality is right now,” Lightner said. “The whole premise of doing a revaluation is to equalize the market values.”

Lightner said the lower- and median-priced homes are generally stable — it’s the high end, speculative markets that are down.

While some counties bring in a specialized appraisal firm to conduct the revaluation, others do it in-house with their own staff. Macon County has done theirs in-house in the past, but Jackson is contemplating bringing the reval in-house for the first time.

Lightner said Jackson is likely to “have a difficult time” if it does. Macon is well along in the revaluation process — some 30 percent of property values are done. Jackson is just starting.

Additionally, Macon has experience doing revaluations in-house; Jackson County does not.

“They’re starting from scratch right now,” Lightner said. “I wouldn’t want to do one like that.”

If Jackson commissioners insist on sticking to its target of 2013, Lightner said he expects Jackson County tax-office staff will be unable to make as many on-site evaluations as Macon County, and instead will be forced to rely more on computer-generated assessments.

Haywood County’s property revaluation was a massive undertaking: appraisers had to lay eyes on 50,000 properties, from condos to fast-food joints to farms, and judge whether they had gone up or down in value over the past five year.

Hundreds of property sales from 2009 and 2010 set the bar for new values on the county’s property rolls. But just because a similar home across town sold for $200,000, does it mean yours would also?

In the world of real estate, location is everything, whether it’s a few blocks down or the other side of the ridge.

This year, the county developed a highly-engineered method called “neighborhood delineation.”

The formula carves the county up into nearly 1,000 neighborhoods. From there, the county essentially wrote its own computer program to calculate property values, taking dozens of variables into account. Each variable takes the value up or down a notch, but is only as good as the baseline assigned to the neighborhood.

The methodology is impressive, said Randy Siske, a Realtor and president of the Haywood County Board of Realtors.

“The last time we had a revaluation, the biggest complaint from the real estate community was they were comparing apples and oranges,” Siske said. “I think they really made an effort to compare apples and apples.”

Before, the county was divided into just 17 townships. All of Maggie Valley was lumped together, or all of Bethel.

Now, clusters of just 30 or 40 similar properties make up a neighborhood.

David Francis, Haywood County tax collector, pointed to a map of Hazelwood where a conspicuous donut hole appears in the middle of one neighborhood. A condo unit along a residential street was carved out and made its own “neighborhood” rather than lumping it in with the houses around it.

“That’s how close and how drilled down this is,” Francis said.

When county’s appraisal team reached the final stage of revaluation — a drive-by of every property on the books to double check their formulas — they had identified some 700 neighborhoods. But during their final drive-bys they kept creating more and more.

One appraiser trolling the back roads of Fines Creek left in the morning to survey what she thought was one neighborhood and came back to the office with three: Betsy’s Gap, Price Town and Turkey Creek.

“They were finding out that some neighborhoods were a little broad so they broke them down further,” said Haywood County Tax Assessor Judy Ballard said.

And further and further apparently, until they had added another 250 neighborhoods by the time reval was done.

“Neighborhood delineation” was lot of work on the front end — entering not just the number of bedrooms, square footage and whether a home has a garage — but also the school district, proximity to town parks or mountain views.

Those appealing their property values may have a harder time making their case.

“I think it is going to be more difficult for property owners to get through the appeal process,” Siske said. “I’m not saying there aren’t properties out there that need to be appealed. But finding a property that is $100,000 off in value I think it is very much less likely.”

Property owners in Haywood County faced a Catch 22 when their new property values arrived in the mail last week.

If your value went up, it’s nice to know the lackluster real estate market didn’t undermine your home’s worth. The downside will be higher property taxes. Those who saw their value go down will likely pay less in taxes — but it’s hard to be excited that your home isn’t worth as much as it used to be.

The total value of property in the county remained flat. If you add it all up — the value of every home, lot and tract of land — it amounts to $6.791 billion, an increase of less than 1 percent over last year’s total value of $6.787 billion.

The flat figures mean the county escaped the brunt of the national real estate downturn. As a result, the county won’t have to hike the property tax rate to bring in the same amount of money as last year.

“I am relieved there were no gigantic swings,” Commissioner Mark Swanger said.

Had property values gone down as a whole, the tax rate would have to go up for the county to collect the same amount as last year. Commissioners would be hard-pressed to explain the nuance of raising the tax rate, but not really raising taxes given lower property values.

Commissioners have been sparred that dilemma, but only to some degree.

Unfortunately, Swanger pointed out that sales tax collected by the county might be down as consumers are buying less. And the state is poised to stick the county with more of the tab for everything from road paving to education, Swanger said.

Commissioners may be faced with raising property taxes to make up for these shortfalls — unless they want to cut the county’s budget for the third year in a row, something that may not be possible, they said.

“We have already reduced it almost as much as we possibly can,” said Commissioner Kirk Kirkpatrick.

If the state cuts education, does the county hang the schools out to dry or pick up the cost locally?

“We have to wait and see what Raleigh does and then decide as a community and as commissioners, what do people want? What do you want your government to do?” Kirkpatrick said.

Those tough decisions will be facing the county over the next few months. A budget — and tax rate — will be hashed out by July 1 when the new fiscal year starts. Then, and only then, can homeowners pull out their calculators and know for sure what their new property values will mean for their tax bill.

 

Why the revaluation?

In North Carolina, counties are required to conduct a mass appraisal of real estate every eight years — called a revaluation, or “reval” for short. Property taxes are based on property values — the more your property is worth the more taxes you pay. The reval is intended to level the playing field, bringing the county’s assessed value of your property in line with the true market value so everyone is paying their fair share come tax day.

 

How do you calculate taxes?

Here’s how to figure county taxes at the current tax rate at 51.4 cents for every $100 of property value. Divide your property value by $100 then multiply by 0.514. This doesn’t include fire taxes for your fire district or town taxes if you live in the town limits. Bear in mind commissioners won’t set this year’s final tax rate until June.

When Mollie Weaver put her house on the market two weeks ago, she was bracing for the worst. She’d been here before, for two years in fact, when her house languished on the market from 2007 to 2009.

“Of course that was when things were rapidly changing,” Weaver said. “We learned from that.”

This time, the mom of three got serious.

“In the higher price ranges, there is stiff competition. There are brand new homes that haven’t sold, and if you can’t compete with that you have to slash down your price,” Weaver said.

ALSO: New values based on hyperlocal formula

So she did, and Weaver’s house in the Iron Duff area of Haywood County was under contract within a day.

She’s selling at a loss compared to where she bought it in 2006, but hopes to make up the difference when she finds a new house: “We sell at a bargain and we buy at bargain.”

Weaver’s story sounds familiar to anyone who’s tried to buy or sell and home in the mountains.

But now for the first, time there are hard-and-fast numbers painting a full picture of real estate values in Haywood County.

Every home, lot and tract of land in the county — all 50,000 of them — have been reappraised to reflect the current real estate market. New values were sent to property owners last week, and many learned their property was worth less than the last countywide appraisal five years ago.

In the past, you could count on values to go up with the exercise. But it’s a different ball game this time, and many anticipated a dramatic decline in property values.

Nationally, the recession has wreaked havoc on the real estate market. A glut of homes coupled with a dearth of buyers forced sellers to slash prices, and real estate values entered a downward spiral.

“To be competitive, to sell your house, you have to undersell the guy down the street and that’s what’s driving your market down,” said Randy Siske, a Realtor and president of the Haywood County Board of Realtors.

ALSO: What new property values mean for your taxes

But the property reval carried rather pleasant surprise in Haywood County when it came out last week.

“Overall we did not have a total collapse here as some other markets did. You don’t see things crippled here,” said David Francis, director of the county tax department

The total value of property — if you add up every home, business and piece of land — essentially remained flat. Roughly half the property owners in Haywood County saw their values go up, and half saw them drop, Francis said.

Keith Gibson, a private property appraiser in Haywood County, said pegging property values has been extremely difficult lately — the most difficult he’s experienced in his 25 years in the business.

Appraisals are dictated by the selling price of similar property. During the boom years, Gibson followed suit with the high prices in the market place, but he often found himself shaking his head over his own appraisals.

“We were seeing things that were unbelievable,” Gibson said. “We made predictions that this cannot go on like this.”

And indeed it didn’t. Property values fell with the recession, and fast, making it hard to know whether last month’s sale was a still an accurate yardstick for today’s appraisal.

“I have never seen values go down in Haywood County until the last two years,” Gibson said.

Fearing the real estate market was still in too much flux to accurately peg property values, Francis last year urged commissioners to postpone the reval until 2012. They had already postponed it one year, from 2010 to 2011.

“We collectively agreed to postpone it for a year because we were afraid there might not be enough valid sales to do as meaningful and accurate a revaluation as possible,” Commissioner Mark Swanger said.

Tax Assessor Judy Ballard didn’t have to dig deep to illustrate the problem. She randomly picked Triple Creek subdivision from a stack of property assessments. In the reval five years ago, appraisers had a long list of lot sales to base their estimates on — 25 of the 40 parcels in the subdivision had sold in the prior two years.

But this time, there were only four recent sales in Triple Creek, and they all fell below their former values.

Francis thought it wouldn’t hurt to delay the reval yet another year, as several neighboring counties have chosen to do. Jackson, Macon and Buncombe counties postponed theirs until 2013, and Swain until 2012.

But commissioners decided to take the plunge in Haywood this year.

Doing so keeps the reval from falling in an election year — although Swanger said this wasn’t the reason. Revals can be contentious and politically charged since tinkering with the tax rate will usually follow on its heels. But Swanger said the county had already entered a contract with an appraisal firm and delaying it could have cost the county fees.

 

Fewer appeals

In the past, angry property owners flooded the county tax office after seeing their new values, outraged by the sharp increase — and fearing the higher property taxes that would follow.

But last week, a county appraiser stationed at the tax window to field inquiries was sitting idle. A basket labeled “property appeals here” was empty, and a jar of fresh pens on the window ledge was untouched.

The county hasn’t seen nearly as many appeals this time, Francis said. For starters, “sticker shock” of rising real estate that played such a large role in past revals is obviously absent this time. But the values are likely more accurate than they’ve ever been this time, thanks to a new, highly engineered formula (see related article.)

“The county had a huge job to do and I think they did a pretty darn good job overall,” said Realtor Phil Ferguson, the owner/broker of The Seller’s Agency.

Ferguson said the county’s new values for his property were in the “ballpark,” and that is actually impressive.

“When they have 50,000 properties to go out and evaluate, there is no way to do it perfectly,” Ferguson said.

The county’s team appraises homes from the curb, stopping at each one but not going in. There’s a lot they might miss inside, said Gibson.

“The counter tops, the doorknobs, whether it has 10-foot ceilings, hardwood floors,” Gibson rattled off a few. Even whether a house has stained oak woodwork instead of painted baseboards and door jambs.

This year, the county is actually seeing appeals from people who think their new values are too low. While it seems odd to lobby for a higher appraisal — since higher values mean higher taxes — that’s exactly what some people are doing, Francis said.

He spoke to one property owner who saw a tract of land — land took the biggest hit in values — fall from $550,000 to $100,000.

“She was very concerned,” Francis said.

Francis has also fielded calls from homeowners who owe more on their mortgages than it is now worth. They want to know whether the bank will come knocking, asking the upside-down mortgage holders to pony up the difference. Francis assured them that’s not the case.

 

The winners and losers

While generalizations don’t apply to every house in every neighborhood, there are some trends.

•  Commercial went up, especially in downtown Waynesville (see chart).

• Tracts of land went down substantially. Land, once considered a mini-gold mine, is no longer in demand by developers. Plus, banks have balked at financing land.

• Lots in subdivisions went down, also due to old fashioned supply and demand. While there’s hundreds of lots for sale, the tanked economy halted the mountain migration of retiring baby boomers.

• Property closer to town held its value or went up compared to rural areas. On average, property values fell in Crabtree, Iron Duff, Jonathan Creek, Fines Creek and the like, while they went up in the towns of Waynesville and Canton and in areas closer to town.

• High-end homes went down, while lower priced homes went up. It’s no surprise, since expensive homes have been in less demand while affordable ones are highly sought.

“On a sliding scale, the higher you go the greater decrease you would find in price,” said Kirk Kirkpatrick, a county commissioner and attorney who has a bird’s eye view of the market through real estate closings.

Kirkpatrick’s own house in Laurel Ridge went from a value of $800,000 in 2006 to $650,000 in the recent reval.

But a small home he owns on the outskirts of Canton went up from $78,000 to $100,000 — a case in point that lower priced homes have gone up compared to expensive ones.

There’s a side effect come tax day, however. High-end property owners will no longer pick up as much of the county’s property tax tab as they once did. Median home owners will see their share of tax burden go up comparatively.

“That is an unfortunate outcome of what this economy has done,” Swanger said.

Of course, the county was lucky to lean on the higher-valued properties for the years that it did.

“I don’t think there is any question the real estate bubble artificially inflated the value of the upper-end homes. They are now back to where they should have been all along,” Swanger said.

 

Turn around coming

Realtor Randy Siske said it is important to take the long view. If you only look at how much your property went down since the last reval in 2006, you ignore the dramatic rise leading up to 2006. In the first half of the decade, property values rose by so much that even though they have taken a step back now, it’s more like one step back for two steps forward.

There has still be a net gain in value over the decade as a whole — although it’s hardly consolation to those who bought at the market’s peak.

Real estate watchers see an uptick on the horizon. After two years of decline, the number of homes sold last year leveled off (see graph).

“It has started to stir now. There have been several good closings in the last couple of months,” Gibson said.

Before prices can fully recover, however, the number of homes on the market needs to be thinned out.

“There is still a lot of inventory on the market. If people don’t absolutely have to sell right now they probably shouldn’t,” Ferguson said.

The converse is certainly true.

“Now is a great time to buy,” Ferguson said.

 

 

What went up, what went down

Median and lower-priced in-town homes held their value compared to tracts of land and mountainside subdivisions, which fell in value. Commercial went up nearly universally. Here’s a break down by geographic region of the county.

Town of Waynesville: +4.22%
Waynesville outskirts: -0.29%
Town of Canton: +1.85%
Beaverdam (Canton outskirts): +3.86%
Town of Maggie: -0.67%
Ivy Hill (Maggie outskirts): +2.76%
Town of Clyde: +6.75%
Clyde outskirts: -2.25%
Jonathan Creek: -0.43%
Crabtree: -3.92%
Iron Duff: -9.99%
Fines Creek: -11.95%
White Oak: -17.93%
Cataloochee: -14.39%
Lake Logan: +1.49%
East Fork: -3.17%

Commercial
Waynesville downtown commercial: +27.9%
Canton downtown commercial: +14.6%
Maggie Valley downtown commercial: +8.8%
Clyde downtown commercial: +3.8%

Property owners in Haywood County will soon learn how their home and land values weathered the recession.

Every home, lot and tract of land in the county — all 50,000 of them — have been reappraised to reflect the current real estate market.

Some will see their property value go up compared to the last countywide appraisal in 2006. But a good number will find their property values have gone down. Start watching your mailbox in March for a notice from the county with new property values.

While the county isn’t yet saying what folks should expect — whether property values as a whole went up or down — it’s not rocket science to make an educated prediction.

“I would think the normal market price is going to drop, on some properties as much as 30 percent,” according to Bruce McGovern, real estate broker and owner of McGovern Property Management and Real Estate Sales.

Of course, it will vary by the type of property. Higher priced homes are more likely to drop, while median priced homes have held their value better and may see increases.

What’s likely to take the biggest hit?

“Vacant subdivision lots have come way down,” McGovern said. So has land.

McGovern pointed to 40 acres he just sold for $160,000 — far less than the $400,000 it was initially listed for four years ago.

But it’s not necessarily a bad thing, McGovern said. WNC was a victim of an inflated real estate market five years ago. Now, values are more realistic.

“I think it is a true adjustment that needed to be done,” McGovern said. “We need to have correct appraisals on property.”

 

Final countdown

A team of four county appraisers is still wrapping up the two-year process with a final drive-by of every piece of property. Snow in December and January set this final step back a few weeks, said David Francis, director of the county tax department. Francis said his staff has been working long hours, including Saturdays, to get it wrapped up.

“It is a complicated process,” Francis said. “It is something we take extremely seriously. We want to make this as accurate and as fair as possible.”

In North Carolina, counties are required to conduct a periodic mass appraisal of real estate — called a revaluation, or “reval” for short. Property taxes are based on property values — the more your property is worth the more taxes you pay. The reval is intended to level the playing field, bringing the county’s assessed value of your property in line with the true market value so everyone is paying their fair share come tax day.

Haywood County commissioners will set the property tax rate in June, which is related to but not contingent on the results of the reval.

This reval will be a different story compared to the last reval in 2006 at the height of the mountain land rush when property owners saw their values double, triple or even quadruple.

The county actually postponed its revaluation from 2010 to 2011 because the real estate market was still in flux, making it difficult for appraisers to determine new market values for property accurately.

Haywood County is one of the first mountain counties to wade into a reval since the real estate crash.

Swain County did a reval two years ago but tossed it out rather than enact it. Swain is now shooting for 2012 instead. Macon County was on schedule to do a reval this year, but postponed it until 2013.

Jackson County is still in limbo about whether and by how much to postpone its reval.

By Colby Dunn and Quintin Ellison • Staff Writers

Although retail businesses might have found some relief toward the latter part of the year, homebuilders and real estate agents found fewer reasons for joy in 2010.

For homebuilders, the outlook was pretty bleak, according to Dawson Spano, president of the Haywood Home Builders’ Association. The bleeding in the industry, he said, has slowed but hasn’t altogether stopped, and many contractors around the region are still calling it quits — or at least still feeling the heat of the recession.

“Builders are getting out of the business, but not at the fast rate that it was last year,” Spano said.

The best way to characterize the situation, he said, is that things aren’t yet getting better, but at least they’re not getting worse.

The business they’re seeing now is different than what has long characterized the home building industry in Western North Carolina, with large developments of second and luxury homes on the decline or stopped altogether. And Spano said he’s not certain that kind of construction and housing market will ever return to the area.

“We’re going back to the way it used to be, where you have builders building one, two houses a year,” Spano said. “I think the big developments are dead for a long time. The Balsam Mountain Preserves, the Sanctuaries, those big places — I don’t see people dropping 300 to 400 thousand for a piece of property.”

Homebuilders, though, are seeing a trend towards remodeling, and Spano thinks this may be where the market is going when the country finally drags itself out of the economic slump. Wherever it’s headed, he has no doubt that it will be scaled back.

Phyllis Osborn, executive officer for Haywood’s Home Builder’s Association, said that the numbers bear this out. What they’re hearing from contractors around the region is that work is there, but it’s smaller in scope and opportunities are still sparse, as evidenced by the drop in contractors still in the game.

“We are 136 in our membership and at the end of last year it was 148, so we’re continually dropping,” said Osborn. “And I know in years prior it’s been up almost to 200.”

Spano’s predictions that small building will lead the way out of the recession and beyond are echoed by the National Association of Home Builders, who released a study at the end of December proving that very trend. The NAHB found that 65 percent of builders that are still in business pull in less than $1 million annually.

“We are seeing market conditions returning to normal in many parts of the country after a long, hard downturn, and these companies have the agility to move quickly and start leading the economy forward,” said NAHB Chairman Bob Jones in a December statement.

In the real estate market, the general sentiment seems to be much the same – that things are still languishing, but the sales dips are not quite as deep as they were last year.

Bob Holt, who teaches about real estate for Southwestern Community College, said there are fewer agents than during the pre-recession boom years. The ones that have stuck with it, however, are staying relatively busy, he said.

“It is still slow, but things are turning around,” said Holt, a Franklin resident. “The prices are low, the interest rates are low — it is a good time to buy stuff.”

Holt said the situation would not improve significantly for another year or so, “until we clear out all the foreclosures” and the job situation improves.

In Haywood County, the Board of Realtors is looking to a merger with Asheville as a possible force to help mitigate the loss if the economic hits keep coming. For homebuilders, 2007 was the banner year, and for Western North Carolina’s real estate world, the benchmark for booming business was 2005. But as one real estate agent put it at a recent board meeting, 2005 probably isn’t coming back, so the future may be found in a new business model, not a return to pre-recession growth.

“If the real-estate market doesn’t improve, then neither will my membership,” said Lisa Brown, association executive for the Haywood Board of Realtors. The math is simple, and after taking a hit of more than 25 percent last year, the area’s agents are looking for a better 2011.

But John Keith, a Waynesville real estate agent in his second year in the county, remains optimistic. People are still buying, even if the pace is much slower. People still want to move here, even if they can’t make it happen until their current house sells.

“The market is still depressed, but I’m optimistic,” said Keith. “We still know that this is one of the best retirement relocation areas in the country, and there’s still a lot of people that are trying to get here.”

For his part, Spano takes a more poetic view of what’s coming in 2011.

“We’re in the valley of the shadow of death,” Spano said. “We’re there, except now we can see the light at the end of the tunnel.”

Money and politics. Right now in the mountains, we can add real estate to that equation.

Dave Curphey’s story is a dime a dozen. Fed up with the urban sprawl that ruined his small town in Florida, devouring a landscape once dominated with orchards in just 10 short years, he packed his bags and moved to the mountains of Western North Carolina. His favorite line to locals: “You should have shot me at the border when you still had the chance.”