Gaging the Effect of Home Dispossession on Neighborhood Property Estimations Enhancing Appraisals to Help Battling Mortg

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Gaging the Impact of Home Foreclosure on Neighborhood Property Values ... Gaging the Impact of Home Foreclosure on Neighborhood Property Values ...

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Gaging the Impact of Home Foreclosure on Neighborhood Property Values Improving Assessments to Help Struggling Homeowners Community & Economic Development Committee City of Milwaukee October 26, 2009 Robert Weissbourd, RW Ventures, LLC

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The Tax System Mediates the Role of Housing in Neighborhoods, Markets, and Local Government Why Should We Care?

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Housing Defines Our Communities Real Estate Matters

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Housing Builds Individual Wealth Real Estate Matters Source: Net worth and the advantages of family units, US Census Bureau 2002.

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Housing Supports Government Real Estate Matters Source: US Census Bureau

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Housing Bubble Aftermath: One in Four Homes Are Now "Submerged " When Real Estate Markets don't Work...

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Bad Things Happen to Our Cities Photo: Doug Benz, The New York Times

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The Devastating Impact of Foreclosures Source: Center for Responsible Lending Press Release, May 2009

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Greatest Impact in Low Income Neighborhoods Data: HUD, Neighborhood Stabilization Program

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A Good Property Assessment System is Key to Households, Communities, and Government. Property Assessments impact Investment in lodging stock Which people group inhabitants pick Households riches Government receipts

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For Struggling Homeowners, Property Taxes are a Substantial Additional Burden Property Taxes: A Significant Household Expenditure In 2007, the common U.S. mortgage holder burned through 2.91% of yearly pay ($1,838) on property charges. In Illinois, this figure was 4.76% of yearly pay, or $3,203 . Source: Property Taxes on Owner-Occupied Housing by State (2007 Tax Foundation report)

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The Assessor's Role in the Tax System Assessments Are Intended to be Accurate, Uniform, and Equitable

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The Assessor's Role in the Tax System Accuracy Ensures Uniformity and Equity in the Tax System

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The Assessor's Role in the Tax System Non-Uniformity: Similar Houses Assessed Differently

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The Assessor's Role in the Tax System Inequity: Different Assessment Ratios for Different Values

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But Current Market Conditions Present Serious Challenges...

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Volume Has Dropped by 64% Between the Peak in 2005 and 2009 Dramatic Decrease in Sales Volume Total Sales of Residential Properties 68,241 24,445 Source: Cook County Assessor's Office, Single Family Only

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Compounded by Skyrocketing Foreclosure Rates Source: Cook County Assessor's Office, Single Family Only

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Result in Legal Challenges, a "Surge" of Appeals... "...Officials the nation over say there is no doubt that the quantity of [assessment] requests has ascended from the typical stream to a surge." (NYT, July 4, 2009) Lou Dobbs Tonight investigates evaluations and property impose dissents (CNN, April 1, 2009) City of Philadelphia sued over appraisal hones

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And Serious Community Development Implications Greatest difficulties in neighborhoods that are most influenced by dispossession emergency Risk of over-appraisals for mortgage holders who can minimum bear the cost of them

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The Cook County Assessor's Office (CCAO) Took Action Project Goal : Enhancing the Assessment Process to Better Estimate Property Values in the Current Environment How to represent the late downturn in the market following quite a while of unfaltering development? How to represent the expanded impact of dispossessions?

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1.8 Million Total Parcels North 2010 & 2013 (450,679 bundles) City 2009 & 2012 (855,140 packages) South 2011 & 2014 (526,799 bundles) About Cook County

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The CCAO Is One of the Largest and Most Sophisticated Assessor's Offices in the Country About Cook County

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Assessment Practices and Considerations Vary Widely Size of Jurisdiction Method and Technology Manual Re-alignment Computer helped mass evaluation GIS Systems Frequency of Reassessment Governmental Considerations Tax Base and Levy Assessment Caps

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Project Structure Build from Existing Models Operate inside current frameworks (information, programming and staffing) Deliver under tight course of events directed by appraisal prepare

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Criteria for Success Accuracy, Uniformity, Equity How close are surveyed qualities to real market values? Are comparable homes evaluated at comparative qualities? Are distinctive esteem homes surveyed at a similar rate? Reasonable Considerations Ease of usage, straightforwardness

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Process and Diagnostics Evaluation of current model Introduce changes, from easy to complex Evaluate every progression utilizing thorough factual methods Review results Develop suggestions

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Evaluation by means of Out of Sample Testing Enables promptly deciding nature of current frameworks and adjustments

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Detailed Reports Generated for Each Model Modification

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DISCLAIMER To protect privacy, the accompanying charts and figures were built for illustrative purposes just, and don't reflect particular venture information or results.

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Defining the Problem: A Major Market Downturn

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That Impacted Neighborhoods Differently

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Model Improvements Goal: Accurately Capture Both Trends

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Tested Multiple Foreclosure Measures Number of abandonment filings in the area inside the previous year Presence of dispossession filings on a similar piece inside the previous year (sham) Also tried: Block-level number rather than sham, REO as opposed to documenting, diverse separations (1/32 mile, 1/16 mile, 1/8 mile)

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Accounting for the Impact of Foreclosures Created new factors that catch and record for close-by abandonments New factors better survey the estimation of the dispossessed property and non-abandoned properties on a similar square

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What Does This Mean for the Assessment of Individual Properties? Recording Nearby No Filing Nearby

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Accounting for the Downturn in Housing Trends Created new factors that track the lodging market on an all the more "continuous" premise New factors acclimate to market patterns – paying little mind to whether they are up, down or level

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Capturing Market Trends: Time Dummies versus Linear Model

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Capturing Market Trends: Time Dummies versus Linear Model

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Capturing Market Trends: Time Dummies versus Linear Model

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Capturing Market Trends: Time Dummies versus Linear Model

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Capturing Market Trends: Time Dummies versus Linear Model

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Capturing Market Trends: Time Dummies versus Linear Model

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Model Enhancements Make a Big Difference Graphics are for illustrative purposes ONLY

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Changes don't Affect Overall Tax Collection (a Function of Levy), yet Preserve Accuracy and Equity in the Tax System Improvements Change Distribution, not Tax Collection Amount

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Project Impact Savings for lower wage property holders (holding total duty income steady) in the request of sixty million dollars . The progressions have been consolidated into the current round of appraisals and will be connected to every future evaluation. Extra appraisal display changes have been recognized and are being investigated together.

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The "New Frontier" of Property Assessments Opportunity to apply freshest measurable and information mining methods to appraisal models Potential to convey evaluations all the more precisely, evenhandedly and proficiently, prompting to another era of property appraisal hones

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In Sum... Time to return to "a standout amongst the most essential, effortlessly reported, and manipulable of all impacts upon the social geology of urban areas, furthermore a standout amongst the most disregarded." (Harris and Lehman, 2001) An unobtrusive venture creates an extensive money related effect for neighborhoods and mortgage holders who woefully require offer assistance. The approach, methods and arrangements of the venture are effectively transferable to different regions.

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Gaging the Impact of Home Foreclosure on Neighborhood Property Values Improving Assessments to Help Struggling Homeowners Community and Economic Development Committee City of Milwaukee October 26, 2009 Robert Weissbourd, RW Ventures, LLC

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