REO Bank Foreclosures Pulled Down Worcester Property Values

by Simon Lindsay on REO Properties

REO bank foreclosures pulled down property values in Worcester, Massachusetts to their lowest level in over 15 years, based on data from the office of the city assessor.

The total value of all assessed properties in Worcester decreased to $12.1 billion in January 2009, marking a drop of almost 10 percent or a $1.2 billion reduction compared to the total property value of $10.9 billion in January 2008.

The peak for assessed property values in Worcester occurred in January 2007 when the total property value was $12.76 billion. This means that total property value in the city fell by $1.8 billion within two years.

The substantial drop in property values in January 2009 was more than twice the rate of reduction in January
2008, when values fell by 4.6 percent. The drop this January also marked the sharpest decrease since 1993, when total property value fell by $875 million.

William Ford, assessor for the city of Worcester, said that the sharp drop in property values was largely caused by difficulties in the local property market, which is riddled with REO bank foreclosures. In the July-September quarter, foreclosure postings in Worcester increased by almost 24 percent from the April-June quarter and by more than 21 percent from the July-September period in 2008.

Ford explained that property values for taxation this year was set as of January 1 this year, based on property valuation data in 2008, creating an assessment lag of one year. Ford said that the assessment period was set by Massachusetts law, so his office needs to comply with state law despite significant changes in property values throughout 2009.

Taxpayers may wonder about higher real estate tax assessments at a time of falling property prices, but Massachusetts law, just like laws in many other states, set property values at the start of the year as the basis for property taxes for the whole year.

According to the city assessor, the average valuation for commercial properties increased slightly from $598,898 in 2008 to $599,392 this year. The average valuation for industrial properties however dropped by 3.5 percent to $701,810. Commercial and industrial properties this year accounted for 21.3 percent of total property valuation while residential properties comprised nearly 79 percent of overall property valuation.

Ford said that because of the lower prices of REO bank foreclosures, the average valuation for a single-family house has dropped by 12 percent to $206,517.