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Lake values high, but leveling off (complete article from source)
Source: The Daily Journal Online, by Tom Hintgen
August 25, 2007
Some look ahead to another round of price increases
Forty years ago, a typical two-bedroom lake cabin in Otter Tail County could be had for as little as $12,000. Today, two-bedroom starter cabins are listed for close to $180,000. In some cases, lake property itself is more valuable than the older dwellings on the premises.
People often ask Realtors such as Monica Kaiser of Kaiser Properties of Dunvilla and Otter Tail County Assessor Robert Moe about lake property prices — and why taxes on lakeshore property are higher than off-lake property.
“People want to be close to the lakeshore frontage and are willing to pay more for a cabin compared to if that same dwelling were located even a short distance away from the lake,” Kaiser said. “By today’s standards, anything less than $200,000 is seen as a good buy — even for a starter cabin used only during the summer months.”
Kaiser, however, knows that buying frenzies come and go.
“For now, people are willing to take the risk in paying premium prices for lakeshore properties — as investments — knowing that prices can go down as well as up,” she said. “In previous years, we've seen a frenzy — whereas the last two years we've seen a leveling off.”
She said today's buyers typically have connections to the lakes and feel that lakeshore properties are good investments — and are willing to pay the high prices.
Kristy and Steve Berg of rural Pelican Rapids have their summer cabin on Lake Lida for sale.
They said they love their cabin but would like something larger for their family. The Bergs believe they’ve offered a fair sales price — reflecting today’s market for lakeshore property.
For Pelican Rapids-area lakes property, the Fargo-Moorhead market drives the prices, Kaiser said.
A prime example is nearby Pelican Lake where many properties for sale are comparable or even higher than similar dwellings at Otter Tail Lake — one of the premier lakes in central Otter Tail County.
“Starter cabins around $200,000 still attract a lot of prospective buyers, but lakeshore property selling for $500,000 and over definitely is leveling off,” Pelican Rapids-based Seifert Realty owner Loren Seifert said. “We’re not seeing today the annual appreciation of 6 to 15 percent on lakeshore property that we did a few years ago.”
However, Seifert sees a possible rebound in higher-priced lakeshore property starting next year or in 2009. Likewise, higher appreciation rates also may take place in one or both of those years, he said.
“Sales prove that lakeshore, in most cases, is much more valuable than other land types,” County Assessor Moe said. “The higher the value, the higher the tax.”
Moe said that each lake in Otter Tail County has its land valued according to the prices buyers will pay.
“This varies greatly from one lake to another, depending on the popularity of the lake,” Moe said. “Other factors such as school district and township or city tax rates will affect the level of taxes from one property to another.”
When comparing value or taxes, Moe said, prospective buyers should make sure they are comparing comparable properties in an area of similar tax rates.
Realtors such as Kaiser and county department heads such as Moe also are asked what affect the construction of large, expensive homes have on valuations and taxes — lakeshore and non-lakeshore.
“Construction of new homes will tend to hold your property taxes down,” Moe said. “The new home will likely be paying a large amount of taxes compared to what the taxes were when the property was bare land. Since property taxes are assessed based on the amount of money local units of government need to collect to operate, this new house will be paying a portion of what existing properties had paid the year before.”
A dwelling’s value is based on actual market. If construction of new homes in one’s area enhances sales prices of existing homes, a person will experience a valuation increase based on the overall market change.
The County Assessor's Office is responsible for the valuation and classification of all taxable property in the county. Every sixth year the office also values all of the tax exempt property in the county.
“Each year we attend meetings of all boards of review where property owners may appeal their valuation or classification,” Moe said. “Our department follows state laws to value all properties based on market value. We classify property based on use.”
For her part, Kaiser sees a continuing rise in lakeshore property values.
“This niche market will always be strong because this limited commodity (lakeshore) won't be affected the way the national market is,” she said. “Will it level off again? Yes. But for now, people are comfortable with paying premium prices for lakeshore property.”
She said those purchases are not only for their enjoyment but also as long-term investments.
Click here for complete article from The Daily Journal Online
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