With real estate values in retreat, Napa County Assessor John Tuteur is cutting $600 million from the assessed values of 5,200 Napa County properties.

In most cases, these properties are worth tens of thousands of dollars less than what their owners paid for them, Tuteur said.

Tuteur is reducing assessments on 1,824 American Canyon homes — 40 percent of the city’s housing stock — by an average of $127,000. The assessed value of some American Canyon properties is dropping by as much as 35 percent.

In Napa, 3,062 homes, or 20 percent of the city’s residences, were dropped in value by an average of $97,000 for 2008-09, Tuteur said.

The countywide property tax roll still grew by almost 6 percent, but continuing turmoil in real estate could reduce next year’s increase to zero, Tuteur told the Napa County Board of Supervisors Tuesday.

Wine Country is not escaping the national home mortgage crunch and economic slump, but things could be worse, Tuteur said. Napa County is outperforming most of the state, he said.

The hardest hit community is American Canyon, where the assessment roll dropped 1.8 percent. Tuteur said he could not remember a city’s assessed values ever dropping until now.

As a city with a high percentage of new homes, American Canyon was most vulnerable to the sharp decline in values, Tuteur said.

Unlike the drop in housing prices in the early 1990s, this real estate cycle is made worse by a rising number of foreclosures, dumping properties onto the market, Tuteur said.

After 213 foreclosures in 2007, Napa County has had 341 so far this year, he said. Foreclosures at this high level are unprecedented since the Depression, he said.

Tuteur predicted that next year would bring more of the same. In many cases, assessments lowered this year will be lowered again, he said. The problems hurting real estate are “steeper and deeper” than anything seen in generations, he said.

Sherrie and Jim Caldwell of American Canyon are typical of the more than 5,000 property owners who got notices of lower assessed values this month.

“We weren’t totally shocked,” Sherrie Caldwell said. “We already had an idea.”

The Caldwells bought a home in Bella Terrace in 2005 for $680,000. Neighborhood values rose as high as $750,000 before starting their plunge, she said.

Tuteur’s office cut their assessment 21 percent, from $720,000 to $568,000. “It is a little bit depressing knowing our home value is dropping, not rising,” Sherrie Caldwell said.

While she and her husband are staying put, Caldwell said one neighbor went through foreclosure, another bought a larger house in American Canyon, attracted by today’s lower values. A third neighbor tried to sell, then gave up, she said.

If there is a silver lining to having your assessed value cut by $152,000, it’s the reduction in property taxes that comes with it. The Caldwells will pay $1,520 less.

Most of the properties receiving lower assessment were caught by the assessor’s office, which reviewed sales data affecting thousands of parcels. Some 700 people recommended their own properties for review, Tuteur said.

In general, properties sold since 2003 are having their assessments reduced, Tuteur said. If values continues to deteriorate, sales from 2002 and 2003 will come under scrutiny next year, he said.

During the worst of the housing downtown of the 1990s, Tuteur’s office cut assessments on 5,700 properties. With 5,200 assessments dropped this year, Tuteur predicted that the eventual total will exceed the 1990s amount.

The countywide assessment rolls grew by nearly 6 percent because of new construction, the annual 2 percent assessment increase allowed by Prop. 13 and sales of properties whose assessed values were far under market values, Tuteur said.

Six percent growth is the smallest increase since 3.9 percent in 1997-98. Napa County’s assessment rolls have grown at double-digit rates most years since.

The decline in real estate values will reduce property tax revenues to cities and Napa County. American Canyon is considering a hiring freeze that could save $2.7 million next year as major revenues slump.

American Canyon’s assessment roll drop of 1.8 percent surprised Tuteur. “I didn’t think American Canyon would have a decline in value this year, but it did. That doesn’t bode well for future years,” he said.

Napa’s assessed values grew by 3.98 percent. Next year’s growth is likely to be lower, Tuteur said. To be conservative, Napa should plan on zero increase, he said.

The cities of Yountville, St. Helena and Calistoga had increases of 10.6 percent, 6.4 percent and 12.2 percent, respectively, demonstrating that the Upvalley real estate market is not as vulnerable to the housing downturn, Tuteur said.

“There is so little housing (Upvalley) and so many people who want to live there,” he said.

“Buyers are willing to invest in Napa County because of our natural amenities, the special character of our vineyard lands and the managed growth policies of local leaders,” he said.

Despite real estate problems, Napa County still has a “vibrant economy,” with a low unemployment rate and robust non-residential construction, Tuteur told supervisors.

Commercial and industrial construction and new vineyard plantings had a value of $228.5 million, he said.

The county’s assessment roll, including the value of all land, structures and vineyards, totaled $26.9 billion in 2008-09, an increase of $1.5 billion. The previous year’s increase was $2.24 billion, or 9.4 percent.

Napa is second among California’s 58 counties when ranked by assessed value per capita, Tuteur said.

In addition to 5,200 residential properties, Tuteur’s office reduce assessed values on nearly 200 non-residential parcels.