For the first time in decades, the value of an average home in Madison has dropped, falling 1 percent in the last year to $245,424.

But a modest rise in the value of commercial property and new construction has resulted in a 0.7 percent increase in the city’s overall real estate value, according to figures released by the city assessor’s office Friday.

Even so, the $378 million in new construction was the lowest sum since 1999. The value of all real estate and personal property, machinery, furniture and fixtures used in business rose 1 percent, to $22.3 billion.

The city began mailing out the new assessments on Friday.

The assessments are based on values as of Jan. 1.

The values are the latest sign that Madison isn’t immune to the national economic slump, but officials said the city is weathering the recession better than many places.

“It’s not good news but about what we expected,” Mayor Dave Cieslewicz said. “I’m a little bit encouraged because our numbers are still positive. We’re a little bit better than the state and the rest of the country.”

Still, the combination of slowing construction and rising costs for services mean the city will face a tight budget for 2010.

“You always like there to be more growth and new value on the tax rolls,” Cieslewicz said. “It’s certainly going to be a challenge.”

City Council President Tim Bruer said the slowdown could force the city to look at “the unimaginable: serious layoffs.”

The value of all existing residential properties dropped $257 million, and half of the city’s 18,654 single-family home properties saw a decrease in value.

The city hasn’t seen a drop in the value of the average home since 1981.

“I think people are expecting a decrease, and for the most part, people are going to see a decrease,” Assessor Mark Hanson said.

No neighborhood saw a dramatic increase or decrease in values, likely because values had not been hyper-inflated as in some cities, Hanson said.

“We never had that bubble when prices were going up double-digits year after year,” he said.

The biggest increase in value for single-family homes was for lake shore property on the Isthmus, which rose 3.8 percent, while values in the Segoe-Mineral Point Road area of the near West Side rose 2.3 percent and those in the Stone Crest Estate/Hawks Creek neighborhood on the Southwest Side rose 2 percent.

The biggest decrease in values were in the Cardinal Glen neighborhood on the Far West Side, which dropped by an average 5.3 percent.

By contrast, the average home value citywide rose more than 8 percent a year between 2002 and 2005.

Sally Miley, who lives on Lake Mendota Drive on the Far West Side, where values generally dropped the most, said she wasn’t surprised by the decline, given the condition of the housing market. In her Spring Harbor neighborhood, the value of residential properties fell an average 4.8 percent, the third biggest decrease in the city, to $281,600.

But Miley, president of the Spring Harbor Neighborhood Association, said she wasn’t worried.

“This neighborhood is desirable in the long run,” she said, noting she has seen very few for-sale signs in her area and no signs of decay. “I’m sure it’ll bounce back, with the amenities we have in the neighborhood, with the magnet middle school and the park.”

The priciest homes in the city, in fact, are those on the lake shore in Spring Harbor, with an average value of $936,700.

On the city’s Far East Side, one of the steeper drops was in the Rolling Meadows neighborhood, where assessed values fell 2.8 percent, to $179,000 from $184,200.

Neighborhood association member Mary Polancih said she was hopeful assessed values would rebound in a few years and has counseled real estate agents and sellers to wait if they can, rather than take less than houses are worth and continue to drive down values.

“We understand that home sales are down and we see that in all the neighborhoods, not just on the East Side,” Polancih said. “It’s just that houses are slower to sell now. It’s nothing remarkable.”

The city’s least expensive homes are in the East Broadway area with homes valued at $137,900; Northgate-Aberg Avenue, $145,400; and Fair Oaks-Worthington Park, $147,200.

The 3.7 percent rise in commercial values was driven by increases in the value of apartments with more than eight units and other commercial properties.

“The commercial class is still a strength,” Hanson said.

Apartments with more than eight units were the lone class of property — residential or commercial — to see an increase in valuations.

The overall increase in commercial value was driven by new construction.

The West Side saw the most new construction, growing by $177 million.

The central city had $103 million in such construction, and the East Side $98 million. But real estate sales of all kinds were the slowest in at least six years.

The city is sending notices to the owners of the 39,166 parcels that have changed in value.

If an assessment didn’t change, no notice is being sent.

But anyone can appeal his or her assessment, whether a notice was sent or not.

The new property values will eventually help set tax bills after the City Council adopts a budget for 2010.

Contact Dean Mosiman at dmosiman@madison.com or 608-252-641; contact Karen Rivedal at krivedal@madison.com or 252-6106.