WASILLA -- Need another sign that Mat-Su's once-hot housing market has cooled off? Just check your mailbox.

Matanuska-Susitna Borough property tax assessments went out last week and for the second year in a row, they showed an average drop of about 2 percent in housing values from the previous year.

That followed a more than 10-year period during which Mat-Su property jumped in value by at least half on average.

Real estate agents say they've noticed the dip with fewer houses on the market and lower sales prices than in 2007. But the trend may be turning around, with prices going up slightly in the past two months.

"We're actually stabilizing. Prices are starting to come up a little bit," said Valley Board of Realtors president Kathryn Clark.

The downswing in property values could be good news for homeowners who have watched their property tax payments increase along with the value of their homes in recent years

But they shouldn't count on a lower bill just yet.

The borough Assembly could raise property tax rates to make up for the decline in home values.

Property tax revenue accounts for a significant portion of the borough budget -- about one-third of the total budget -- so any loss in property value means a potential loss in income for the Mat-Su government.

Mat-Su Borough Manager John Duffy said it was too early to say whether homeowners will face higher property tax rates to offset lower home values this year. Budget talks are just beginning, he said.

Mat-Su Borough Assessor Dave Dunivan said despite the drop in housing value, the total value of property -- what every lot and home in the Valley is worth when added together -- actually rose in 2008, thanks to new development.

Dunivan estimated the total assessed value will rise to $9.3 billion this year, up from $9.1 billion last year. His estimates won't be final until near the end of May.

New commercial construction helped drive up that figure, including a shopping center near the new Wasilla Target store and several new hotel rooms at the McKinley Princess Lodge north of Trapper Creek.

New housing construction also added to the increase, although at a slower pace than in recent years. Dunivan said. A total of 302 new houses were built last year. That's fewer than half the number built in 2005 at the height of the building boom, he said.

Clark, the Realtor, said she hopes the slight upswing in housing sale prices she noticed in January and February continues through the rest of the year.

Fewer houses sold, but the sale price rose by about $5,000 over that same period last year, she said.

"Buyers aren't quite as jittery as they were a few months ago," she said.

However, she said some willing buyers are struggling to secure financing.

"The reason we're not seeing as many successful sales is, the lending criteria is changing almost daily," she said.

That's true, said Cris Skinner, past president of the Alaska Association of Mortgage Brokers and a branch manager at Preferred Mortgage in Anchorage. Skinner said banks and mortgage insurance companies around the nation are tightening their requirements, but she expects the process to smooth out soon.

"Lending regulations were so lax that just about anybody could get a loan. One day out of bankruptcy, you could get a loan," she said. "We're not seeing as much of it (declining home values) as the Lower 48 has, but what happens with the rules and regulations in the Lower 48 does affect us."