Home values have risen substantially across south Montgomery County during the last five years, and with notices soon to be mailed out by the Montgomery Central Appraisal District in March, residents can expect their property values to see yet another spike in 2014.
MCAD Chief Appraiser Mark Castleschouldt said home values are rising countywide and across the state—particularly in cities and communities surrounding metropolitan areas—and The Woodlands area has seen a substantial increase over the past five years, as average home values in The Woodlands rose 10.9 percent from 2009 to 2013.
Although much of the value increases are because of population growth, Castleschouldt said home values have risen because of the lack of new home construction and the rising demand for homes in the area.
"For values to increase, somebody has to want it," Castleschouldt said. "You have to follow the old rule of economics. It's really a supply and demand type situation. If you want a house and there's a limited supply, then prices are going to go up."
Home values rising
Homes in Montgomery County are appraised annually based on home sales and the sale prices of homes within communities, Castleschouldt said. MCAD uses mass appraisal techniques to determine fair prices for homes within particular areas.
"It is impossible to do an independent appraisal on every single property in Montgomery County," he said. "We break them down into neighborhoods. We're not going to value lake front property the same as golf course property, or property that's interior or property that's out in the country. They're all grouped in a similar manner."
Growth has a significant effect on annual home values, Castleschouldt said, whether it is population growth or the addition or expansion of businesses within a region. However, with a shrinking supply of new homes being built and existing homes on the market, the rising population growth and influx of new business exacerbates the housing demand.
"It's not just people moving in, it's businesses moving in," he said. "Exxon going [in] across in Harris County has made a significant difference in southern Montgomery County. If you move that many people down here, with the numbers we're already getting, then the supply's going to shrink even more."
Tim Welbes, co-president of The Woodlands Development Company, said the entire Houston area is experiencing a similar supply shortage and increased housing demand. A slowdown in construction because of financial constraints after the recession and a labor shortage in the construction industry have hindered developers to keep up with the 140,000 new people moving annually to the Greater Houston area, Welbes said.
New home supply has not met the demand for potential homebuyers since 2009, Welbes said, with the demand growing exponentially each year as it outpaces new inventory. Only an estimated 27,000 homes are expected to be constructed in the Greater Houston area in 2014 to meet the growing demand of as many as 77,000 potential buyers, he said.
About 2,000 homes remain to be constructed in the Village of Creekside Park and another 400–600 higher-density single-family residences are planned for Town Center, Welbes said. In a year, developers are providing less than a one-month supply of homes less than $400,000 to meet the current demand in The Woodlands.
Bruce Tough, chairman of The Woodlands Township board of directors, credited ExxonMobil's relocation and the expansion of other businesses within The Woodlands, such as Anadarko and CB&I, with creating job opportunities to increase the demand for residential development in The Woodlands area. Tough said the community's amenities may also play a role in increasing home values, including parks, public safety, shopping, the trees and Conroe ISD.
"It makes The Woodlands an extremely attractive location," Tough said. "And you're going to see the home values increasing even more, because with the limited amount of inventory, the home prices are going to go up because there's not that many homes left to build."
Older villages in The Woodlands, such as Grogan's Mill, continue to see redevelopment, Tough said.
"There's no one moving from The Woodlands, and everyone is trying to move in," he said.
Welbes said existing home prices in the region will continue to rise as the community reaches build-out. He said there appears to be no end in the foreseeable future to the rise of home values unless mortgages rise to interest rates that first-time homebuyers can no longer afford.
Although The Woodlands has seen significant development and an influx of new businesses in the area, Castleschouldt said this growth has had a ripple effect on the rest of the region, as other communities across south Montgomery County have experienced higher home values in recent years.
No community has seen a greater increase in home values than Shenandoah, where the average home value has risen 24.6 percent since 2009. Shenandoah City Administrator Greg Smith said as many as 100–150 new homes have been built during that time, with development picking up during the last 24–30 months. He said Tuscany Woods and Malaga Forest had just begun construction, while Marion, Lily, The Reserve at Grogan's Mill and Boulevard Green have been announced over that time.
"It's continuing to go at a very fast pace," Smith said. "I certainly think the demand is driving the development. I also think it's driving some of the values."
Although he credited the city's location and the housing demand for the rise in home values, he also cited the city's infrastructure improvements made over the last five years, the quality of services offered by the city and the low property tax rate.
The Rayford Road corridor in Spring has also seen an increase in home values, which have risen 5.3 percent throughout the past five years, according to MCAD. Paul Cote, Realtor and president of the Rayford Road Civic Association, said several new developments have begun during that time, including Legends Trace, the Falls at Imperial Oaks and the Harmony subdivision, while new homes are being constructed behind Legends Ranch and within Bender's Landing.
The Woodlands' amenities benefit the Rayford Road corridor, Cote said, although homebuyers can get more value east of I-45.
Cote said area residents are taking advantage of a seller's market.
"I'm finding a lot of people who are in the process of upsizing or downsizing their homes," Cote said. "They're in a position to make a little money on their home, and they can make a big move without it being a big loss for them."
Although home values are on the rise, they fell in Oak Ridge North by an average of 4.3 percent in 2013 after four consecutive years of increased appraisals.
City Manager Vicky Rudy called the drop a "bump in the market," and said existing homes in the community have been selling better since 2013. Rudy said foreclosures may have had an effect, although the city and appraisal district do not keep track of foreclosures.
"One or two foreclosures is not going to tip a market, but when you have a substantial amount of foreclosures in a small, specified area, it can definitely affect market value," Castleschouldt said.
There are no new subdivisions on the horizon for Oak Ridge North as the city is mostly built out, Rudy said. However, she said, there is some redevelopment as homeowners of older homes sell their property and larger lots are split into smaller lots for homebuilders. She said the few existing homes in the market are selling well.
"I do know that houses are going on the market and being sold fairly quickly," Rudy said.
Property tax rates
Rising home values can lead to property owners spending more money on property taxes every year, but local municipalities have cut property tax rates since 20009, including a 3.4-cent decrease in The Woodlands, a 6.2-cent drop in Shenandoah and an 11.5-cent drop in Oak Ridge North.
Unlike Oak Ridge North, Shenandoah and The Woodlands receive the majority of their revenue from sales tax, meaning they have significantly lower property tax rates than Oak Ridge North.
"Do I share a property owner's concern that his values rise and his taxes go up? Of course," Castleschouldt said. "We do the values. Your taxing entities are the ones out there setting the budgets and spending the dollars. Are they being good stewards of the money, so to speak."
Despite a drop in the average home value in Oak Ridge North last year, Rudy said the city saw an 8 percent increase in property tax revenue thanks to new commercial development that allowed the city to lower the property tax rate 5 cents.
"The whole reason we do economic development is to bring value to the city, so that it can offset the tax rate," Rudy said. "You can improve your quality of life without raising your tax rate."
If property owners feel their property has been appraised too high or too low, Castleschouldt said, they can appeal to MCAD after receiving their notice. Property owners can protest the market value of their homes, whether their homes are being appraised fairly and equally with similar properties, the denial of an exemption or the ownership of the property.
"You get the opportunity to come in and say, 'Well, you may not have been aware of this physical problem my property has or this functional problem my property has, or here's some additional information you may not have gotten your hands on,'" he said. "Property owners have the opportunity to be a part of the process."