Protests accepted through June for newly appraised property
Most homeowners in Williamson and Travis counties will find their property value increased as of Jan. 1, 2014, according to data released by the central appraisal districts in April.
Low home inventory and high demand caused Williamson County average residential market values to rise 10.6 percent during the past year, said Alvin Lankford, chief appraiser with the Williamson Central Appraisal District.
Preliminary numbers from Williamson County show the average market value for a home in the city of Austin rose 10 percent from $228,390 in 2013 to $251,279 in 2014.
In Travis County, average residential property market values rose 12.6 percent, and the portion in the city of Austin rose 14.2 percent.
Marya Crigler, chief appraiser with the Travis Central Appraisal District, said the trend was prompted by construction, growth in the apartments sector and a strong residential market.
Property owners in both counties have until June 2—or 30 days after they receive their appraisal notice, whichever is later—to protest the CAD's findings. By the end of July, a majority of the protests will be resolved, and values will be certified, Lankford said.
Effect on taxing entities
Once the values are certified, taxing entities such as the city of Austin or the counties can begin to build their fiscal year 2015 budgets with a specific property tax rate in mind.
Spokesman Kyle Carvell said the city of Austin receives property value assessments early enough to forecast anticipated revenue at a certain tax rate.
"We start with the current or nominal tax rate and figure out what our fixed costs are and how much extra revenue we'd need to cover that," Carvell said. "Council then has discretion to adjust [the tax rate] as they see fit."
The governing boards of taxing entities can adjust their property tax rates annually based on the amount of money needed to fund the next year's budget. When property values increase, applying the prior year's tax rate could levy more money for the taxing entity.
However, entities can opt to lower the tax rate to offset the increase in home values. Travis County may lower its tax rate of $0.4946 per $100 of assessed value for its fiscal year 2015 budget based on assumptions from TCAD and guidelines presented by commissioners March 18, Travis County Budget Director Jessica Rio said.
Cause for increases
The number of Austin-area homes sold in 2013 increased 19 percent compared with 2012, and the median selling price for single-family homes increased 9 percent during that time, according to the Austin Board of Realtors. The total value of single-family properties sold in the area rose 28 percent in 2013 compared with 2012 to more than $7.9 billion, according to ABoR data.
"In a balanced market, there's typically six months of [housing] inventory. We are at two months of inventory, which makes it a seller's market," Lankford said. "So with a high demand of people coming in wanting to buy homes and a very low inventory of homes, you are seeing large increases in value associated with that. [The CAD's values] are a direct reflection of what happens in the marketplace. We are monitoring the sales transactions that occur within the county and moving our values in accordance with those sales."
Steady population and job growth in the Austin area led to an increased need for housing, appraisers said. In 2013 the area's unemployment rate held at about 5 percent as Austin added 27,200 jobs, Crigler said.
In addition to single-family residential property value gains, the apartment sector remained exceptionally strong with vacancy at 4.4 percent, she said. According to TCAD, the total value of existing apartment properties increased 15 percent, or by about $2.1 billion, from Jan. 1, 2013, to Jan. 1, 2014.
"The residential and the apartment markets are the two strongest that we see, but all [real estate] areas have strong growth," Crigler said.
Charles Heimsath, president of real estate research firm Capitol Market Research, said property appraisals and rental markets have a cyclical relationship. He said it is too early to tell how this year's increase in property values will affect rental rates, but historically appraisal districts have reflected increased rates on rental properties in residential tax appraisals. Owners often will pass on tax appraisal increases to renters, he added.
"From a tenant's perspective, there will be very few areas of town where ... you might see a little bit of relief," Heimsath said. "Otherwise, as a general rule, I think everybody can expect to see [rental] rates go up."
Regulation and protests
Appraisal districts use a mass-appraisal system that adjusts neighborhood values based on sales, depreciation, land value and other factors to calculate two figures for each property in its jurisdiction.
A market value is the price at which a property would sell under prevailing market conditions on Jan. 1, when values are tabulated. The taxable value is the total market value minus any exemptions, such as those offered for homeowners, property owners age 65 and older, and disabled persons.
For properties with a homestead exemption—or exemptions that are filed as the owner's primary residence—the taxable value generally cannot increase more than 10 percent each year, TCAD Deputy Chief Appraiser Paul Snyder said.
"If it's a homestead, then the assessed value or taxable value is capped at a 10 percent increase unless there was a new value [added] like a pool or an addition to the house," Snyder said.
TCAD received 78,000 property appraisal protests in 2013 and expects a comparable number this year, Snyder said. Protesters could be scheduled for an informal or a formal hearing to explain why their property's value should be readjusted, Snyder said.
"We encourage everybody to come to their informal [hearing] to talk about whatever issues they may have with our appraisal. The vast majority of protests are solved informally," he said. "If we are unable to resolve the issues ... [property owners] will be scheduled for a formal hearing to come in and talk to three independent taxpayers from Travis County who will make a decision based on the evidence from both sides."
Additional reporting by Amy Denney, Joe Olivieri and Lyndsey Taylor