High demand and low inventory mean house prices are rising, property tax rates could follow
Most homeowners in Williamson and Travis counties will find their property value increased in 2013, according to data released by the counties' central appraisal districts in April.
Low home inventory and high demand caused Williamson County residential market values to rise an average of 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 Round Rock rose from $185,656 in 2013 to $205,959 in 2014. In Hutto the average home's market value increased from $131,265 to $150,670.
Market value is what a home would likely sell for if put up for sale. The taxable value is how much of the market value an appraisal district determines is fair when calculating a homeowner's property tax.
Residents living in Round Rock's numerous municipal utility districts such as Brushy Creek and Fern Bluff saw similar increases year over year. The MUDs, which provide utility services to residential developments outside of Round Rock's city limits and taxing jurisdiction, cover most of the heavily populated areas of unincorporated Round Rock.
The average home's market value in the MUDs rose from $242,352 in 2013 to $273,693 in 2014, according to the Williamson Central Appraisal District. Some MUDs were excluded from calculations as they are too new to have data for 2013 or too small to affect the area MUDs' overall average home prices.
In Travis County, average residential property market values rose 12.6 percent, and the average taxable value rose 7.9 percent. Marya Crigler, chief appraiser with the Travis Central Appraisal District, said the trend was prompted by construction, growth in the apartment sector and a strong residential market.
The average home's market values in Pflugerville rose from $159,223 to $174,758 between 2013 and 2014. In the portion of Round Rock located in Travis County, the average home market value rose from $146,333 to $150,923.
Property owners in Travis and Williamson counties had until June 2—or up to 30 days after they received 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 confirmed, Lankford said.
Cities' stances
Once the values are confirmed, taxing entities such as cities can begin to build their fiscal year 2015 budgets with a specific property tax rate in mind.
The governing boards of taxing entities can adjust their property tax rates annually based on the amount of money needed to fund the next fiscal year's budget. When property values increase, applying the prior fiscal year's tax rate would levy more money for the taxing entity. However, entities can opt to lower the tax rate to offset rising home values.
Officials from Round Rock, Pflugerville and Hutto all said, however, that it is too soon in the budget-making process to decide how the cities will react.
"At this point we haven't discussed [next steps] with the City Council," Hutto City Manager Karen Daly said. "Our budget process started internally in May, and we won't take anything to the council until [late] June."
Pflugerville City Council, which has reduced the city's portion of the property tax rate for 10 consecutive years, will need to wait and see whether this year will be different, Pflugerville Assistant City Manager Lauri Gillam said in a statement.
Round Rock Finance Director Cheryl Delaney also said it is too soon to know what approach Round Rock will take.
"Our [property] tax rate is one of the lowest in the area, and we rely heavily on sales tax," Delaney said, adding that the city's share of the property tax cannot be reduced much more before it would affect Round Rock's bottom line.
The sales tax in Round Rock is 8.25 percent. Two percent of that goes to the city, and a quarter of the city's share is used to keep property taxes down, Delaney said Round Rock's city manager will propose a new 2015 budget to council by Oct. 1, the day the city's 2015 fiscal year begins.
Cause for value 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, according to the Austin Board of Realtors. The total value of single-family homes 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."
Steady population and job growth in the Austin area have also 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.
Cindy Crawford, a Round Rock–based real estate agent with Keller Williams Realty, said the housing market in the northern suburbs is especially strong.
"Texas has been known for rapid home price increases. However, this year has been very different," Crawford said. "There's six offers on every property and they're pretty much all going for over list."
Regulation and protests
The TCAD and WCAD 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 market conditions on Jan. 1. The taxable value is the total market value minus any exemptions, such as those offered for homeowners or property owners age 65 or older.
For properties with a homestead exemption, or those 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 are scheduled for an informal and a formal hearing to explain why their property's value should be readjusted, Snyder said.
"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."
