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Bill Morris
RE/MAX Capital City
13018 Research Blvd
Austin, TX 78750

Direct or Text: 512-785-3345
Email:              bmorris@remax.net

Texas Broker License # 505218

Thank you for visiting today. If this is your first visit, please take your time and look around. I have plenty of information and resources available to you. If you are a return visitor, thank you. I will welcome your comments, questions, or suggestions. I would also love to learn about your real estate needs, wants, and objectives, and I will offer my best professional advice and counsel.

My Thoughts on Central Texas Real Estate

Tax appraisals are here! Now what?

If you own real property in Texas, you have probably received your 2017 Notice of Appraised Value.  If you haven’t, it won’t be long.

Question:  What does that Notice tell you?

Answer:  The appraisal district’s estimate of the market value of your property as of January 1, 2017.  If you have exemptions, it will also tell you the taxable value, which will be lower than the appraised value.

So now what?

First, you can just file the Notice, wait for 2017 property tax rates to be decided in October/November, and for the resulting tax bill to be sent.

Or … you can inform the appraisal district that you wish to appeal the new valuation of your property.  You should have received a Notice of Protest form (Texas Comptroller Form 50-132) with your Notice of Appraised Value.  In most situations, you will have until midnight on May 31, 2017 to file your protest, but read the form you received and follow those instructions.

There are a number of valid reasons for a protest, but the most likely for residential properties are (a) you believe the appraised (market) value is incorrect, and/or (b) you believe your property is not valued fairly (equally) with similar properties nearby.  You’ll see those and other possibilities listed on the protest form.

After receiving your Notice of Protest, the appraisal district will respond with a date for your “informal” hearing — a meeting at the appraisal district, possibly with the appraiser who is responsible for property valuations in your neighborhood.  You’ll have an opportunity to explain the reasons for your protest, present supporting data, and to persuade the appraiser to reduce the proposed valuation.  If you are satisfied with the results of that meeting, then you’re done.

If you’re not happy with the outcome of the informal hearing, and wish to continue your protest, then you’ll be scheduled for a “formal” hearing with members of the Appraisal Review Board.  At that hearing you will sworn in and the proceedings will be recorded.  You will again be allowed to present your evidence and your reasons for the protest.  When the ARB renders its decision, it is final, and it supersedes any decision from your informal hearing.  There’s no way back to that decision if it turns out that you prefer it to the outcome of the formal hearing.

But … if you’re determined, there is one more step you can take:  Binding Arbitration.  You won’t be surprised to learn there’s another form involved, .  You must complete the formal and informal hearings, and then submit the Request for Binding Arbitration to the appraisal district, along with a cashiers check or money order for the required deposit.  If the arbitrator decides that the proper valuation of your property is closer to your estimate than to the appraisal district’s estimate, then the deposit will be refunded to you (minus an administrative fee charged by the Texas Comptroller).  If the arbitrator decides in favor of the appraisal district, then the deposit will be used to pay the arbitrator’s fee and the Comptroller’s administrative fee.

As the popular saying goes, taxes are one of very few certainties in life, and there is no way to get away from property taxes for most of us.  There are ways to reduce your property tax burden, though.  Your individual circumstances should determine whether you will invest the time and effort to pursue a protest.  I’ll comment on property tax exemptions in another post.

More on the Outlook for 2017

In “2017 Outlook” I provided links to several viewpoints on the Texas and Austin-area economy and housing market.  As I mentioned at the end of that post, last week I attended a presentation by Mark Sprague (Director of Information Capital, Independence Title) to hear his projections.

An important theme of the presentation was “disruptive change,” in the real estate business and throughout our culture and economy.  Last November’s presidential election has obviously influenced much in the months since, but rapid technological changes, international political tensions, concerns about the European and Asian economies, worldwide trade, shifts away from traditional retail business models, and changing cultural priorities as millennials take larger roles in all areas of national and international activity all create uncertainties that are largely unprecedented.  These changes and uncertainties call for adaptation by individuals, businesses, and governments.

With that backdrop, Sprague described the U.S. economy as healthy, but not robust, with GDP growth in the 2% to 2.5% range.  He projected that the housing market will strengthen nationally and regionally.  He cautioned that job creation in Austin seems to have slowed somewhat, which could impact demand for housing in Central Texas.  He also commented that rising mortgage interest rates could slow sales growth temporarily, but that after a brief psychological adjustment the law of supply and demand will take hold again.

In Austin’s urban core, prices have been pushed upward quickly in recent years, and Sprague predicts moderation in sales and price appreciation there.  On the other hand, conveniently located homes priced below $350,000 will continue strong appreciation.  As for rentals, he expects apartment prices to continue to rise, and for single family rentals to remain strong.  He noted, however, that apartments don’t generally have the long waiting lists that they have had recently, and that as more apartment units come on the market some are beginning to offer new-tenant incentives again.

As I have written before, Austin’s strong real estate market has been driven by real growth in jobs and population, and comparing median income to median home prices, Sprague indicated that our area remains relatively affordable — essentially on par with Miami and Portland, somewhat less affordable than Dallas and Houston, but much better off than Seattle, Washington, Boston, Los Angeles, and New York City.

Finally, Sprague projected that the Austin economy will remain in expansion mode, albeit a little more cautiously than in the past couple of years.  This positive outlook was shared recently by another important Austin analyst, Eldon Rude:

Expert: 2017 off to strong start for Austin housing market

Both Eldon Rude and Mark Sprague are also quoted in an article today, with a headline that overstates the downside:

Austin-area home sales weaken in February as market cools

My take:  Buckle up.   It’s going to be another busy year for the Central Texas housing industry.

Interest rates going up?

Mortgage interest rates have been very, very low for most of 10 years now.  Rumors have come and gone many times that rates would increase soon, raising concerns among prospective home buyers, and sometimes spurring short flurries of purchases.  With news this week that the Federal Reserve has raised the “Fed Funds Rate,” we’ve already seen articles discussing the potential impact, including the possibility of rising mortgage rates.

While higher mortgage interest rates are almost certainly in our future, the Fed Funds Rate will have little to do with them.  In December 2015 I posted “All the talk about interest rates …” to point out that mortgage rates at that time were about half of the long-term average.  That is still true today, even with some modest increases in recent weeks.  In that post I also demonstrated that mortgage rates have rarely moved in tandem with the Fed Funds Rate, and in fact have sometimes moved in the opposite direction:

Interest Rate Comparisons 1971-2015

We have been spoiled, and younger home buyers have come to think of mortgage interest below 5% as “normal.”  Is it NOT.  As the health of the economy and the housing industry in general improve, there may be upward pressure on mortgage rates, and that is as it should be.

With that in mind, it is worth considering the impact higher interest will have on the “buying power” of prospective homebuyers.  “More about interest rates — what can you buy?,” also in December 2015, included a couple of tables to illustrate that effect, including this one:

Interest Rates and Buying Power

That table shows the price that a buyer qualified for a $1,600 monthly payment (PITI) could buy.  I haven’t heard any forecast yet of rates going above 5%  in the next year, but there are no guarantees.  With that in mind, though, note that this hypothetical home buyer would lose about $18,000 in buying power if his or her qualifying rate moves from 4% to 5% — noticeable, but probably not catastrophic for most.  In that same post, another table shows that the monthly payment for a $250,000 home would increase from $1,559 to $1,678  with the same change in the interest rate.

So, will mortgage rates change?  Yes.

When?  Hard to forecast, but watch the bond market, not the Fed.

Will sellers still sell and buyers still buy?  Yes.  That was true even with rates above 10% in the early 1980s, and it will certainly be true in the still-very low range to be considered in the coming year or two.  The sky is not falling.


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