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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

Market Dashboard – Austin area update

It has been another very busy year in Austin-area real estate, and I haven’t made time for months to write about the market environment and outlook.  This is the first of a few posts I hope to add over the next couple of weeks.

If you have followed my blog over the past several years, you know that I maintain a high-level “market dashboard,” to keep me in touch with broad market trends and to provide a larger context as I discuss with my clients the specific dynamics of the neighborhoods where they wish to sell or buy homes.  With that background, I am pleased to report that our residential market continues to move quickly.

One metric that will help to differentiate the current market cycle from those of the past is the “odds of selling” – i.e., the percentage of active listings that sell each month.  Here’s a look at that measure over the past 28 years:

Note that the long-term average since January 1990 has been 25% of active listings selling each month.  Notice, too, that that average has been affected dramatically by activity over the past six years.  For most of the other 22 years shown on that chart, the “odds of selling” were significantly lower – frequently below 20%!  I find this metric interesting, but a more complete look at supply and demand is important.

One of the best views of market vitality is shown in this Market Activity chart:

Market economists generally consider  6 to 6 ½ months of listing inventory to represent a “balanced” market, in which neither sellers nor buyers are generally favored by market conditions.  There are enough homes on the market that buyers have alternatives, and enough buyers in the market that sellers can be choosy.  Lower inventory levels tend to favor sellers and limit buyers’ choices, and the lower the inventory the more noticeable that market bias becomes.

Follow the dotted green line on the chart:  We were down to about 2 months’ supply during the early part of 2000 (and, referring back to the first chart above, 50% or more of active listings sold in a few months during that same time).  Inventory then climbed to near 7 ½ months’ supply in mid-2003 as we worked out of the market downturn resulting from the dot-com bust in 2001, then the 9/11 attack and the accounting scandals at Enron, Worldcom, Tyco, and others.  (And the odds of selling dropped to below 20%.)

That market cycle was near its low from mid-2002 to early 2003, and the subsequent, fairly normal cycle lasted until the mortgage meltdown in 2007-2008.  The Austin-area market weathered that storm much better than many other metro areas, and our recovery became noticeable in 2011, and very obvious in 2012.  Note that that market bottom was longer and more chaotic than those before – discussion for another day.  The most important feature of the current market cycle is that listing inventory has been at or below 3 months’ supply for virtually all of the past 5 years (and that the “odds of selling” have averaged about 40% for that period).  This has been the longest-lasting “seller’s market” on record, at least for this area.

Throughout this long-term view, residential sale prices have fared well:

You can see that with a few months’ lag behind market lows, prices sagged below the long-term trend.  You can also see that strong market times have lifted prices above that trend line – most noticeably since the beginning of 2015.

Demographic estimates still project strong job creation and population growth in and around the Austin metropolitan area in coming years.  Home builders have gained some ground in new starts, but resale inventory remains constrained.  That complicates moves for prospective home sellers who want to stay in the Austin area and keeps some from even entering the market, further limiting the availability of housing to support in-migration.  It seems clear that that market environment will continue into 2018 (and longer?).

Obsolete land use policy, high permitting costs, and complicated processes in the city of Austin continue to exacerbate the housing supply vs. demand problem and to make housing in the city less affordable for many newcomers.  At some point that issue itself may slow growth but in the meantime many (most?) new Austinites will be forced to the suburbs and beyond, so we can expect more sprawl for the foreseeable future, along with continued price appreciation throughout the area.

We may be seeing signs of this market cycle maturing, but short of a very significant economic event population growth and demand for housing show no signs of a real downturn.  I’ll write more on that separately.  For now, I’ll close by saying we can expect “more of the same” at least over the next six to twelve months, and probably longer.


What’s Up with Austin Home Prices?

It’s no surprise that home prices have been going up in the Austin area, especially during the past 5 years.  It’s also no surprise that the trend is more pronounced the closer you get to Central Austin.  Here is a look at sales and median sale prices over the past 10 years:

And for comparison, here is the same view of the Urban Core — the area in Austin bounded by US 183 north and east, Hwy 71/Ben White Blvd on the south, and Loop 360 to the west:

Demand patterns for all five of those views are very similar, with unit sales moving very much in parallel.  (The dip in 2017 sales is almost entirely because this data only includes 9 months’ activity.)  The noticeable difference from chart to chart is the median sale price.

Although we tend to use median prices for market comparisons, this look at average prices is especially interesting:

Notice that there is a significant difference between average and median prices in each of the charted market areas.  That indicates that the half of sales above the median range MUCH higher, and the half below the median are relatively near the median.

It’s also worth noting that all of the charts above use MLS data that includes sales of houses, condominiums, and townhouses.  Instead, consider what has happened to the prices of single family homes in Austin’s urban core:

Compared to prices in the San Francisco Bay area or New York City, $600,000 doesn’t seem especially shocking, but depending on financing, a purchase at that level will require twice the median income for the entire metro area, or more.

Land development policies in Austin make it very difficult to build anything but single family homes on large lots.  There really are only two ways to build more affordable homes — higher density and smaller floorspace per unit.  Austin is working to rewrite its land use code (a 5-year old project named CodeNEXT).  Without real progress in that effort adding “missing middle” housing types is largely out of reach, and “drive ’til you qualify” will remain especially relevant for prospective home buyers in the Austin area.

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.

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