The coronavirus pandemic and ensuing economic recession has skyrocketed house values in the Dallas – Fort Worth metroplex through the course of 2020. North Texas median home real estate prices were up 9% for the first nine months of 2020 and 13% for November compared to the prior period. Homeowners can expect the robust 2020 housing market to influence their taxable assessed values, and subsequent property taxes in Texas, when the Texas appraisal districts publish 2021 values in April.
Although housing activity usually declines during the last quarter of any year, in 2020 year over year sales in North Texas for October and November were up over 20% compared to the prior period. Low mortgage rates are the primary driver of increased sales, as lower rates expand homebuyer’s budgets, and the COVID-19 pandemic has encouraged people to get into larger living quarters for the longer term.
Current mortgage rates are at record lows, “an all time low of 2.81% in the week ending Oct, 15,” as the Fed continues to support the real estate market as we work our way out of an economic recession. Decreased mortgage rates allow buyers to spend less on monthly interest payments, expanding their budgets on the home value they can afford. Affordability in the US housing market improves with low rates, so buyers are less concerned about taking on increased debt.
The flood of buyers into the housing market was unexpected following the onset of the pandemic. The expectation was another economic recession would bring lower home values and decrease buyer interest, however the opposite has come to fruition. Individuals who remained employed through the pandemic often transitioned to working from home. With more time spent at home, potential homebuyers started shopping for larger homes that could support a lifestyle with home offices and larger outdoor spaces.
Because of COVID-19, construction on new homes has hit some supply chain hiccups as they are having trouble sourcing the raw materials needed to complete homes and hire additional labor to keep up with demand. Homebuilding in the third quarter was up 34% from prior year levels but builders are reporting sales prior to completion due to the unsatisfied demand. As a result, new construction and listings declined and more buyers are chasing less properties.
In the current real estate market, November’s preowned home inventory for sale was down to 10,600 units – a thirty year low -- while sales for the month were 9,400. As recently as August listings were up as high as 25,000 in North Texas. In 2010 listings were above 40,000 in number. North Texas preowned home prices are up over 50% for the past five years.
There appears to be no relief in sight in 2021 for homeowners who are sensitive to higher taxes arising from higher home sales prices. According to James Gaines, chief economist for the Real Estate Center at Texas A&M University, “All indicators say we are going to have a good, strong, solid market. I think for the first six to nine months (of 2021) there will be that momentum effect.”
Will housing prices drop in 2021? “In the D-FW area, Realtor.com predicts that home sales will rise 11.3% in the year ahead. Median home sale prices in the area are forecast to increase 4.4%.”
The date for 2021 Texas taxable valuations by appraisal districts is January 1. Sales for the prior 15 months and the following three months – through March 31 – are used to establish values using current market trends. This means that your taxes in Texas will encompass the entire 2020 real estate trends.
Homeowners, however, have a powerful tool available to help control their property’s taxable valuations. Appraisal districts use Mass Appraisal techniques which evaluate properties in large batches rather than individually. Mass appraisal is only an opinion and estimate of value using systems and logical analysis of data, not separate, individual appraisals.
But the Texas Property Tax Code (Section 23.01) requires individual characteristics that affect a property's market value also be evaluated in determining that property's market value. Thus, the basis for a taxpayer’s protest is that individual characteristics of the property were not sufficiently considered when the districts use mass appraisal techniques. To resist the higher values that are likely to be proposed by the appraisal districts in April an owner or agent must be able to demonstrate how those characteristics differentiate the owner’s property from the contemporary market of homes being sold.
Property Tax Protest has been building protest cases effectively for its’ clients since 1998. We will help mitigate your risk to the rising housing market by making sure you exhaust all legal avenues to lower your Texas property taxable value, saving you money when you need it most.