Williamson County Market Analysis
Changing Market Conditions – Appreciation
Since the required date of appraisal is January 1st, the first step in the yearly revaluation process is to research and extract adjustments to account for changes that took place in the market prior to the appraisal date. Adjustments for market conditions are made when sale prices indicate property values have increased or decreased following the various transaction dates, and sales data collected throughout the twelve months leading up to the appraisal date are used to identify appreciation or depreciation that the market has experienced. Those calculated market adjustments are used in the valuation process to make the sales which took place prior to the appraisal date relative to the market conditions of January 1st.
One way to measure and extract market changes is to compare the available sales collected to the appraised values from the prior January 1st so there is a base date in time to begin the analysis. In this process, the ratios of the sale prices to the last appraisal values can be analyzed to measure the changing market conditions and calculate adjustments to apply to the sales to make them relative to the next appraisal date.
Sales taking place soon after the last appraisal date would typically have a sale to appraisal ratio (inverted ratio) close to 1.0. In an appreciating market, the inverted ratios will increase above 1.0 as time progresses and sales take place after the last appraisal date. Conversely, the inverted ratios would decline below 1.0 if the market was declining following the prior reappraisal.
These trends are often a steady pattern which can be easily seen when plotting a linear best-fit line through the data points. This is evident in the graphs showing county-wide inverse ratio plots for 2019 and 2020.
As time progressed from the 2019 and 2020 reappraisal dates, market appreciation was taking place and producing inverse ratios around 1.07 and 1.20 respectively at the end of the best-fit lines.
The county-wide data and resulting best-fit line for 2021 is markedly different and illustrates a much higher rate of market appreciation following the January 1, 2021, appraisals.
The pattern of rapid appreciation over time during 2021 is better illustrated by a polynomial best-fit line.
When further breaking the county-wide data down to specific defined market areas, the pattern of rapid appreciation over time during 2021 is more evident and illustrated by applying non-linear best fit lines to identify the patterns.
The remarkable change in the local housing market appreciation from a consistent pattern in past years required a new approach and calculations to best represent the different appreciation rates that took place during 2021 so sale prices could be adjusted to the January 1, 2022 appraisal date.
Residential Valuation Approach
The sales comparison approach is the valuation model utilized in the yearly reappraisal of most residential property in Williamson County. Of the three approaches to value, cost, income, and sales comparison, it is often applied in the valuation of residential property and usually introduced to property owners through the purchasing or refinancing process of their homes.
The process is used to determine the market value of a house on a specific date by initially selecting sales of comparable properties with similar characteristics to the subject property. The next step is to make adjustments to the comparable property sales prices to account for any uncommon financing and changes that took place in market conditions between the dates of the sales and the proposed appraisal date. After that, additional adjustments are made to the time adjusted sales prices to balance any physical or location differences that exist between the subject property and selected comparable property sales. Finally, a single value is reconciled from the adjusted comparable sales prices to establish a market value on the given appraisal date.
The subject property, comparable property sales, adjustments, and final estimate of value are commonly arranged in what is referred to as a sales comparison grid.
Residential property owners who have a home valued by the sales comparison approach will receive a sales comparison grid along with the mailed notice of value. The indicated Total Market Value on the first page of the notice is also the final Indicated Value on the sales comparison grid. This valuation process and inclusion of the sales comparison grid with the notice of value, which was implemented by WCAD in 2021, provides a new level of transparency to property owners. Many property owners now have the ability to see the sales and process used in the property valuation and can make an informed decision of their opinion of value based on that evidence prior to considering whether to file a protest. The sales comparison grid provided with the initial notice of value and other supporting market analysis data will be used in discussions with appraisers and property owners in informal meetings and formal hearings initiated by protests.
Most residential properties were valued with the sales comparison approach, however, those that did not receive a sales comparison grid were valued using a modifier based on all sales in their market area.