Williamson County Market Analysis

Changing Market Conditions – Appreciation & Depreciation

Since the required date of appraisal is January 1st, the first step in the yearly revaluation process requires researching market activity prior to the appraisal date to identify any relevant changing market conditions that took place. Adjustments for changing market conditions are made by appraisers when data exhibits sale prices were increasing or decreasing after transaction dates. Sales collected throughout the twelve months prior to the appraisal date are used to identify appreciation or depreciation that the market experienced. If statistics identify that changes were evident, time trend factors are extracted for application to the sales prior to the valuation process. Those calculated time trend factors are used during valuation to adjust the sales which took place prior to the appraisal date to make them relative to the market conditions of January 1st.  
One way to measure and extract market change is to compare collected sales to 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 identify and measure any changing market conditions across time. From that analysis, time trend factors are calculated and applied to sales prices 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 (inverse ratio) close to 1.0.  In an appreciating market, the inverse ratios increase above 1.0 as time progresses and sales take place after the last appraisal date. Conversely, inverse ratios decline over time below 1.0 if the market was going down 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 first graph showing county-wide inverse ratio plots for 2020 which was used to develop time trend factors for the 2021 valuation year. As time progressed from the 2020 reappraisal date, market appreciation was taking place at an even pace and resulting in inverse ratios around 1.20 at the end of the best-fit line in the first graph. This meant that sales in Williamson County, on average, trended upward from January 2020 to January 2021 by about 20%.
The moderate and linear appreciation trends from prior years drastically changed from January 2021 to January 2023. Rapid appreciation of approximately 40%, illustrated in the second graph, took place in the first five months of 2021, followed by a slight levelling, and then continued growth in the last two months of the year. The third graph shows another non-liner pattern followed in 2022, with the appreciation from the end of 2021 extending for about 6 months until a downward trend took place and extended to the end of the year. Due to the market conditions analysis data reflecting appreciation and depreciation trends other than typical past linear patterns, and the changes were occurring so rapidly over time, polynomial and smoothing parametric functions were used to model and calculate the time trend factors on a per day basis for the 2022 and 2023 appraised values.
The fourth graph shows the sales data analyzed from 2023 and used to model and calculate the sales trend factors for the 2024 residential valuations. The data points illustrate a pattern of more stability and gradual change than the past two years prior. The polynomial best fit trendline represents a gradual appreciation until about the middle of the year followed by a downward turn that continued until the end of 2023. Although the rates of change are significantly lower than past years, development of a per day basis of the resulting time trend factors was used again for the 2024 residential appraised values.
When further breaking the county-wide data down to specific defined market areas that are used for valuation, the market trends that took place during 2023 do follow the same general pattern, however the fifth graph shows varied rates of change, and the time they occurred during the year. Additionally, one market area experienced a downward linear trend across the entire year. This is a good illustration of how various market areas or property types trend differently and why WCAD differentiates the analysis to more specific areas rather than just applying a global county-wide time trend factor to all sales. This approach results in more market-specific data in the valuation process and thus more accuracy in the appraisals. 

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.