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Location, Location, Location is the popular refrain. So, let's see. 
If we mine all the land closings in Gillespie County over the last 12 years, per section, and identify the median sale price of each sample, we can compare those median sale prices and see how much location matters.

Here are pictures of data pulls showing red closing dots from four sections, with samples pulled in a five mile geo-circle radius in each instance.

Southwest Gillespie: Median Sale Price: $249,375



Going counter clockwise, the market value declines -14.937%
Southeast Gillespie County: Median Sale Price $212,127



Continuing counter clockwise, the market value increases +17.85% to the Wine Road 290 Corridor.
Northeast Gillespie County: Median Sale Price $250,000


Continuing counter clockwise, the market value decreases -12.8%
Northwest Gillespie County: Median Sale Price $218,000


So, the data clearly supports the principle that location matters, and it's important to have the data to price your property, make an offer or confirm a contract price.

The general feeling among Fredericksburg real estate investors is that real estate values never decline here, especially short term rental (STR) values.

That was until a couple years ago, when interest rates escalated to bring down the federal inflation rate. With less money available to borrow, real estate buyers lost their enthusiasm.

But even in these glum times, the Fredericksburg charm seems to come shining through.

Data from the Central Hill Country Board of Realtors shows 59 Fredericksburg permitted STR sales in the past 12 months. Median prices dipped over the first six months and then climbed back in the past six. Specifically, twelve to seven months ago, the median STR sale in Fredericksburg declined -8.016% from $617,500 to $568,000. However, in the last six months a rebound from the $568,000 median sale to a $679,000 median sale price occurred -- a 19.54% increase. 

Things went down... but then they went back up... AND slightly higher than before.

So, the bright side for investors is that there has been a slight increase in the overall past 12 months -- +9.96% or +.83% per month over the last 12 months. The graph above is a little deceiving. The trend line shows a slight overall decline. The appearance is worse than it is. Outlier highs and outlier lows can make data pictures appear better or worse than reality. It's important to look at the median sale prices over time, and the median sale prices detailed in my explanation above show a rebounding picture.

So, your STR has slightly increased in value in 12 months -- not a lot -- but at least it hasn't gone down.

"Energy Efficient Items" is actually a line item on the Sales Comparison Approach grid -- the form generally used by appraisers to perform residential appraisals. "Energy Efficient Items" is down on the list, in the comparison grid, which means it's certainly not prioritized as high as "timing of sale," "location," "site size," etc...; but it IS a factor. One of the significant ways energy can be made more efficient in a house is with the use of better insulation, and spray foam insulation shows superior efficiencies over other insulation options, and that savings should enter the calculations of any would-be buyer trying to decide what a fair house price should be. Likewise, it should enter the calculus of any appraiser who is comparing recent comparables in a market to also reach a market value conclusion.

Savings in Annual Utility Expenses
Energy Efficiency: Spray foam insulation is highly effective at reducing energy consumption due to its excellent sealing properties. It minimizes air leaks more effectively than traditional insulation materials like fiberglass or cellulose. By creating an airtight seal, spray foam insulation reduces the workload on heating and cooling systems, leading to lower energy bills.

Average Savings:
Percentage Reduction: On average, homes with spray foam insulation can save between 20% to 50% on heating and cooling costs annually .
Cost Example: For a typical U.S. household spending about $2,000 annually on energy, this could translate to savings of $400 to $1,000 per year .
Case Studies: Specific case studies have shown substantial savings. For instance, a home in a moderate climate zone that installed spray foam insulation reported a reduction in energy consumption by approximately 30%, leading to significant yearly savings on utility bills .

Increase in Residential Real Estate Market Value
Market Perception: Homes with spray foam insulation are often perceived as more energy-efficient and environmentally friendly, which can be a selling point for eco-conscious buyers. Energy-efficient homes tend to have a higher market value due to lower operational costs and increased comfort.

Return on Investment (ROI):
Enhanced Home Value: Studies and real estate reports indicate that energy-efficient homes, including those with spray foam insulation, can see a market value increase of 2% to 6% .
ROI Calculation: If the average home price is $300,000, this could mean an increase in market value by $6,000 to $18,000. Given the upfront cost of spray foam insulation (which can range from $2,000 to $6,000 for an average-sized home), the investment often pays for itself through both energy savings and increased home value.
Buyer Preference: According to a survey by the National Association of Home Builders (NAHB), energy efficiency is a top priority for homebuyers. Features like spray foam insulation that contribute to energy efficiency can make a property more attractive and potentially lead to quicker sales at higher prices .

References
U.S. Department of Energy: "Insulation: Understanding the Basics". Accessed 2023.
Energy Star: "Benefits of Insulation". Accessed 2023.
Home Energy Magazine: "Savings with Spray Foam Insulation". Issue May/June 2022.
Building Science Corporation: "Case Study: Energy Savings with Spray Foam Insulation". 2021.
Appraisal Institute: "The Impact of Energy Efficient Home Features on Market Value". 2020.
Zillow: "Energy Efficiency and Home Values". 2022.
National Association of Home Builders (NAHB): "What Home Buyers Really Want". 2023.
In summary, spray foam insulation can significantly reduce annual utility expenses through improved energy efficiency and can also enhance the market value of residential properties, making it a worthwhile investment for homeowners.

As the economic landscape continues to shift, one of the most pressing questions on the minds of business leaders, homeowners, and investors is: when will the Federal Reserve begin to lower interest rates? The current high-interest rate environment, designed to curb inflation, has significant implications for various sectors. We turned to three prominent economic experts for their insights on when we might expect a pivot in federal interest rates.

1. Janet Yellen: Mid-2024 Adjustment

Former Federal Reserve Chair and current U.S. Treasury Secretary Janet Yellen suggests that a rate decrease could occur by mid-2024. Yellen's perspective is informed by her deep understanding of monetary policy and its interplay with economic growth and inflation. She emphasizes that while inflation has shown signs of easing, the Federal Reserve remains cautious about declaring victory too soon. Yellen predicts that by mid-2024, if inflation continues on a downward trend and economic growth remains stable, the Fed might consider easing the rates to foster more robust economic expansion. This timeframe, according to Yellen, allows for a careful assessment of the long-term effects of the current rate hikes on the economy.

2. Paul Krugman: Early 2025 is More Realistic

Nobel laureate and renowned economist Paul Krugman offers a more conservative outlook. Krugman believes that the Federal Reserve will likely wait until early 2025 before making any significant rate reductions. His reasoning is rooted in historical patterns and the Fed’s cautious approach to avoid the mistakes of prematurely loosening policy, which could reignite inflation. Krugman points out that while current data on inflation is encouraging, the Fed will want to see a prolonged period of stable prices and a cooling labor market before changing course. According to him, the lessons from past inflationary periods suggest that patience is key to ensuring that inflationary pressures are fully subdued before easing monetary policy.

3. Laurence Kotlikoff: A Gradual Decrease Starting Late 2024

Economist Laurence Kotlikoff, known for his work on fiscal policy and intergenerational economics, provides a nuanced perspective that falls between Yellen’s and Krugman’s predictions. Kotlikoff foresees a gradual decrease in interest rates beginning in late 2024. He argues that the Fed will likely adopt a step-by-step approach to lowering rates to avoid shocking the financial markets and to carefully monitor economic responses. Kotlikoff suggests that the Federal Reserve will start with minor rate cuts, assessing their impact on investment, consumer spending, and overall economic health before committing to more substantial reductions. This strategy, he believes, will help balance the risks of inflation resurgence and economic stagnation.

Balancing Act: Inflation and Economic Growth

All three experts underscore the complexity of the Federal Reserve's task in balancing inflation control with fostering economic growth. The cautious optimism from Yellen, the conservative stance from Krugman, and the gradual approach from Kotlikoff all reflect a shared understanding of the delicate nature of monetary policy adjustments.

While their timelines vary slightly, the consensus is clear: any decision to lower rates will be contingent on a sustained period of economic stability and a definitive decline in inflation. As we navigate through 2024, these expert opinions offer a roadmap for anticipating the Federal Reserve's actions and preparing for the economic shifts that will follow. For now, the best approach for businesses and individuals alike is to remain informed and agile, ready to adapt to the evolving economic conditions.

One might think the decision is made by just one person, but that is not the case.

The Federal Reserve Chairman does announce interest rate changes (or that there will be no changes) eight times a year, so the decision process appears to be just his. One might imagine him alone, in a white-walled sterile office, scouring data and perhaps throwing a dart at a bulletin board wall filled with thumb tacks and yarn connecting newspaper clippings and line graphs.

That idea is far from the truth.

The truth is the chairman, along with the Board of Governors and Federal Open Market Committee (FOMC) members, review extensive economic data and research prepared by Federal Reserve economists. He then writes a proposal, they debate the proposal, vote on it, the majority wins, and the chairman makes the announcement about their decision.

Meeting
During meetings of the chairman and FOMC, the Chairman Jerome H. Powell
 
leads discussions among the committee members, where each member presents their views on the economy and monetary policy. This collaborative discussion allows for a thorough examination of different perspectives and considerations.

Chairman's Proposal to the Group
Based on the discussions and data, the chairman often proposes a course of action regarding interest rates and other monetary policy tools. This proposal reflects the chairman’s assessment of the best policy to achieve the Federal Reserve's dual mandate of maximum employment and stable prices.

Internal Debate
The FOMC members (pictured in order below: Philip N. Jefferson, Michael S. Barr, Michelle W. Bowman, Lisa D. Cook, Adriana D. Kugler and Christopher J. Waller) then deliberate on the chairman’s proposal, offering their support, suggestions, or concerns. This debate is critical in reaching a consensus or majority view on the appropriate policy action.


A Majority Vote Decides the Course of Action
Following the discussions, a formal vote is taken. Each voting member of the FOMC (the Board of Governors and the rotating Reserve Bank presidents) casts their vote on the proposed policy action. The majority vote determines the outcome.

Announcement
After the meeting, the FOMC issues a statement summarizing the policy decision and the rationale behind it. This statement is critical for guiding market expectations and providing transparency.

Press Conference
The chairman holds a press conference to explain the decision, answer questions, and provide additional insights into the FOMC’s economic outlook and policy considerations.

The chairman’s influence is significant due to their leadership role, expertise, and the ability to guide discussions and build consensus. While the chairman does not unilaterally set policy, their views and recommendations carry substantial weight in the decision-making process. Through careful analysis, leadership, and communication, the chairman helps the FOMC navigate complex economic conditions and implement effective monetary policy.

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People consider FHA loans for good reasons:

1. Lower Down Payment: FHA loans typically require a lower down payment compared to conventional loans, making homeownership more accessible for individuals who may not have substantial savings.Credit Flexibility: FHA loans may be available to borrowers with lower credit scores or less extensive credit histories compared to conventional loans. This can be beneficial for first-time homebuyers or those who have had financial setbacks in the past.

2. Fixed Rates: FHA loans offer fixed interest rates, providing stability and predictability in monthly mortgage payments over the life of the loan.

3. Assumable Loans: FHA loans are assumable, meaning that if you sell your home, the buyer may be able to take over your FHA loan, potentially making your property more attractive to buyers.

4. Streamlined Refinancing: FHA offers a streamline refinance option, which can make it easier and more affordable for borrowers to refinance their existing FHA loans, potentially lowering monthly payments or interest rates.

5. Flexible Qualification Criteria: FHA loans have more lenient qualification criteria regarding income and debt-to-income ratios compared to conventional loans, making them accessible to a wider range of borrowers.

Several reasons may disqualify individuals from obtaining FHA loans:

1. Credit Score: While FHA loans generally accept lower credit scores compared to conventional loans, there is still a minimum credit score requirement. If an applicant's credit score falls below this threshold, they may not qualify for an FHA loan.

2. Income Requirements: Borrowers must have a steady income and demonstrate their ability to repay the loan. If an applicant's income is insufficient or unstable, they may not meet FHA loan requirements.

3. Debt-to-Income Ratio: FHA loans have specific debt-to-income ratio (DTI) requirements, which determine the percentage of a borrower's monthly income that goes toward paying debts. If an applicant's DTI exceeds the allowable limit, they may not qualify for an FHA loan.

4. Property Requirements: FHA loans have property standards that must be met, including minimum property condition requirements. If the property does not meet these standards, the loan may not be approved.

5. Previous Foreclosure or Bankruptcy: FHA loan guidelines include waiting periods for borrowers who have experienced foreclosure or bankruptcy. If an applicant has not completed the waiting period, they may not qualify for an FHA loan.

6. Outstanding Federal Debt: Borrowers with outstanding federal debts, such as delinquent taxes or student loans, may be ineligible for FHA loans until these debts are resolved.

7. Mortgage Insurance Issues: FHA loans require mortgage insurance premiums (MIP), which can affect a borrower's eligibility based on their ability to afford these additional costs.

8. Loan Limits: FHA loan limits vary by location and property type. If the loan amount exceeds the FHA's maximum limits for the area, the borrower may not qualify for an FHA loan.

9. Illegal Activities: FHA loan applicants with a history of illegal activities, such as mortgage fraud or identity theft, may be disqualified from obtaining FHA financing.

It's crucial for prospective borrowers to review FHA loan requirements thoroughly and work with a knowledgeable lender to assess their eligibility and explore alternative financing options if needed.

So, you bought a Condo. You outright own the air space between the walls but just a stake in everything else, including the land, along with your neighbors. What could go wrong?

Condos have many benefits, but they have more complex ownership situations than a traditional detached house. Anytime you add more humans to your ownership mix, there is a greater possibility for conflict. The good news is that while condo ownership has fallen off the Humpty Dumpty wall in the past, there are protections in place. In fact, something called the UCA is the law that keeps things in balance.

The Uniform Condominium Act (UCA) was developed by the National Conference of Commissioners on Uniform State Laws (NCCUSL) in response to several issues and challenges that arose in the realm of condominium developments across different states.

1. Rapid Growth of Condominium Developments: During the 1960s and 1970s, there was a significant boom in condominium development across the United States. This rapid growth led to a multitude of legal issues and disputes related to the governance, operation, and management of condominiums. The need for a standardized legal framework to address these challenges became evident.
2. Inconsistent State Laws: Prior to the UCA, state laws governing condominiums varied widely, causing confusion and uncertainty for developers, unit owners, and associations. The lack of uniformity made it difficult for parties involved in condominium projects to navigate the legal landscape, especially when dealing with cross-border issues. The UCA aimed to establish a consistent set of rules and regulations applicable across states.
3. Rights and Responsibilities of Unit Owners: Disputes and conflicts arose regarding the rights and responsibilities of individual unit owners within condominium communities. Issues such as the allocation of common expenses, the use of common areas, and the enforcement of rules and regulations required clarification and standardization. The UCA sought to address these matters and provide a clear framework for resolving disputes.
4. Condominium Association Governance: Problems related to the governance and operation of condominium associations also prompted the need for the UCA. Associations are responsible for managing common areas, collecting assessments, and making decisions that affect unit owners. However, issues such as lack of transparency, inadequate financial management, and conflicts of interest could arise. The UCA aimed to establish guidelines to ensure effective and accountable association governance.
5. Consumer Protection: The UCA was designed to provide a level of protection for purchasers of condominium units. It aimed to ensure that developers adhered to certain disclosure requirements and provided accurate and comprehensive information to potential buyers. This was particularly important to safeguard the interests of purchasers in an environment of rapidly growing condominium developments.

These situations and challenges were key factors that influenced the development and eventual passing of the Uniform Condominium Act, and the UCA is formidable security we have to feel good about condo ownership -- to keeping Humpty on the wall, where the community wants him.

 

Well known PUDs in the Fredericksburg, Kerrville and LLano areas are:

Boot Ranch: a luxury residential and golf community located near Fredericksburg
Comanche Trace: a golf and residential community located in Kerrville
Horseshoe Bay Resort: a large resort community located on the shores of Lake LBJ, near Llano
Escondido: a luxury residential and golf community located near Horseshoe Bay, in Llano County.

A Planned Unit Development (PUD) is a type of real estate development that allows for a combination of different land uses, such as residential, commercial, and recreational, within a single project or subdivision. PUDs are typically developed on large parcels of land and are designed to offer a variety of housing options and amenities to residents.

The history of PUDs in the United States dates back to the 1960s and 1970s, when developers began to explore alternative approaches to traditional suburban development. At the time, there was a growing concern about the negative impacts of sprawl and the need to preserve open space and natural resources. PUDs offered a way to create more sustainable and livable communities by incorporating green space, mixed land uses, and walkability.

In terms of market value, a PUD property typically differs from a non-PUD property of the same size in several ways. First, PUDs often offer a wider range of amenities and services than traditional subdivisions, such as parks, community centers, and shopping centers. These amenities can enhance the quality of life for residents and make the property more desirable, which can increase its value.

Second, PUDs often have more flexible zoning regulations than traditional subdivisions, which allows for greater diversity in housing types and styles. This can attract a wider range of buyers and increase demand for the property, which can also increase its value.

Finally, because PUDs are often developed on larger parcels of land and incorporate a variety of land uses, they can offer more opportunities for developers to increase density and build more units than would be allowed in a traditional subdivision. This can lead to a higher overall value for the property.

Overall, while there is no guarantee that a PUD property will be worth more than a non-PUD property of the same size, the combination of amenities, flexible zoning, and potential for increased density can make PUDs a desirable and valuable option for both developers and homebuyers.

A "catalytic event" or a "catalyzing force" is the term used to describe something that drastically accelerates progress during the process of evolution. It refers to a sudden change or trigger that stimulates a rapid and significant advancement or transformation, much like a catalyst in a chemical reaction.

Are there catalytic events on the appraisal industry horizon? Appears so.

There have been advances in the appraisal industry in the past 10 years, and while some have significantly advanced the industry processes, none arguably rise to the level of a catalytic event:

1. Automated Valuation Models (AVMs): AVMs are computer-generated estimates of a property's value, which can be produced in a matter of minutes. They have increased the efficiency of appraisals and improved their accuracy, as they are based on real-time data on recent sales and market trends. They are often used by appraisal districts for property value assessments, for property tax levies.

2. Geographic Information Systems (GIS): GIS technology allows appraisers to create interactive maps of properties and neighborhoods, giving them a comprehensive understanding of the local real estate market. This technology has made appraisals more accurate and efficient, as appraisers can easily access and analyze data on property values, demographics and market trends.

3. Big Data Analytics: Big data analytics tools allow appraisers to analyze large amounts of data in real-time, which helps them to make more informed decisions about property values. This technology has improved the accuracy of appraisals and has made the appraisal process more efficient by reducing the amount of time and effort required to analyze data.

4. Cloud Computing: Cloud computing technology has allowed appraisers to access their data and software from anywhere, at any time, using any device. This advancement has made the appraisal process more flexible and efficient, as appraisers can work from anywhere, without the need for specialized hardware.

These four innovations have been significant advancements but they haven't changed the game. On the other hand, there are three recent innovations that could catalytically impact the appraisal industry and possibly eliminate the need for many appraisers altogether.

1. Artificial Intelligence (AI): AI technology has the potential to significantly improve the accuracy of appraisals by providing more accurate and up-to-date data on property values and market trends. AI-powered appraisals could also be completed much faster than traditional appraisals. Truly, the bottom line here is the removal of human effort in the writing of the report. What this means is the substitution of flesh and blood appraisers writing reports with artificial-evolving-intelligence taking their places.

2. Virtual Reality (VR) and Augmented Reality (AR): VR and AR technology could be used to create virtual tours of properties. The typical evolution advancement perspective is that this technology allows appraisers to conduct appraisals remotely, without the need for on-site visits. However, this advancement could in reality be a catalytic event as appraisers become the VR gofers, or not even that. The realtor or non-real estate licensed photographer could be the person who uploads the VR data so that the AI can recognize the property materials and conditions to incorporate and correlate with construction handbook costs and accessible market data, then do the  analysis, write a report and email its flawless results to a client.

3. Blockchain: Blockchain technology could be used to create a decentralized database of property records, allowing appraisers (or AI) to access accurate and up-to-date information on property values and ownership. This resource could greatly improve the accuracy and efficiency of appraisals and reduce the risk of fraud. This little advancement could moderately change how multiple listing services operate and store records or it could just replace them in general. How exclusive is the data? That's a good question because realtors have vigorously protected the data in MLS systems for a long time. Owning the information enables the realtors to make exclusive matches, which enables commissions. If the blockchain real estate records is open, it negates realtor power -- which throws real estate agent leverage, in general, into questionable relevance, and that change would qualify as catalytic.

AI working in tandem with blockchain could eliminate the need for realtors and/or appraisers.

Market demand drives change in a capitalistic society, and consumer benefits drive ever expanding innovations, like iPhones, battery powered cars, indeed.com and eharmony.

These three new innovations (AI, VR and Blockchain) are poised to benefit the consumer with faster appraisal production, information transparency and fewer errors. So, they consequently benefit lenders (lenders are the typical appraiser client). Skeptical of the impact? The impact trajectory on appraisers and the appraisal industry will likely be obvious in an evolutionary graph 10 years from now. It's a meteorite in the sky that just hasn't collided with us yet, and our way of life is as normal as it was yesterday, so we're generally, blissfully unalarmed. Don't look up.

An independent appraiser's appraisal process differs from an appraisal district's process in several key ways. An appraisal district is a government entity responsible for determining the value of properties for property tax purposes. An independent appraiser, on the other hand, is hired by an individual or company to provide an appraisal for a variety of purposes, such as loan underwriting, property sales, and estate planning.

An appraisal district's appraisal process is known as a mass appraisal, which is designed to value large numbers of properties quickly and efficiently. Mass appraisals are typically performed once a year and are used to determine the taxable value of properties for property tax purposes. The process of a mass appraisal is as follows:

1. Data Collection: Appraisal districts gather data on all properties within their jurisdiction, including information on location, size, age, and condition. This data is collected through physical inspections, public records, and sales data.

2. Model Development: The appraisal district uses the collected data to develop a model that predicts the value of each property. This model is based on the sales price of similar properties, the cost to replace the property, and the income generated by the property.

3. Property Valuation: The model is then applied to each property in the appraisal district, resulting in an estimated value for each property.

4. Review and Adjustment: Appraisal districts then review the estimated values and make any necessary adjustments based on any discrepancies between the estimated value and the actual value of the property.

5. Notification: The appraisal district then notifies property owners of their estimated value, which becomes the taxable value for property tax purposes.

In contrast, an independent appraiser's appraisal process is more individualized and tailored to the specific property and purpose of the appraisal. An independent appraiser will conduct a thorough examination of the property, including a physical inspection, research of public records and sales data, and an analysis of the property's unique characteristics and condition. The appraiser will then use this information to determine the property's value, which may be based on the sales price of similar properties, the cost to replace the property, and the income generated by the property.

In summary, an appraisal district's appraisal process is a mass appraisal designed for speed and efficiency, while an independent appraiser's appraisal process is more individualized and tailored to the specific property and purpose of the appraisal.