By Blake Rasmussen

Friday, 02 December 2011

Agents are already seeing effects; market still up over 2010

PFLUGERVILLE — As Pflugerville residents lined up Oct. 18 and Nov. 1 to voice their opinions about the proposed water rate increase to nearly 5,000 Windermere Utility Company customers, many expressed a thinly veiled threat.

How high would your water bill have to be to convince you to move out of your current residence?

Go through with this increase, and we may not stick around.

“I moved to Pflugerville because I love Pflugerville, but quite frankly, if I’m going to be paying $300 for a water bill, I’ll just go stay in the city of Austin,” Windermere customer Ria Garza said at the Oct. 18 hearing.

And even though the increase would affect only a slice of the city, many worried for Pflugerville’s health.

“Asking for the rate increase that we are being presented with will not only prevent people, in my opinion, from moving into Pflugerville, but is making many people consider moving out,” resident Cheryl Mangelsdorf said. “So it will be the death of Pflugerville.”

As the city searches for ways to help, some area real estate agents say they are already seeing the effects of the proposed increase and even more say they expect that if the rates were to go through, the market could face some troubles.

Realtor reactions

John Pfluger, a Pflugerville-based real estate agent, represents a house in the affected area and said the proceedings are giving buyers pause.

“They’re not much interested until something gets worked out.” Pfluger said. “People are shying away from it until they know what’s going on.”

Even if they have not yet seen the effects, most real estate agents interviewed said they expected a market correction if the rates rise.

“Years ago, there were a lot of issues like that in the [municipal utility] districts,” Pflugerville real estate agent Larry English said. “If it gets so high that it’s ridiculously high, it obviously affects the marketability of homes in this area.”

Stuart Sutton, a real estate agent for Re/Max, also said there could be a correction similar to what happened with MUDs, where home prices dropped to compensate for higher costs.

Not only do some realtors worry the increase would affect the buyers market, but several have also expressed concern it could cause people to move away.

Dow Kennedy, a realtor with Re/Max Capital City II, said that the areas affected have owners and tenants that would be hit hardest by the increase. He said it could affect their bottom line.

“I think so. If it’s true that rates are going to double or triple, that could be quite a bit of somebody’s [income],” Kennedy said. “We’re not talking about million-dollar homes … people don’t have that much extra room in their budget to pay for water.”

Kennedy also shared a story about some clients of his who lives in the area but is looking to sell. He said they were already looking to upgrade to another house, but that the impending rate increase added to their resolve.

Kennedy also said that that particular home has not had as much activity as expected.

Home sales up

So far, the home sales market hasn’t quite borne out any dip in sales, though notices about water price increases were only sent out at the end of August.

Home sales in Pflugerville from August through October have actually increased over 2010 levels during that same time period in Pflugerville, including both affected and unaffected areas.

Overall, there were 35 more homes sold in Pflugerville during that period. In fact, home sales were down in the first part of the year, but began to rise in June. In September, there were 23 more homes sold than in the same month in 2010.

The only month that showed a decrease in the second half of the year was October, when the rate increase began to receive some publicity. However, the dip was slight—only by six home sales compared to 2010—and could be the result of any number of factors.

Still, sales throughout the city don’t tell the whole story, since only part of the city is affected.

Home sales in Heatherwilde, Picadilly Ridge, Windermere, Cambridge Heights and Pflugerville Northwest—which represent much of the affected area—were trending up or generally flat over the past year (see graphic on Page 1) across a relatively smaller sample size.

There was a small drop off from yearlong highs in July and August to September and October, but it could be due to seasonal slowing.

In other words, if there is to be any market correction, it hasn’t happened yet.

Still, that doesn’t necessarily allay some agents’ concerns.

“A lot of people are not real aware of it [the water rate increase] as far as purchasing,” said Kelli Roch of Marketplace Real Estate Group. “I think it will be a major impact when people start looking. It’s still new enough that enough people don’t know about it.”

City response

The fact that the water rate increase could slow home sales in affected areas has not escaped the city’s notice.

Pflugerville City Manager Brandon Wade has instructed city staff to look for solutions to the potential problem.

Wade said the city is exploring options such as changing landscaping requirements for commercial properties in the affected area—he said they cannot expect to require businesses to place water-hungry plants in an area with high water costs—or creating special zones for residential funding.

He said city staff have also been examining the possibilities of residential wells, septic systems and city delivery of water, all of which are questions residents have asked for guidance on from the city.

However, Wade said he fears his hands may be tied legally as to what he can do in the area, and many of the solutions may not be financially or physically viable.

“I don’t hold out much hope that any of them offer a possible solution,” Wade said.

However, he said city staff will continue to search for other possibilities and would also continue to fight any rate increase to head the problem off at the pass.

“We certainly hope that this does not affect property values,” Wade said. But, he added, “Hope is one thing; reality is another.”

---