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Bastrop land values fall after Fire

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Bastrop’s land values decimated

‘Vulture investors’ on the hunt for fire sales

Premium content from Austin Business Journal by Cody Lyon, ABJ Staff

Date: Friday, September 23, 2011, 5:00am CDT

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Banking & Financial ServicesCommercial Real EstateResidential Real Estate

The wildfires that destroyed most of Bastrop County could drop property values by as much as 60 percent, one firm estimates. Land is already starting to trade hands and more transactions are expected as the smoke clears.
Nick Simonite

The wildfires that destroyed most of Bastrop County could drop property values by as much as 60 percent, one firm estimates. Land is already starting to trade hands and more transactions are expected as the smoke clears.

Bastrop County land values could be cut in half as the real estate market faces dramatic ups and downs resulting from the wildfires that scorched almost 35,000 acres.

Dramatic value dips would be problematic for many landowners, but they could yield opportunities for investors looking to employ a patient buy-hold strategy while this patch of Texas recovers.

“We’re confident there will be some devaluation in the acreage charred by the fires,” said Cameron Boone, director of research at Lewis Realty Advisors Inc. Lewis Realty estimates the value of land directly impacted by wildfires could drop by up to 60 percent.

This might open the door for what some call vulture investors, who swoop in and offer pennies on the dollar for damaged properties, Boone said.

Bastrop County will reappraise land values of affected properties soon, said Mark Boehnke, the Bastrop Central Appraisal District’s chief appraiser. He said the discounted tax bills would last for a quarter of the year, ending Jan. 1.

About 82 percent of the land that was burned is forested, according to the Texas Forest Service.

“If you include low-density housing areas that have trees, the percentage would creep up to 88 percent,” said Holly Huffman, spokeswoman at The Texas Forest Service.

The pine trees in Bastrop County — Loblolly trees — were a major contributor to land values. They’re the westernmost Loblollies in the United States, Texas Forest Service foresterDaniel Lewis said.

Experts are confident the trees will recover relatively soon.

“Pine trees generally thrive in fire-prone environments,” said Professor Charles LaFon, an associate professor in Texas A&M University’s geography department and a member of the Association for Fire Ecology. Pine seedlings usually establish soon after a fire, so he expects a “rapid recovery.”

Living or working in the shade of the big pines has been part of Bastrop County’s draw, along with its proximity to Austin.

“Trees add value to the land. That’s why there will be an impact on many of Bastrop County’s values,” said Charles Gilliland, rural land specialist at The Real Estate Center at Texas A&M University.

Still, until there is a market reading on what people are paying, “you’re just going to be speculating on what the impact is going to be,” he said.

Phones at some real estate brokerages have gone temporarily silent.

“The phone hasn’t been ringing for any of my listings,” said Brady Moore, broker at Big League Ranches LLC. None of the small ranches he was marketing in Bastrop were burned by the wildfires. He said those who might be looking to sell would probably not be able to do so quickly.

On the other hand, Moore said, “Bastrop County just shrunk by around 35,000 acres.”

Once some sense of normalcy returns to the area, demand may actually increase for Bastrop properties. Some are already seeing it.

“Based on the economics of supply and demand, I would predict that decreased supply and increased demand would result in higher prices. We have already seen increased activity in the area,” said Mishell Kneeland, principal at Moxie Realty Group who has done business in the Bastrop area.

Kneeland said 35 new Bastrop County properties have gone on the market in the last 10 days. Of those, seven are already under contract.

It might be difficult to predict whether property in Bastrop County will lose significant value, said Kenneth Klein, an associate professor at California Western School of Law and a Texas native.

“You would think that land values would initially drop,” said Klein, who teaches a class about legal lessons learned from Hurricane Katrina and other natural disasters.

Property values in post-Katrina New Orleans increased, he said.

“The nature of speculative investment is just that — speculative,” he said. “And land values in the wake of the fires are speculative.”

Despite the emotion of losing a home or property, those who were impacted by the fires need to treat dealings with banks, builders and insurers as a business matter, Klein said.

“Go slowly and carefully, and find good resources guidance and be willing to accept help,” he said.

Meanwhile, a few other issues might prove more complicated, he said.

For example, insurance does not cover mortgage debt, which means insurance money to rebuild may be held by the homeowner’s lender.

And for many — about 80 percent of homeowners, Klein estimates — insurance won’t cover the full cost of rebuilding.

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Written by codylyonreporter

January 28, 2012 at 1:26 am

Posted in Uncategorized

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