How Missing the Bubble Hurt Dallas Real Estate
Sure, our home prices didn’t collapse like they did in other parts of the country. But that’s not necessarily a good thing.
THE PARK CITIES
For now, the rich do not get richer.
Real estate agent Burton Rhodes (above) says you can get a “pretty nice” property for a steal these days: a mere $700,000.photography by Scott Womack
THE OVERVIEW: When it comes to shrimp, “jumbo” is good. When it comes to housing, “jumbo” is not. The Park Cities experienced some of the greatest price appreciation in the Dallas area during the past decade. But, ever since the housing bust changed the way banks give out loans (They now actually require loan applicants to have a source of income and a down payment!), sales of high-priced homes have been slipping. That’s because to get a loan above $417,000, you typically have to get a jumbo loan, which carries a mortgage rate that’s often a full percentage higher than the prevailing rate. Combine higher rates with portfolios in decline, thanks to a stock market that’s in the tank and businesses that are cutting back or going under, and you have a toxic cocktail for pricey property. Maybe that’s why average home prices in the Park Cities fell from well above $1 million for most of 2008 and 2009 to $779,000 in January of this year, and average prices have hit $257 a square foot, down from $410 in November 2008, when the national economy began its free fall.
THE REAL ESTATE AGENT’S VIEW: “There used to be a time where you might get a total piece of junk for a million bucks in the Park Cities,” says Burton Rhodes of Dave Perry-Miller Realtors (The Rhodes Group), who specializes in Highland Park properties. “Now we’re seeing pretty nice properties even in the 700s. The encouraging thing is, people outside the Park Cities are now trying to capitalize on how low the prices are. And they may be able to capitalize on the gains moving forward by buying at these lower prices.”
A QUIETER NEIGHBORHOOD: Jumbo turns out to be a good thing for people who don’t like bulldozers knocking down their neighbors’ homes. New construction—teardowns and building on vacant lots—in the Park Cities is off, Rhodes says, because banks now require builders to put as much as 30 percent down before work begins. “We’ve seen lot prices pull back from $1.2 million between Preston and Hillcrest to $1 million and below,” Rhodes says. “But even with that, we’re not seeing a lot of housing starts. It’s just too risky for the builders right now.”
IN THE CITY
Cascading prices north and west. A stable east.
THE OVERVIEW: North Dallas, Northwest Dallas, and Oak Lawn have all suffered from the same factors causing sluggish sales and diving prices in the Park Cities: the tough economy and jumbo loans that punish buyers of high-priced properties. In the more moderately priced neighborhoods to the east and to the south, there’s an entirely different story. Median prices in Northeast Dallas were actually higher at the end of 2009 than they were at the end of 2007. And the area began 2010 with one of the highest listings-to-closings ratios in the entire Dallas area. Historically low inventories combined with a plethora of buyers qualifying for the extended federal housing tax credit are likely factors driving purchases both in the northeast quadrant of the city and in the M Streets and Lakewood.
THE REAL ESTATE AGENT’S VIEW: “So what if our home values have decreased by 2 percent?” says Jeff Duffey of Jeff Duffey & Associates. “We are positioned really well for a rebound.” Duffey thinks that is particularly true in the neighborhoods within the city limits of Dallas, where he specializes. “I think your investment is going to be safer in an established area. If a developer wants to go buy 100 acres, they can usually go 5 miles up the road from any suburb and find it, and you’ll have to compete with new homes. In Plano and McKinney, they are still building—and those are very old cities. In Dallas, south of LBJ, there aren’t the new homes except for teardowns. That makes the investment a little bit safer.”
SELL ONLY IF YOU HAVE TO: The number of homes listed for sale all over the north, west, and east of Dallas has declined. One example: the M Streets and Lakewood had 305 active properties listed in January 2010, down from 349 the prior January. Duffey thinks that’s because city sellers are avoiding the market if they can. “Most of the people who are selling are moving because of school reasons or relocation,” he says. “Nobody’s testing the market like they used to.”