Homing in on Dallas-Fort Worth’s Luxury Market

Residential real estate experts share their perspectives on the “hottest cycle in 30 years.”

Sales of new homes in North Texas valued at $400,000 or more shot up a whopping 56 percent in 2014. That’s just one of the takeaways from a breakfast briefing D CEO hosted in November at The Warwick Melrose Hotel. The panel discussion featured four leading experts in the luxury realm: Robbie Briggs, president and CEO of Briggs Freeman Sotheby’s International; Kevin Egan, president and COO of American Legend and Belclaire Homes; Erin Mathews, executive VP of Allie Beth Allman & Associates and founding partner of Mathews Nichols Group; and Ted Wilson, principal of Residential Strategies Inc. Here are some highlights:

D CEO: How would you describe the current state of the local luxury market?

ROBBIE BRIGGS: We’re very fortunate to be living in Texas. The luxury market here is very strong. When you have companies like Toyota and others moving into the city, with the great numbers that they have, it has a huge impact on everything. When Toyota made its announcement, 30 other companies also started calling the Dallas Regional Chamber. There is so much activity in North Texas—it’s phenomenal.

ERIN MATHEWS: I know the big talk in the market is about Toyota and the larger companies moving here. But what I’m seeing, and I know many of my colleagues are seeing, are what I call the “quiet moves.” These companies, perhaps family-owned, are coming from California, bringing the father and multiple generations of a family, securing office space and buying multimillion-dollar homes in Highland Park. The thing that makes our market so strong is that it’s not just the big splashy names; it’s the undercurrent of this enormous migration into our market. We’re certainly seeing it at the higher end. And as those people bring their companies, they bring a lot of rank and file. Then they hire when they get here. So it’s just great for our market on a million different levels.

TED WILSON: I’m going to be the nerd of the group. I did my homework last night. Market-wide, in the $1 million-plus category, the average per-square-foot rate is $283 and the average size is 4,858 square feet. In MLS Area 25, the Park Cities market, a shortage of inventory is hurting activity. There, $345 per square foot is the average price, in the $1 million-plus category, and the average size is 4,300 square feet. As for lot prices overall, at the peak of the market we saw lots going for $100 per square foot. It’s well over $125 today, depending on the quality of the lot.

KEVIN EGAN: We primarily build in the northern sector—Frisco, McKinney, Flower Mound, Keller—and have an average sales price of about $450,000. Compared to previous cycles, I think this is probably the hottest cycle I’ve seen in 30 years. We typically sell 40 homes a month. Last month we sold 71. In most cases we probably are limiting sales just because of the challenges of getting those houses built. 

WILSON: New homes priced at $400,000 or more are up 56 percent on a year-over-year basis—that’s how much it has grown. Most builders have migrated into the high-end production market.

“The biggest concern for builders going forward, and for a lot of people in real estate, is the direction of the mortgage rate,” Wilson says.

D CEO: How would you describe the balance between supply and demand?

MATHEWS: In the closer-in markets, which is where I specialize, there is still a lack of inventory. People are wanting new construction or a home that’s like-new. It’s a real race for building sites, particularly in existing neighborhoods like Highland Park, University Park, Greenway Parks, and Bluffview, where the land is pretty finite. That is where the red-hot activity is. … What I’ve noticed, because I help first-time home-buyers and empty-nesters and everything in between, is that they all—I call it the “HGTV generation”-—they think they’ll just come in and everything is going to be perfect and they won’t have to drive a nail. If it’s not new, they want it to be like-new. And anything other than that is, to me, is the most sluggish part of the market.

BRIGGS: Going back a bit to the impact a move like Toyota has on the market, it’s interesting that many of the companies that are relocating here are coming from areas where they do a lot of commuting. So, when you see a corporation like Toyota come in and you see where the headquarters is going, you think they’re all going to move to Frisco. Well, we sold the CEO of Toyota a home in Westlake, the head of the legal department in Uptown, and another gentleman, a ranch. These executives are used to major drives in California or New York. There isn’t a commute in Dallas that equals anything they’ve experienced. So, the relocations affect the entire market.

EGAN: We’d like them to move to Frisco.

BRIGGS: And a bunch of them will.

D CEO: What are the hot spots for new home development?

WISLON: If you take a map of North Texas and draw a line from northeast Tarrant County up to McKinney along State Highway 121, those are what we consider the A-quality markets. Those are the markets that came back the fastest after the downturn and where most of the lot development is taking place. The challenge for developers and builders is that land prices and lot values have really accelerated. In Frisco, just in the last four years, lot prices have doubled. Think about that. Builders are trying to digest these higher prices—and higher construction costs—and pass them on to the consumer. 

EGAN: It’s definitely a challenge. And there are not enough [tradesman] out there. The biggest challenge we’re having is—it’s just difficult to build houses today. We are raising prices at least every month, partly because land costs are going up—our hard costs have gone up 7 to 10 percent over the last year. Our average sales prices has gone up probably 10 percent to 15 percent, year over year. What’s interesting is, as we continue to raise prices, people are still jumping in and buying. They’re seeing the instant equity that’s being built as we’re building their house! That’s the nice part.

WILSON: The biggest concern for North Texas homebuilders going forward, and for a lot of people in real estate, is the direction of the mortgage rate. The Fed came out and basically said they’re going to keep rates low for the foreseeable future. A lot of people are trying to figure out that “Fed speak.” Does it mean mid-2015 and the rates go up, and if so, how much? It’s not as big of an issue for the luxury market as it is for the mid-management types who are coming here. For the relo buyers coming to DFW, housing is cheap, compared to California. This is more of a concern for the move-up buyers in this market. That, along with the challenges with Dodd-Frank and all of the new qualification requirements, has extremely limited the first-time buyer market. So, a lot of builders are focused on the move-up, because that’s where the opportunities have been. Going forward, with the gap we’re seeing in land and lot prices, there’s a lot of consternation about the direction of the future of the housing market.

BRIGGS: One of the things I wanted to bring up, if it’s alright, we had Phil Puckett with CBRE come and speak to our office a couple of weeks ago. One of the things he said is that Dallas is now one of the nine top cities in the world for real estate investment. … You do not have to go to California. You do not have to go to New York. In fact, with our tax structures and business climate—everything is better here in Texas.

WILSON: I’m always surprised by how many people don’t know these facts, but everyone here should know this: The population for Dallas-Fort Worth is 6.8 million people. We are the fourth-largest metropolitan area in the United States. Our job growth is over 100,000 net people per year. Since the downturn, our workforce has expanded by 13 percent. Those are stunning facts. There’s no place else in the country that can top that.

MATHEWS: We also have a very diversified base of companies. It’s not just an oil and gas world. I think outside of Texas, that’s what so many people think of us. Having been fortunate to have represented so many people who are new to Dallas, I can tell you that there are industries out there that I didn’t even know existed. … People coming here—from New York or California, particularly—are shocked every time. The expectation is that Dallas is just a bunch of rubes. They’re surprised at the level of sophistication and diversity here. I think it says a lot about our culture and the city that we live in.

WILSON: The relocation business is way up today on the new-home side. Twenty-three percent of the new homes sold today are to relo buyers. In the last cycle, we peaked out at about 17 percent. So that’s how important all of these companies coming to Dallas-Fort Worth are to this market.  

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