WHY THE DALLAS HOUSING MARKET IS GOING BONKERS

Beneath the apparent chaos, some basic laws of economics.

Making it in Dallas means a Rolex watch, a Mercedes, and a house in the Park Cities. Now it’s possible to get a Rolex on time, and janitors have been known to drive Mercedes-Benzes, but a house in the Park Cities – well, you don’t just rush out and buy one of those. You bid on it, as if it were a ticket to the Texas-OU football game. The asking price may be outrageous, but if you want to be part of the action you pay.

For example, a “cozy little cottage” on an 80-by- 135-foot lot off of Mockingbird in Highland Park would have brought $40,000 in 1968. A few weeks ago an investor bought the property for $115,000, on condition that the housebe torn down before he took ownership. In the jargon of the profession, the house was “underbuilt” for its location. It embarrassed the lot, and probably the neighbors as well. The investor plans to sell the lot to a builder for $162,000, making a quick 47-percent profit. Not to be outdone, the builder will then put up a house to sell for around $250,000.

Highland Park has the most rapid inflation in housing costs in Dallas – between 18 and 25 percent a year, depending on whom you talk to. But in nearly every part of the city, housing prices have doubled, in some cases tripled, over the last decade. People shake their heads and mutter “outrage” and “bonkers.” Yet beneath the apparent chaos some very basic laws of economics are operating.



Inflation



Dallas is currently being affected by a nationwide inflationary spiral that has dealt a double blow to the housing industry: The cost of houses has increased, and so has the cost of loans (i.e. interest rates). Investors, realtors, and others close to the industry predict that there will be no decrease in the current 9 7/8-percent interest rates until well into 1979. So buy now, the argument goes, and hope that history continues to repeat itself.



Availability of Money



Although interest rates are high, loans are readily available to “qualified buyers.” You become a qualified buyer by whispering “Armstrong Parkway” or “Volk Estates” to a loan officer. “Beverly Drive” and “Greenway Park” seem to have a similar mellowing effect. Economists will tell you that Dallas is a capital deficient city, meaning that there are more investment opportunities here than there are local dollars to invest. Consequently, investment dollars from capital surplus cities like Chicago, Los Angeles, and New York pour into the area, many of them into the home-loan market. The combination of easy loans and an extremely low default rate makes Dallas seem like the Promised Land to outside investors.



Taxes



The Tax Reform Act of 1977 took away many tax shelters. Among those that are left are worm farming and real estate. Since it’s unlikely that worm farming will attract many investors, that leaves real estate. “With prices going up all the time,” says one broker, “you can’t make a mistake in buying.”



Sunbelt Phenomenon



Wheezing, red-nosed, frostbitten Northerners have been pouring into Texas in record numbers. Even the prospect of chinch bugs and tornados hasn’t deterred a thousand families a month from relocating in Dallas. They bring lots of money and generally try to sink it into real estate. Consequently, a Dallas home buyer finds himself competing not only with other Dallasites but with all those damn Yankees who just want to bid up the price of everything. Down-right Un-American.



Intangibles



Such as sentiment and prestige. Buying a house means more to most people than buying stocks or microwave ovens. It means buying a part of the community, a slice of its future. Native Dal-lasites traditionally buy the most expensive houses, and those who decide to buy in the Park Cities seem willing to put up with all sorts of financial outrages for a view of Turtle Creek or the right to sport a “Scots” bumper sticker. Well, maybe some things really can’t be explained.

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