Monday, April 15, 2024 Apr 15, 2024
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The one-time fad that triggered a modern day gold rush

THERE SEEMS to be no stopping it. What appeared three years ago to be just a real estate fad-the transformation of old apartment buildings from rental units to condominiums-has turned into the most potent force in the Dallas real estate market.

When the first condominium converters marched on the Dallas real estate scene in 1977, they were hardly noticed by the major developers in town. The condominiums they converted were eyed warily by many residents in Dallas, a city which for years has prided itself on its high percentage of single-family homes.

Condominiums were fine for investment purposes, home owners thought. And maybe the kids could live in one while they saved up for their house in North Dallas. But condominiums weren’t to be taken seriously as permanent homes.

That’s all changed. For most buyers in 1981 who make less than $35,000 a year, ownership of that home in North Dallas or the suburbs is virtually out of reach. For those searching to own a home today, condominiums are not just an attractive alternative. They may be the only alternative.

Hundreds of rental units are still converted in Dallas every month, but the broker-converters have been joined by heavyweight developers who have seen the future, and the future is condominiums. Fox & Jacobs, U.S. Homes, and Raldon Homes – three of Dallas’ four largest single-family home builders -have condominium projects underway. All three companies, which made their reputations and fortunes with ranch-style homes, expect to spend at least 50 per cent of their budgets building condominiums by the end of the century.

Fox & Jacobs will begin construction this summer on an undetermined number of condominium units in its Bryan Place development. The giant developer also has plans to build condos in suburban locations if the Bryan Place units sell as well as expected.

Local developers are being joined by other construction giants like Campeau Corp., Canada’s largest landlord. Ottawa-based Campeau will break ground in July on the first of its nine proposed high-rise condos located between Oak Lawn and downtown Dallas. Campeau will be building only condos in the Dallas area. All will be built within walking distance of downtown.

In-town or suburban; high-rise or garden-style; one bedroom or six bedrooms; $35,000 or $350,000. Dallas condominium buyers in 1981 can get any style home they want, in almost any location they desire, and in any style they choose.

“The condominium market is growing like gangbusters,” says Don North, an agent with Ebby Halliday Realtors specializing in condominiums and townhomes. “Five or 10 years from now, we’ll be selling more condos than single-family homes. When you get your big builders in the market, you know that’s where the action is because they spent a hell of a lot of money before putting their two cents in.”

Financing is the only inhibiting factor in condominium growth, but all developers and real estate agents tell the same story: If you don’t buy today, prices, interest rates, and monthly payments will be higher tomorrow. And your home will be smaller.

“Creative financing is the key in buying a condominium today,” says Carole Taylor, president of Quest Realty. Co-mortgages are so popular, for example, that Fox & Jacobs includes two co-mortgagee floor plans in their Bryan Place project. Other, non-traditional financing ploys include having the parents of first-time buyers co-sign the mortgage, arranging financing through the previous owner for lower interest rates than offered by banks and savings and loans, and arranging risky shared appreciation mortgages in which the lending institution receives up to 40 per cent of the condominium’s increase in value.

“It’s often easier to get a condominium that has just been built or converted than to buy from a previous owner,” Ms. Taylor says. “The commitment to convert or build often has occurred many months before and therefore will reflect lower interest rates than are prevalent at the time in the marketplace.”

Don North agrees. “Condominiums are easy to buy,” he says. “It’s coming out of them that can crimp you a little bit. So many people are not told this when they first go in.”

Still, condominiums in the Dallas area have bucked the recent slump in home sales. And most buyers under 30 may never be able to afford a single-family house with a large lot, real estate agents say.

“We get a lot of people who are looking for their first home,” Ms. Taylor says. “They will go to the residential agencies and get real discouraged when they find out they can’t qualify for a home loan. They come to us looking for an apartment, but we say to them, ’Wait a minute, have you considered condominium living? It’s a lifestyle whose time has come.’ “

Even families that can afford the hefty mortgage payments that come with the two-car garage and crabgrass are beginning to think twice about assuming the obligations of home ownership, says Suzan Tillery of Merrill Lynch Realty, Paula Stringer Inc. Realtors’ new condominium division.

“It now takes two incomes to maintain a mortgage,” she says. “People are beginning to say, ’Who’s going to take care of that big house?’ Then there are the energy bills that can rule out houses even if you can afford the mortgage payments. Things aren’t as simple as they used to be.”

Adds Richard Urso, general manager for Fox & Jacobs’ Bryan Place, “Lifestyles have changed. People today either have to live way out in never-never land to buy a new house, or they’re going to have to live closer together in town and accept a different lifestyle in the city.”

Economics have forced the big builders to consider condominium development. Raldon Homes is a suburban builder that opened its first Dallas-area subdivision 12 years ago. When the first wave of condominiums washed over the Dallas market, company President George V. Tannous said Raldon would never consider condominium development.

“But things have changed,” Tannous now claims. “The cost of land and the cost of development is forcing the developers into unique housing alternatives.”

Unlike Fox & Jacobs, which is experimenting with in-town condominiums before going suburban, Raldon is constructing its first condominium development in Piano and plans to remain a strictly suburban builder. Raldon’s first development, located at the corner of Park and Custer, will contain about 80 units ranging from $50,000 to $70,000. Tannous said they will be the first condominiums ever offered in Piano, and they will be ready for occupancy later this year.

“This is really something we never considered until recently,” says Tannous. “At one time, Dallas was the premier low-cost housing market in the county. You could offer a tremendous buy if you were a builder. You could buy land cheap, you could build cheap, and you could sell cheap.”

But in the last three years, Dallas has caught up with the rest of the country, he says. “This has forced developers to offer higher yield, higher density types of housing. We have other locations in mind, but we have to see what the market in 1982 will bring.”

Suburban condominiums, like those in Raldon’s development, are still rare. More than 60 per cent of the 19,000 condominium units in Dallas County are located between downtown Dallas and LBJ Freeway, Ms. Taylor says.

But that situation won’t last long. “Before the midd le of the decade, you’re going to see condominiums in every city in the county and in almost every section of Dallas,” says Mrs. Tillery of Merrill Lynch Paula Stringer.

“What’s hot right now is North Dallas and Oak Lawn,” she adds. “But Arlington will be big. Carrollton will be hot as a pistol because of its proximity to the airport. There’s already a tremendous demand in Richardson.”

Tannous says many of the suburbs are going to have to change their zoning requirements if they want to increase their stock of residential housing. “They’re not going to grow unless they change the number of units they allow per acre,” he says. “Things are moving in the direction of condos and patio homes. If the suburbs don’t change, the growth will go elsewhere. That’s why Dallas has so much of a concentration right now.”

Condominiums may be the savior of downtown and East Dallas, developers say. If Bryan Place and Campeau’s Vineyard condominium projects are as successful as predicted, they could steal many of the Dallas newcomers who otherwise would settle in the far North Dallas corridor along Preston Road and the North Dallas Parkway.

Fox & Jacobs stumbled onto the in-town market last summer when they converted two dilapidated 25-year-old apartment buildings into condominium units. The gutted buildings, located across Pavillion Street from the builder’s Bryan Place homes, were remodeled to blend with the mock-Victorian style of the area. Each was installed with 1980-vintage fixtures and interior details. No advertising was purchased, but within a month, all eight units in both buildings were sold. Fox & Jacobs knew they were on to something.

Fox & Jacobs recently finished clearing a site near the corner of San Jacinto and Pavillion for its second excursion into condominium development. The new units will range in price from $60,000 to $80,000. The buildings will perpetuate the Victorian styling of Bryan Place. Four different floor plans will be offered, and the first owners are expected to move in during July or August.

“We respond to the market, and we definitely saw one here,” says Bryan Place general manager Urso. “The number we eventually build here will be determined by what the market will hold. Condominiums are perfect for Bryan Place. This is a city neighborhood. There are a lot of mixed-use residential structures in a city neighborhood.”

Campeau’s plans for the Vineyard are every bit as ambitious as Bryan Place, and corporation vice president Jerry Parsons says the $1 billion development-“an urban village of human scale” – will change the condominium market in Dallas.

While Fox & Jacobs plans to build for middle-income, professional young adults, Campeau is shooting a bit higher. The least expensive of the 1450 condominiums planned for the Vineyard will be $135,000. The most expensive will be priced close to $1 million. Campeau will begin construction on its first building, La Tour, in July. The 24-story building, located at 3030 McKinney near The Quadrangle shopping center, won’t be completed until October 1982. Their second building will be constructed at the corner of Allen and Laclede.

“Our main competition will be the high-rises along Turtle Creek,” Parsons says. “We’re taking that same type of quality construction and the amenities offered away from Turtle Creek. We think the construction of these condominiums will improve the quality of life downtown. Dallas has matured quite a lot in the last few years. I think the market can handle this number of luxury condominiums.”

The Vineyard condominiums are just a part of the boom in luxury condos. The Warrington, The Beverly, and The Clar-idge are all under construction along Turtle Creek. Ray and Clare Stern also are developing the high-rise Claremont on Keller Springs Road in far North Dallas.

The Vineyard alone will double the number of high-rise luxury condos available in Dallas. Their arrival -and the development of the other high-rises – rounds out the condominium market, which three years ago was confined strictly to garden-style apartments.

“When the rush to condominiums first started, the only thing of that (luxury) type were the rental high-rises on Turtle Creek,” says Don North of Ebby Halliday. “They were very limited, so basically, if you wanted a condominium, you were forced to buy a garden-style apartment that had been converted. Some were built as condominiums that way. Now you have an unlimited supply of condos and an unlimited supply of customers who want to buy them.”

North said a Dallas condominium can appreciate between $800 to $1000 every month, depending on where it is located and whether the complex is new construction or a conversion. Most conversions bring $55 to $65 per square foot, he says. New construction will bring the seller $75 to $95 per square foot. Oak Lawn is the best location for investment purposes and, at the moment, will bring a higher return when the owner tries to sell, he says.

But the rush to condominiums is so strong-from all segments of the home-buying public -that Oak Lawn will not keep its exalted status for long.

“It’s the way we’re all going to be living, and that’s something I thought I’d never say,” North claims. “When I first began to sell condos a couple of years ago, it was strictly first-time buyers, but not anymore. I recently sold to a fellow who gave up three bedrooms, two baths, a pool – the works. You see that a lot.”

First-time buyers, middle-aged couples who are sick of large houses and big yards, young professionals looking to live close to work, and even families, are well represented in the area’s 370 condominium developments, says Mrs. Tillery of Merrill Lynch. And, she adds, there is an almost unlimited supply of apartment complexes just waiting to be converted if the market demands it.

“There are literally thousands of rental units just sitting there,” she says. “They were built with conversions in mind.”

Rental units will become scarce, however, as the condominium market continues to grow, she says. Apartment construction in recent years has slowed so much that more condominium units were built in Dallas County last July than rental units, Ms. Taylor says.

“Rents are going to skyrocket,” North warns.

Buyers determined to own a house and a yard also will lose in the condominium rush, especially as the large developers abandon the suburban subdivision for the condominium complex. The Accent, Today, and Flair subdivisions that dot the countryside may be the last of their kind. The change will be so rapid in the next few years that the Department of Housing and Urban Development believes that 50 per cent of all Americans will be living in condominiums by the turn of the 21st century.

“It’s a matter of money for all of us,”Tannous says. “Either you come up withnew and innovative housing or you don’tsurvive. The day of the quarter-acre lotis over.”

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