Friday, April 19, 2024 Apr 19, 2024
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We Are Living in the Weirdest Real Estate Market Ever

Looking to buy or sell in the pandemic? Here are the new North Texas rules.
Nothing is normal in this year of the pandemic. That includes Dallas’ housing market, which is hot in a really strange way. One real estate agent describes the situation as “a near frenzy.” Another calls it simply “weird.” 

Back in early March, it was neither. It was normal. Houses were selling at a brisk pace. The market wasn’t as hot as it was in, say, 2016, but sellers were still making a buck and buyers had to work to find a deal. Then the coronavirus arrived. In-person home showings were disallowed. By May, according to the MetroTex Association of Realtors, residential sales in Dallas County had fallen 35 percent from their level in May 2019. The median sales price was down 4 percent. Some said the housing market would continue to suffer for months, maybe years. It didn’t. 

In that same month of May, after Dallas County had declared real estate an essential business and reopened in-person showings, the sagging market sprung to life. “I have not seen anything like what happened after we became ‘essential’ in the 16 years I have been doing this,” says Faisal Halum, head of the Faisal Halum Group, which sells high-end properties for Briggs Freeman Sotheby’s International. “It was a near frenzy. We have had to work seven days a week to keep up.”

By June, six out of every 10 houses on the market received multiple offers. Only Boston had a more competitive market that month. As demand here surged, supply ebbed. Many homeowners understandably decided not to sell during the pandemic. So in June, according to MetroTex, there were 20 percent fewer homes on the market than had been available in June 2019. Still, total sales were up 16 percent that same month, and prices rose 2 percent across the Dallas area. In neighborhoods like Lakewood, the Park Cities, Preston Hollow, and suburban communities bordering Lake Lewisville and Lake Ray Roberts, the price spikes were far higher. Some homes were selling within just 14 days, and near White Rock Lake and Turtle Creek Park, homes were selling for 25 percent more than they had been before the pandemic, according to agents. 

Somehow all of that happened even with the virus out there, even with surging numbers of new cases and deaths in the Dallas area, and even as hundreds of thousands of jobs were evaporating. And now, even as the global economy continues to sputter with uncertainty and virus outbreaks happen worldwide, many experts believe the Dallas real estate market will stay frenzied—and healthy—for the rest of this year. Yes, this market is weird. 

Here are some of the ways it has changed and may continue to evolve.

1. Buyers want to move up, not move out

They say density is dead. They say that in the post-pandemic future no one will want to ride trains, buses, or even elevators. They say that the pandemic will drive us all farther away from each other. City dwellers will skedaddle to the suburbs, suburbanites will make an exodus to the exurbs, and exurbanites will run to rural areas where, one presumes, they’ll grow hemp and make moonshine. 

They are probably wrong about most of that. “None of my clients are getting out of Dallas proper,” says Jennifer Cloud, owner of Prominus, a real estate agency that has represented properties stretching from central Dallas to Rockwall. “In fact, none of my clients are even remotely saying they want to leave the city.”

That’s not to say buyers aren’t interested in places where they can escape the city or the suburbs. They are. But only for vacations. “The market has just skyrocketed for lakefront properties,” Halum says. “People aren’t thinking about vacations that involve getting on a plane. They’re thinking about a place they can drive to in a couple hours.” 

Take East Tawakoni, for example. It’s an 883-person lakeside town about a 90-minute drive from downtown Dallas. In late July, a three-bedroom, two-bath, 1,400-square-foot waterfront home there received multiple sight-unseen offers within just a few hours of listing for $160,000. Julie Nicholson, an agent with JP & Associates, says it sold in just two days.

Those kinds of properties may be hot, but the available data don’t definitively suggest there’s any kind of massive city flight taking place to the East Tawakonis of the country. Or, for that matter, from Dallas to Southlake. Economists at RealPage, a Richardson firm that provides analytics to property management companies, found that only a handful of renters—the group that can relocate more quickly than homeowners—have likely left the densest neighborhoods in Dallas, like downtown and Uptown, since the pandemic began. Those renters didn’t move en masse to the suburbs. 

“In our data, we did show a few net move-outs from the urban core” over the summer, says Greg Willett, chief economist for RealPage. “But I think the economy explains most of those moves. I mean, I won’t say nobody moved from downtown to Frisco, but it doesn’t look like many people did.”

The story for buyers is similar. Economists at the home listing site Zillow reported this summer that their suburban listings didn’t generate more traffic than did their urban or rural home listings. That was true nationally and for searches in Dallas. Instead, Zillow says, traffic for all Dallas-area home listings has increased since the pandemic began.

2. Out-of-towners are still buying

Real estate agents say that since their business was declared essential, they’ve seen waves of out-of-towners come to the Dallas area looking for homes. New Yorkers and San Franciscans have poured into town to buy as job relocations that had been stalled by the pandemic were back on. 

“Dallas is still a job hub,” says Jim Gaines, chief economist at the Real Estate Center at Texas A&M University. In the past decade, new jobs have created a land rush that has made North Texas one of the fastest-growing areas in the country. In 2018, 102,500 jobs were created here, and about 130,000 people moved to town. 

But it’s hard to imagine that 2020 will produce similar numbers, especially considering the way the Dallas area hemorrhaged jobs during the first few months of the pandemic. There were 3.6 million people employed in the Dallas area in July 2020, about 370,000 fewer people than had jobs here in January 2020. The leisure and hospitality industries were hit hardest by layoffs, followed by education, health services (surprise), then manufacturing. 

Still, some of the people coming here to buy homes haven’t been moving for work. They’ve been bringing their work with them. Powered by Zoom and Microsoft Teams and Google Meet, buyers decided to head to Dallas to be closer to family and farther away from their former states’ income taxes.

In late July, a Chicago couple and their two boys drove 15 hours from the Windy City to spend two days trying to find a home before the school year began. The couple’s employers had OKed virtual work even beyond the end of the pandemic. That allowed them to consider moving closer to relatives they have in Texas and to change the way they live in the process.

“They were living in 1,900 square feet in Chicago for months of lockdown, and it wasn’t enough space for the way we’re living now,” says Nina Bhanot, a real estate agent with Compass who primarily sells in Dallas and its closest northern suburbs and who led the Chicagoans around for two whirlwind days of home shopping, mostly in East Dallas. “When everyone is home all the time, like we’ve all been, you really learn what works for you and what doesn’t in your house. This couple needed a private office and a place for the kids to take virtual classes, and they could afford that here.”

3. Buyers’ needs have changed

The Chicagoans aren’t alone in making a residential reevaluation. Real estate agents say the pandemic is likely the reason that many are now looking for new homes—even, you know, during the pandemic. “Homes have, of course, always been important,” says Douglas Newby, an agent who specializes in architecturally unique homes. “But buyers are now making the home a greater priority than it has ever been. They’re being a lot more thoughtful about the kinds of spaces they need and about the things that make them happy at home.”

That has meant a big change in what people are looking for locally. Fully open-concept living is out. In: houses with separate living and working spaces. Space for one home office is good. Space for two home offices is much better. Sellers can forget about advertising “bonus rooms.” Call them “offices” or “study rooms.” “No one is going to see value in a ‘bonus’ room without a purpose,” Newby says. 

Also in: pools. “Pools have become really important,” Halum says. “So has space in general. That’s why we’ve seen some of the higher-priced homes here that are sitting on a good amount of acreage selling like hotcakes. People want somewhere to go, even if that’s their own backyard.”

What buyers don’t want right now, in spite of the tight supply of available homes, is fixer-uppers. “Updated, well-located properties are getting multiple offers,” Bhanot says, “because buyers are going to have to be home more often now, and they don’t want to be living where there is construction work going on.”

Even though buyers are looking at renovations and study rooms and pools differently, one thing that hasn’t changed in the pandemic is the interest many buyers have in being near good schools. Indeed, schools are the biggest advantage Dallas and Southlake and McKinney and the rest of our area have over a cabin in tiny East Tawakoni. “Buyers still want to be near great schools,” Cloud says. “So if you list a good house in a location that also has good schools, especially good elementary schools, there will be 20 people seriously looking at it right now.”

These new criteria matter—a lot. Some agents say that houses that don’t fit the current buyer criteria (good schools, updated amenities, and, of course, pools) have languished on the market, while others that check all those new boxes received multiple offers and sold above list price within days. Mash the strong sellers together with the weaker properties and you get a sense for why Zillow rates the overall Dallas-area market as “cold,” and predicts prices will fall overall here by 2.4 percent by year’s end.

4. The market’s moves will be hard to predict

It’s little wonder that most homeowners don’t want to sell right now, with the uncertainty in the job market and the spread of the virus. “Sellers are just not putting their homes on the market,” Cloud says. “If there’s not a real need for them to move, they don’t want to go looking during this.” 

That has left the available houses for sale at a historically low level. In real estate speak, there’s less than a three-month supply of houses. Since that stat means almost nothing to civilian homebuyers, A&M’s Gaines phrases it another way. “I’ll say this in Aggie speak,” he says. “In terms of inventory, right now we ain’t got none.” 

Builders had been working to change that. In June, the Associated General Contractors of America reported that Dallas and Miami were building houses as quickly as they had been before the pandemic began. But that was before the spike in virus cases throughout Texas and much of the South. As of press time for this story in early August, it was unclear how that would affect the pace of building. 

What was clearer was that the low supply of houses amid the current demand would exacerbate Dallas’ overall affordability problem. Houses priced below $300,000—the most attractive price point for most first-timers—have become increasingly scarce in our area in recent years, and that has gotten worse during the pandemic. Gaines says first-time homebuyers, “are really struggling to find affordable homes in the Dallas-Fort Worth area.”

They may be struggling, but they’re still trying. Agents say first-time buyers have been increasingly getting into the market as mortgage rates plummeted to 3 percent and sometimes lower during the pandemic. The lure of low mortgage rates is understandable, but it may seem counterintuitive that so many—including first-timers and more seasoned buyers—are ready to get into the Dallas-area housing market at a time when prices are spiking and jobs and businesses are sinking. Late this summer, Dallas was the fifth-leading metropolitan area in terms of business closures, according to a report from Yelp. The site said 3,200 businesses had closed in the Dallas area from March 1 to July 10—1,900 of them permanently. 

How do you buy a house when businesses are closing up all around it? 

“We’re going to have a lot of businesses that are not going to reopen,” Gaines says. “That’s unfortunate, but it is happening. But historically it has generally been the case that when we have gone through periods of downturn and economic recession, one of the things that has held up over time is real estate or fixed assets. So even now, investing in a house is not a bad financial play.”

Write to [email protected]. 

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