Working at home wasn’t working for Katy and Casey Dailey. She works in marketing and advertising, and he played linebacker for the New York Jets for three seasons before becoming a special education teacher. The three-bedroom, two-bath, 1,880-square-foot Carrollton home that the Chicago and California transplants had purchased in 2013 seemed to get smaller every day during the pandemic—especially when their two boys, 9 and 10 years old, started distance learning.
“We needed an office, needed to spread out, and needed to not see our children every second of the day,” Katy says.
Their decision this spring to buy a new home made sense. But little else seemed to once the Daileys entered the market. Katy describes the process of buying and selling as “crazy,” “stressful,” and “chaotic.”
Her real estate agent, Brian Micalizzi, calls it something else. “The market right now,” says the owner of Micalizzi Real Estate, “is total insanity.”
It’s outer limits in Fairview and Frisco and Farmers Branch. It’s nutbar in Oak Cliff and Oak Lawn, in Preston Hollow and Pleasant Grove. “It’s just crazy out there right now,” says Sue Krider, an agent with Allie Beth Allman who specializes in high-end properties in central Dallas. “It’s so insane,” says René Burchell, an agent with Coldwell Banker Realty who sells luxury and mid-priced homes in Frisco, Prosper, Celina, McKinney, Plano, and other surrounding cities.
Everything is upside down and topsy-turvy and turvy-topsy. Interest rates are at historic lows, which has buyers jacked up, but there’s very little to buy because—get this—interest rates are at historic lows. Many homeowners who might have been inclined to sell have instead refinanced and renovated. Swimming pools went in. Additions went on. And the market for existing homes got tighter. Some homeowners who want to buy can’t because they can’t sell their homes first because if they do, they might not be able to find anything to buy. And then where do they go?
Krider has a client, a couple, who cashed in their home in Dallas, which had skyrocketed in value this year, and are moving to California. California! Who moves in that direction anymore? The couple have no home in California yet, so they’re renting while they house hunt virtually.
It’s bananas. All of it. All over the area, at all price points, and for a lot of reasons. Let’s try to make some sense of what’s happening in the craziest North Texas real estate market ever.
The Issue With Inventory
“Inventory,” the weird real estate term for the number of homes listed for sale at any given time, is down. Way, way down. According to real estate data tracking firm MetroTex, in Dallas County, listings are down 47 percent from what was already a depressed market in April 2020. They’re 62 percent lower in Collin County, 63 percent lower in Denton County, and 66 percent lower in Rockwall County. “There’s a total squeeze on the inventory in the market,” says Joe Atkins, who heads Dallas’ Joe Atkins Realty. “That’s across the board, in the city, in the suburbs, everywhere.”
There are a lot of reasons for that, but let’s stick to just three.
First, there’s the aforementioned push to refinance and remodel that has made many local nests more comfortable and kept many from selling. Freddie Mac, the mortgage financing entity, says Americans cashed out $152.7 billion of home equity through refinancing in 2020, the most since 2007.
“Inventory,” the weird real estate term for the number of homes listed for sale at any given time, is down. Way, way down.
Second, investors have swooped in. Powered by apps like Fundrise and Roofstock, individuals have been buying shares in homes around the country, while bigger investors backed by big banks have bought up groups of homes—sometimes entire subdivisions—just to rent them out. More than 8 percent of all the homes sold in the Dallas area last year went to investors. Many of those sales were all-cash transactions, the kind that crowd out traditional homebuyers.
Third, there is a global shortage of building supplies. That has been driving up prices for a lot of the things that go into homebuilding, like steel and concrete. A tariff war with Canada has exacerbated that problem in the United States, causing a 34 percent spike in lumber prices, a number big enough to tempt far too many to say lumber prices are “through the roof.” In Texas, supply shortages are even more acute because there’s still a lot of rebuilding in the wake of February’s storm. “There is a logjam right now,” Krider says, no pun intended, about the shortages.
And yet somehow, in the Dallas area, houses are still being raised at a record clip. “There will actually be more new single-family home construction in the Dallas-Fort Worth area this year than in any year since 2005,” says James Gaines, a research economist with the Texas Real Estate Research Center. “That’s still not enough to keep up with the pace of demand, but it does make Dallas-Fort Worth No. 1 in the country for new home construction.”
How Pricey Has Your Neighborhood Gotten?
All data from single-family home sales this year through April
Still, newly built homes here usually account for less than 20 percent of total sales, with the rest of sales coming from existing homes. So even with record levels of construction, there won’t be enough new homes built to offset the existing homes that aren’t coming on the market. That leaves us with the old Econ 101 scenario: high demand is meeting low supply. And that’s why Micalizzi says, “It doesn’t really matter where the home is or at what price point, it’s selling in the Dallas area. There’s just very little inventory, so there’s demand for everything everywhere.”
That even includes tony apartments in downtown high-rises, a segment of the market that stalled during the early months of the pandemic when people didn’t want to be arm’s-length from their neighbors in an elevator. This year, high-rises have roared back. In the Turtle Creek tower where she lives, Krider says, there were no properties sold in the first half of 2020. This year, a dozen have turned over. Krider says the single-family homes she’s selling in neighborhoods like Lakewood and Preston Hollow are selling even faster.
“Pretty much every single-family home that comes on the market is under contract within a few days,” Micalizzi says. “That’s made prices, starting in about January of 2021, appreciate faster than I’ve ever seen before.”
The Problem With Prices
That appreciation is happening everywhere. In Oak Cliff, for the first quarter of this year, average prices are up 22 percent over the mostly normal-ish first quarter of 2020. In Rockwall, they’re up 16 percent. McKinney has seen a 21 percent jump. In East Dallas, prices are up 13 percent. They’re up 20 percent in Frisco and North Dallas and Northeast Dallas. In Fairview, the gain is 24 percent. In Southeast Dallas, it’s 23 percent. And in Lewisville and Flower Mound, it’s 15 percent. Plano brings up the rear at a still whopping 14 percent increase.
Gaines says some of those increases in average prices are statistically tricky because sales this year have been more concentrated in homes priced around $500,000. Of all the homes sold in the Dallas area in 2020, just 13 percent were valued at more than $500,000. This year, that’s increased to 17 percent. Meanwhile, the proportion of homes priced under $200,000 has fallen from 20 percent of the market to just 13 percent.
For that, you can also blame, or maybe credit, those low mortgage rates. Figure it this way: at the historically low rate of 3 percent, with 20 percent down, you can buy a $500,000 home for about $2,100 a month. At, let’s say, 8 percent interest, with the same down payment, you’d only have gotten a $310,000 house. That’s one big driver behind the inflating prices in the area: buyers are willing to pay much more for a home if their monthly payments won’t increase dramatically.
Melissa and Rob Gladney took advantage of low rates this spring. The couple, who have two young daughters, were also feeling cramped with both work and school from home in the 1,800-square-foot, three-bed, two-bath house they’d owned in Dallas’ Lochwood neighborhood since 2015. After shopping unsuccessfully for a new home a year ago, as rates dropped, they were able to increase their budget by $100,000 and hit the same monthly payment. So they bid on a nearby four-bed, four-bath, 3,600-square-foot home and ended up getting it.
“We still went over the asking price,” Melissa says. “But the appraisal ended up being the same price as what we offered, and with the lower interest rates, it’s basically the same monthly payment. So that makes us feel that we didn’t get hustled just because the market is crazy right now.”
The rest of the Gladneys’ buying story should probably come with a trigger warning for frustrated would-be buyers in this market who have been having a hard time finding a home for sale or making a winning bid on a property they want. You see, the home the Gladneys bought was only the eighth one they looked at, and it was the first one they bid on. The. First. One. “We got really, really lucky,” Melissa says.
The (Fleeting) Supremacy of the Seller
That’s not the story of the moment in the rest of the Dallas area, or in most of the rest of the country, including small spots like Allentown, Pennsylvania. It’s not even the story right now in Canada. Canada! Because of the same lack of inventory we’re seeing locally, prices up north are surging both in big cities and in the small towns where they make cheese or have a moose as a mayor or, well, whatever goes on there. In part, that’s because city dwellers able to work remotely are opening new fronts in the pricing wars they’ve fought for years in places like Vancouver; New York; Washington, D.C.; and Southern California.
Veterans of those wars started arriving in Dallas more than a decade ago, and they’re still coming. Real estate agents I spoke to said recent clients have relocated to Dallas from New York, Chicago, San Francisco, and Los Angeles. All were moving for work and for housing bargains—the same mix that brought Katy and Casey Dailey from California to North Texas. “Coming from California, Texas homes seemed basically free,” Katy says.
But to win their newest home in the Dallas suburbs during the current insanity, the couple had to bring more than just California cash. After struggling to find anything that suited their needs, the Daileys finally found a home to bid on—but were immediately outbid. So they amped things up when they found the next bid-worthy property. “There wasn’t one thing about this house that we wanted to change,” Katy says. “So we were going to do a whole dog and pony show if we had to, to get it.” The show started with a big financial offer: 30 percent down and a bid that was $50,000 above the list price.
Big bids over asking are just one of the things that have changed in this market. “I’ve probably written 30 offers so far this year, and I haven’t written one offer for less than asking price,” says agent Atkins. And agent Burchell says her sellers this year have gotten offers that have ranged from $50,000 to $225,000 over asking prices.
That’s one big driver behind the inflating prices in the area: buyers are willing to pay much more for a home if their monthly payments won’t increase dramatically.
To help with their big offer over list, the Daileys took out a special loan called a bridge loan that lets buyers borrow against their current home so they can make a contingency-free offer on a new home. Bridge loans have a major downside, namely that if you buy a new home and your current home doesn’t sell quickly, you’ll be left paying two mortgages. But there are few other good workarounds in such a hot-crazy-insane market.
“A big reason why we have a squeeze on inventory is because most people need the equity out of their house to buy a new house,” Atkins says. “But right now, contingent offers aren’t really being accepted by sellers.”
Sellers these days can also force buyers to accept appraisal waivers and allow them to lease back their homes for weeks or even months after a sale, helping to bridge that gap. Making matters worse, the highly competitive market means that many properties receive multiple bids. Some real estate agents say they’ve seen 30 or more bids on a single home. “It’s a really stressful and sometimes frustrating market for buyers,” Micalizzi says.
With their bridge loan in hand and offer made, the Daileys weren’t taking any chances. Casey and the two boys put on their best button-downs and khakis while Katy donned a dress and heels to go schmooze the seller’s agent at an open house. “My youngest child could not understand why we were getting dressed up to look at a house,” she says. “We kept telling him, ‘You loved the house, right? Then we have to do everything we can to make a good impression.’ So we ended up looking like this wonderful, qualified family. I really think that’s what pushed us over and got our offer accepted.”
With that, the buyers became the sellers as the Daileys finally listed their house. “We didn’t even have a ‘for sale’ sign in our yard,” Katy says. “But within an hour of it being listed, we had cars constantly slowing down, looking, people waving. It was crazy.”
Four days, 34 showings, and seven offers later, the house sold. “We ended up with an astronomical profit on a house we bought just eight years ago,” she says. “But we paid more on the buying side, too. There’s no way the house we bought is going to appraise for what we paid for it. Maybe in a year. So we’re now the comp for the neighborhood. Hey, you’re welcome, new neighbors.”
Write to [email protected]. This story ran in the July issue of D Magazine with the headline, “The Craziest, Weirdest, Hottest, Most Bonkers Market Ever.”
