The overall real estate market in Dallas is experiencing a cool off period as sales begin to level off. Yet, the resilient luxury market appears to be impervious to the same factors that affect the rest of the market. While mid to low markets experienced a flatline in sales and total home sales will grow at 4.3% compared to last year’s 5% year-over-year sales, the luxury market is continuing to face a surge in demand.
By the end of 2018, there was a 30% increase in luxury home sales, homes priced at over a million, which Juli Harrison, Executive Vice President at Allie Beth Allman and Associates attributed to an increase in out-of-town buyers.
“We’re seeing so many out-of-town buyers that are coming from California to Texas where there is no state income tax and these [home] prices look, generally better,” Harrison said. “I think part of it has to do with out-of-town buyers from markets that are more expensive than ours. You still see in-town buyers making changes but really it’s the out-of-town buyers who keep the luxury market up.”
In Q1 of 2017, 5.5% of migrating Californians relocated to the Dallas-Fort Worth area. The robust job market and affordable housing compared to coastal California markets were a few of the top motivators behind the migration.
As Dallas’ economy continues to grow and strengthen, the area is steadily becoming an attractive destination for luxury homebuyers.
“There’s no secret that the luxury market has been doing well for the last several years,” said Dr. James Gaines, Chief Economist at Texas A&M. “The surprise is it hasn’t let up much. That market tends to have some stability because the people in that market don’t tend to move around as much. Some people claim it’s recession-proof. It’s not as susceptible to short-term changes in the economy as the lower mid-markets are. It also doesn’t tend to be quite as sensitive to the interest rate.”
While last year’s tax law stirred apprehension of what the financial impact would entail, the fears surrounding the law have since been abated as the effects have shown to be minimal. However, while changes in property tax affect the lower markets more heavily, luxury homeowners should be wary about their estate taxes.
Although Texas doesn’t have an estate tax, individuals would still be subjected to federal estate taxes that apply to those with more than $5.45 million. Proper estate planning in advance can help minimize the outcome when passing along investments to loved ones.
While Dallas’ housing market is expected to see a flatline in home sales this is not an indication of the city dying off as a top migrating destination but a lack of inventory. “The real reason the volume for the overall market declined was not because of a fall off in demand or people, or jobs but there are just not enough homes available for sale,” said Dr. Gaines. As jobs continue to be available and the population increases, Dallas will continue to be an area in high demand.
